Financial Instruments

3 Months Ended

Mar. 31, 2016

Financial Instruments

6:Financial Instruments

Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value.  The table does not include information on cash, cash equivalents, short-term accounts and notes receivable, short-term investments, and current liabilities since the carrying amounts of these items approximate their fair values because of their short-term nature.  For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.

In Millions
	March 31, 2016															December 31, 2015
				Fair Value															Fair Value
	Carrying						Level									Carrying						Level
	Amount			Total			1			2			3			Amount			Total			1			2			3
CMS Energy, including Consumers
Securities held    to maturity		$	13		$	13		$	-		$	13		$	-		$	11		$	11		$	-		$	11		$	-
Long-term    payable1			14			15			-			-			15			14			14			-			-			14
Notes    receivable2			1,175			1,256			-			-			1,256			1,161			1,228			-			-			1,228
Long-term    debt3			9,099			9,841			-			8,856			985			9,084			9,599			-			8,648			951
Consumers
Long-term    debt4		$	5,382		$	5,853		$	-		$	4,868		$	985		$	5,381		$	5,684		$	-		$	4,733		$	951

¹ Includes current portion of long-term payable of $1 million at March 31, 2016 and December 31, 2015.

² Includes current portion of notes receivable of $151 million at March 31, 2016 and $144 million at December 31, 2015.

³ Includes current portion of long-term debt of $929 million at March 31, 2016 and $684 million at December 31, 2015.

⁴ Includes current portion of long-term debt of $448 million at March 31, 2016 and $198 million at December 31, 2015.

Notes receivable consist of EnerBank’s fixed-rate installment loans.  EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk.

CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available.  In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt.  Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.

The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt.  At March 31, 2016 and December 31, 2015, CMS Energy’s long-term debt included  $103 million principal amount that was supported by third-party credit enhancements.  This entire principal amount was at Consumers.

Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:

In Millions
	March 31, 2016												December 31, 2015
				Unrealized			Unrealized			Fair						Unrealized			Unrealized			Fair
	Cost			Gains			Losses			Value			Cost			Gains			Losses			Value
CMS Energy, including Consumers
Available for sale
DB SERP
Mutual funds		$	152		$	-		$	7		$	145		$	152		$	-		$	6		$	146
Held to maturity
Debt securities			13			-			-			13			11			-			-			11
Consumers
Available for sale
DB SERP
Mutual funds		$	109		$	-		$	5		$	104		$	108		$	-		$	4		$	104
CMS Energy    common stock			4			30			-			34			4			25			-			29

The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities.  Debt securities classified as held to maturity consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

Consumers Energy Company [Member]

Financial Instruments

6:Financial Instruments

Presented in the following table are the carrying amounts and fair values, by level within the fair value hierarchy, of CMS Energy’s and Consumers’ financial instruments that are not recorded at fair value.  The table does not include information on cash, cash equivalents, short-term accounts and notes receivable, short-term investments, and current liabilities since the carrying amounts of these items approximate their fair values because of their short-term nature.  For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 5, Fair Value Measurements.

In Millions
	March 31, 2016															December 31, 2015
				Fair Value															Fair Value
	Carrying						Level									Carrying						Level
	Amount			Total			1			2			3			Amount			Total			1			2			3
CMS Energy, including Consumers
Securities held    to maturity		$	13		$	13		$	-		$	13		$	-		$	11		$	11		$	-		$	11		$	-
Long-term    payable1			14			15			-			-			15			14			14			-			-			14
Notes    receivable2			1,175			1,256			-			-			1,256			1,161			1,228			-			-			1,228
Long-term    debt3			9,099			9,841			-			8,856			985			9,084			9,599			-			8,648			951
Consumers
Long-term    debt4		$	5,382		$	5,853		$	-		$	4,868		$	985		$	5,381		$	5,684		$	-		$	4,733		$	951

¹ Includes current portion of long-term payable of $1 million at March 31, 2016 and December 31, 2015.

² Includes current portion of notes receivable of $151 million at March 31, 2016 and $144 million at December 31, 2015.

³ Includes current portion of long-term debt of $929 million at March 31, 2016 and $684 million at December 31, 2015.

⁴ Includes current portion of long-term debt of $448 million at March 31, 2016 and $198 million at December 31, 2015.

Notes receivable consist of EnerBank’s fixed-rate installment loans.  EnerBank estimates the fair value of these loans using a discounted cash flows technique that incorporates market interest rates as well as assumptions about the remaining life of the loans and credit risk.

CMS Energy and Consumers estimate the fair value of their long-term debt using quoted prices from market trades of the debt, if available.  In the absence of quoted prices, CMS Energy and Consumers calculate market yields and prices for the debt using a matrix method that incorporates market data for similarly rated debt.  Depending on the information available, other valuation techniques and models may be used that rely on assumptions that cannot be observed or confirmed through market transactions.

The effects of third-party credit enhancements are excluded from the fair value measurements of long-term debt.  At March 31, 2016 and December 31, 2015, CMS Energy’s long-term debt included  $103 million principal amount that was supported by third-party credit enhancements.  This entire principal amount was at Consumers.

Presented in the following table are CMS Energy’s and Consumers’ investment securities classified as available for sale or held to maturity:

In Millions
	March 31, 2016												December 31, 2015
				Unrealized			Unrealized			Fair						Unrealized			Unrealized			Fair
	Cost			Gains			Losses			Value			Cost			Gains			Losses			Value
CMS Energy, including Consumers
Available for sale
DB SERP
Mutual funds		$	152		$	-		$	7		$	145		$	152		$	-		$	6		$	146
Held to maturity
Debt securities			13			-			-			13			11			-			-			11
Consumers
Available for sale
DB SERP
Mutual funds		$	109		$	-		$	5		$	104		$	108		$	-		$	4		$	104
CMS Energy    common stock			4			30			-			34			4			25			-			29

The mutual funds classified as available for sale hold primarily fixed-income instruments of varying maturities.  Debt securities classified as held to maturity consist primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.