Financial Instruments

12 Months Ended

Dec. 31, 2017

Financial Instruments

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, 2017															December 31, 2016
				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		$	21		$	21		$	-		$	-		$	21		$	22		$	22		$	-		$	-		$	22
Notes    receivable2			1,371			1,464			-			-			1,464			1,326			1,415			-			-			1,415
Securities held    to maturity			16			16			-			16			-			13			13			-			13			-
Liabilities
Long-term    debt3			10,204			10,715			-			9,363			1,352			9,504			9,953			-			8,990			963
Long-term    payables4			27			26			-			-			26			17			17			-			-			17
Consumers
Assets
Long-term    receivables1		$	21		$	21		$	-		$	-		$	21		$	22		$	22		$	-		$	-		$	22
Notes    receivable5			17			17			-			-			17			45			45			-			-			45
Liabilities
Long-term    debt6			5,904			6,236			-			4,883			1,353			5,628			5,903			-			4,940			963

1Includes current accounts receivable of $14 million at December 31, 2017 and $12 million at December 31, 2016.  

2Includes current portion of notes receivable of $200 million at December 31, 2017 and $219 million at December 31, 2016.

3Includes current portion of long-term debt of $1.1 billion at December 31, 2017 and $864 million at December 31, 2016.

4Includes current portion of long-term payables of $3 million at December 31, 2017 and$1 million at December 31, 2016.

5Includes current portion of notes receivable of $17 million at December 31, 2017 and $29 million at December 31, 2016.

6Includes current portion of long-term debt of $343 million at December 31, 2017 and $375 million at December 31, 2016.

At CMS Energy, notes receivable consisted primarily of EnerBank’s fixed-rate installment loans. EnerBank estimated 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 estimated 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 calculated market yields and prices for the debt using a matrix method incorporating 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 were excluded from the fair value measurements of long-term debt. At December 31, 2017 and 2016, 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, 2017												December 31, 2016
				Unrealized			Unrealized			Fair						Unrealized			Unrealized			Fair
	Cost			Gains			Losses			Value			Cost			Gains			Losses			Value
CMS Energy, including Consumers
Available for sale
DB SERP
Debt securities		$	141		$	-			-		$	141		$	-		$	-		$	-		$	-
Mutual funds			-			-			-			-			141			-			-			141
Held to maturity
Debt securities			16			-			-			16			13			-			-			13
Consumers
Available for sale
DB SERP
Debt securities		$	102		$	-		$	-		$	102		$	-		$	-		$	-		$	-
Mutual funds			-			-			-			-			102			-			-			102
CMS Energy    common stock			2			19			-			21			4			29			-			33

The DB SERP debt securities classified as available for sale at December 31, 2017 were U.S. Treasury debt securities with maturities ranging from one to ten years. The DB SERP mutual funds classified as available for sale at December 31, 2016 held primarily fixed-income instruments of varying maturities. Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

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	2017			2016			2015
CMS Energy, including Consumers
Proceeds from sales of investment securities		$	145		$	6		$	3
Consumers
Proceeds from sales of investment securities		$	105		$	4		$	2

The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale. During 2017, CMS Energy and Consumers sold the mutual fund securities and used the proceeds to purchase U.S. Treasury debt securities. CMS Energy reclassified gains of $2 million ($1 million, net of tax) from AOCI and included this amount in other income on the consolidated statements of income. This amount included Consumers’ gains of $2 million ($1 million, net of tax). During 2016 and 2015, realized gains and losses on the sales were immaterial for CMS Energy and Consumers.

Consumers recognized a gain of$14 million in 2017 and $9 million in 2015 from transferring shares of CMS Energy common stock to its 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.

Consumers Energy Company [Member]

Financial Instruments

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, 2017															December 31, 2016
				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		$	21		$	21		$	-		$	-		$	21		$	22		$	22		$	-		$	-		$	22
Notes    receivable2			1,371			1,464			-			-			1,464			1,326			1,415			-			-			1,415
Securities held    to maturity			16			16			-			16			-			13			13			-			13			-
Liabilities
Long-term    debt3			10,204			10,715			-			9,363			1,352			9,504			9,953			-			8,990			963
Long-term    payables4			27			26			-			-			26			17			17			-			-			17
Consumers
Assets
Long-term    receivables1		$	21		$	21		$	-		$	-		$	21		$	22		$	22		$	-		$	-		$	22
Notes    receivable5			17			17			-			-			17			45			45			-			-			45
Liabilities
Long-term    debt6			5,904			6,236			-			4,883			1,353			5,628			5,903			-			4,940			963

1Includes current accounts receivable of $14 million at December 31, 2017 and $12 million at December 31, 2016.  

2Includes current portion of notes receivable of $200 million at December 31, 2017 and $219 million at December 31, 2016.

3Includes current portion of long-term debt of $1.1 billion at December 31, 2017 and $864 million at December 31, 2016.

4Includes current portion of long-term payables of $3 million at December 31, 2017 and$1 million at December 31, 2016.

5Includes current portion of notes receivable of $17 million at December 31, 2017 and $29 million at December 31, 2016.

6Includes current portion of long-term debt of $343 million at December 31, 2017 and $375 million at December 31, 2016.

At CMS Energy, notes receivable consisted primarily of EnerBank’s fixed-rate installment loans. EnerBank estimated 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 estimated 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 calculated market yields and prices for the debt using a matrix method incorporating 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 were excluded from the fair value measurements of long-term debt. At December 31, 2017 and 2016, 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, 2017												December 31, 2016
				Unrealized			Unrealized			Fair						Unrealized			Unrealized			Fair
	Cost			Gains			Losses			Value			Cost			Gains			Losses			Value
CMS Energy, including Consumers
Available for sale
DB SERP
Debt securities		$	141		$	-			-		$	141		$	-		$	-		$	-		$	-
Mutual funds			-			-			-			-			141			-			-			141
Held to maturity
Debt securities			16			-			-			16			13			-			-			13
Consumers
Available for sale
DB SERP
Debt securities		$	102		$	-		$	-		$	102		$	-		$	-		$	-		$	-
Mutual funds			-			-			-			-			102			-			-			102
CMS Energy    common stock			2			19			-			21			4			29			-			33

The DB SERP debt securities classified as available for sale at December 31, 2017 were U.S. Treasury debt securities with maturities ranging from one to ten years. The DB SERP mutual funds classified as available for sale at December 31, 2016 held primarily fixed-income instruments of varying maturities. Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

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	2017			2016			2015
CMS Energy, including Consumers
Proceeds from sales of investment securities		$	145		$	6		$	3
Consumers
Proceeds from sales of investment securities		$	105		$	4		$	2

The sales proceeds for all periods represent sales of investments that were held within the DB SERP and classified as available for sale. During 2017, CMS Energy and Consumers sold the mutual fund securities and used the proceeds to purchase U.S. Treasury debt securities. CMS Energy reclassified gains of $2 million ($1 million, net of tax) from AOCI and included this amount in other income on the consolidated statements of income. This amount included Consumers’ gains of $2 million ($1 million, net of tax). During 2016 and 2015, realized gains and losses on the sales were immaterial for CMS Energy and Consumers.

Consumers recognized a gain of$14 million in 2017 and $9 million in 2015 from transferring shares of CMS Energy common stock to its 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.