Financial Instruments

12 Months Ended

Dec. 31, 2016

7: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 excludes cash, cash equivalents, short-term financial instruments, and trade accounts receivable and payable whose carrying amounts approximate their fair values. For information about assets and liabilities recorded at fair value and for additional details regarding the fair value hierarchy, see Note 6, Fair Value Measurements.



In Millions
	December 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
Assets
Long-term receivables1		$	22		$	22		$	-		$	-		$	22		$	-		$	-		$	-		$	-		$	-
Notes receivable2			1,326			1,415			-			-			1,415			1,161			1,228			-			-			1,228
Securities held to maturity			13			13			-			13			-			11			11			-			11			-
Liabilities
Long-term debt3			9,504			9,953			-			8,990			963			9,084			9,599			-			8,648			951
Long-term payables4			17			17			-			-			17			14			14			-			-			14
Consumers
Assets
Long-term receivables1		$	22		$	22		$	-		$	-		$	22		$	-		$	-		$	-		$	-		$	-
Notes receivable5			45			45			-			-			45			-			-			-			-			-
Liabilities
Long-term debt6			5,628			5,903			-			4,940			963			5,381			5,684			-			4,733			951

Includes current accounts receivable of $12 million at December 31, 2016.

Includes current portion of notes receivable of $219 million at December 31, 2016 and $144 million at December 31, 2015.

Includes current portion of long-term debt of $864 million at December 31, 2016 and $684 million at December 31, 2015.

⁴

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

⁵

Includes current portion of notes receivable of $29 million at December 31, 2016.

⁶

Includes current portion of long-term debt of $375 million at December 31, 2016 and $198 million at December 31, 2015.

At CMS Energy, notes receivable consist primarily 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 December 31, 2016 and 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
	December 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		$	141		$	-		$	-		$	141		$	152		$	-		$	6		$	146
Held to maturity
Debt securities			13			-			-			13			11			-			-			11
Consumers
Available for sale
DB SERP
Mutual funds		$	102		$	-		$	-		$	102		$	108		$	-		$	4		$	104
CMS Energy common stock			4			29			-			33			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.

CMS Energy and Consumers determined that the unrealized losses on the mutual funds in the DB SERP were other than temporary at December 31, 2016. Accordingly, CMS Energy reclassified unrealized losses of $5 million ($3 million, net of tax) from AOCI to other expense on the consolidated statements of income and established a new cost basis of $141 million for these investments, which was equal to fair value at December 31, 2016. Consumers reclassified net unrealized losses of $4 million ($2 million, net of tax) from AOCI to other expense on the consolidated statements of income and established a new cost basis of $102 million for these investments, which was equal to fair value at December 31, 2016.

Presented in the following table is a summary of the sales activity for CMS Energy’s and Consumers’ investment securities:



In Millions
Years Ended December 31	2016			2015			2014
CMS Energy, including Consumers
Proceeds from sales of investment securities		$	6		$	3		$	8
Consumers
Proceeds from sales of investment securities		$	4		$	2		$	6

The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale. Realized gains and losses on the sales were insignificant for CMS Energy and Consumers during each period.

Consumers recognized a gain of $9 million in 2015 from transferring shares of CMS Energy common stock to a related charitable foundation. The gains reflected the excess of fair value over cost of the stock donated and were recorded in other income on Consumers’ consolidated statements of income. The gains were eliminated on CMS Energy’s consolidated statements of income. Consumers did not transfer shares in 2016 or 2014.

Consumers Energy Company [Member]

Financial Instruments