Financial Instruments

9 Months Ended

Sep. 30, 2018

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Financial Instruments

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 5, Fair Value Measurements.

In Millions
	September 30, 2018															December 31, 2017
				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		$	21		$	21		$	—		$	—		$	21
Notes receivable2		1,640			1,730			—			—			1,730			1,371			1,464			—			—			1,464
Securities held to maturity		22			21			—			21			—			16			16			—			16			—
Liabilities
Long-term payables3		26			26			—			—			26			27			26			—			—			26
Long-term debt4		10,817			10,798			445			9,088			1,265			10,204			10,715			—			9,363			1,352
Consumers
Assets
Long-term receivables1		$	22		$	22		$	—		$	—		$	22		$	21		$	21		$	—		$	—		$	21
Notes receivable5		17			17			—			—			17			17			17			—			—			17
Notes receivable – related party6		107			105			—			—			105			—			—			—			—			—
Liabilities
Long-term debt7		6,115			6,083			—			4,818			1,265			5,904			6,236			—			4,883			1,353

¹  Includes current accounts receivable of $15 million at September 30, 2018 and $14 millionDecember 31, 2017.

²  Includes current portion of notes receivable of $263 million at September 30, 2018 and $200 million at December 31, 2017. For further details, see Note 7, Notes Receivable.

³  Includes current portion of long-term payables of $3 million at September 30, 2018 and December 31, 2017.

⁴  Includes current portion of long-term debt of $1.9 billion at September 30, 2018 and $1.1 billion at December 31, 2017.

⁵  Includes current portion of notes receivable of $17 million at September 30, 2018 and December 31, 2017.

⁶  Includes current portion of notes receivable – related party of $7 million at September 30, 2018. For further details on this note receivable, see the DB SERP discussion below.

⁷  Includes current portion of long-term debt of $876 million at September 30, 2018 and $343 million at December 31, 2017.

The effects of third-party credit enhancements were excluded from the fair value measurements of long-term debt. The principal amount of CMS Energy’s long-term debt supported by third-party credit enhancements was $35 million at September 30, 2018 and $103 million at December 31, 2017. The entirety of these amounts 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
	September 30, 2018													December 31, 2017
	Cost			Unrealized Gains			Unrealized Losses				Fair Value			Cost			Unrealized Gains			Unrealized Losses			Fair Value
CMS Energy, including Consumers
Available for sale
DB SERP
Debt securities		$	—		$	—		$	—			$	—		$	141		$	—		$	—		$	141
Held to maturity
Debt securities		22			—			(1		)		21			16			—			—			16
Consumers
Available for sale
DB SERP
Debt securities		$	—		$	—		$	—			$	—		$	102		$	—		$	—		$	102
CMS Energy common stock		—			—			—				—			2			19			—			21

DB SERP: 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. In July 2018, CMS Energy and Consumers sold the DB SERP debt securities and CMS Energy issued a $146 million demand note payable to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028. The demand note payable and associated DB SERP investment were eliminated on CMS Energy’s consolidated balance sheets. The portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets at September 30, 2018.

Held-to-maturity Debt Securities: Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

CMS Energy Common Stock: In January 2018, Consumers implemented ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In accordance with the standard, as of January 1, 2018, Consumers removed a $19 million unrealized gain on its investment in CMS Energy common stock from AOCI and recorded the gain in retained earnings.

In January 2018, Consumers transferred substantially all of its shares in CMS Energy common stock to a related charitable foundation. Consumers’ remaining equity investment in CMS Energy common stock was $1 million at September 30, 2018. In accordance with the new standard, as of January 1, 2018, Consumers’ investment in CMS Energy common stock was no longer classified as available for sale. Therefore, this amount is not presented in the table above. There were no material changes in the fair value of Consumers’ investment in CMS Energy common stock during the nine months ended September 30, 2018. For further details on CMS Energy’s and Consumers’ accounting for this new standard, see Note 1, New Accounting Standards.

Consumers Energy Company

Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]

Financial Instruments

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 5, Fair Value Measurements.

In Millions
	September 30, 2018															December 31, 2017
				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		$	21		$	21		$	—		$	—		$	21
Notes receivable2		1,640			1,730			—			—			1,730			1,371			1,464			—			—			1,464
Securities held to maturity		22			21			—			21			—			16			16			—			16			—
Liabilities
Long-term payables3		26			26			—			—			26			27			26			—			—			26
Long-term debt4		10,817			10,798			445			9,088			1,265			10,204			10,715			—			9,363			1,352
Consumers
Assets
Long-term receivables1		$	22		$	22		$	—		$	—		$	22		$	21		$	21		$	—		$	—		$	21
Notes receivable5		17			17			—			—			17			17			17			—			—			17
Notes receivable – related party6		107			105			—			—			105			—			—			—			—			—
Liabilities
Long-term debt7		6,115			6,083			—			4,818			1,265			5,904			6,236			—			4,883			1,353

¹  Includes current accounts receivable of $15 million at September 30, 2018 and $14 millionDecember 31, 2017.

²  Includes current portion of notes receivable of $263 million at September 30, 2018 and $200 million at December 31, 2017. For further details, see Note 7, Notes Receivable.

³  Includes current portion of long-term payables of $3 million at September 30, 2018 and December 31, 2017.

⁴  Includes current portion of long-term debt of $1.9 billion at September 30, 2018 and $1.1 billion at December 31, 2017.

⁵  Includes current portion of notes receivable of $17 million at September 30, 2018 and December 31, 2017.

⁶  Includes current portion of notes receivable – related party of $7 million at September 30, 2018. For further details on this note receivable, see the DB SERP discussion below.

⁷  Includes current portion of long-term debt of $876 million at September 30, 2018 and $343 million at December 31, 2017.

The effects of third-party credit enhancements were excluded from the fair value measurements of long-term debt. The principal amount of CMS Energy’s long-term debt supported by third-party credit enhancements was $35 million at September 30, 2018 and $103 million at December 31, 2017. The entirety of these amounts 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
	September 30, 2018													December 31, 2017
	Cost			Unrealized Gains			Unrealized Losses				Fair Value			Cost			Unrealized Gains			Unrealized Losses			Fair Value
CMS Energy, including Consumers
Available for sale
DB SERP
Debt securities		$	—		$	—		$	—			$	—		$	141		$	—		$	—		$	141
Held to maturity
Debt securities		22			—			(1		)		21			16			—			—			16
Consumers
Available for sale
DB SERP
Debt securities		$	—		$	—		$	—			$	—		$	102		$	—		$	—		$	102
CMS Energy common stock		—			—			—				—			2			19			—			21

DB SERP: 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. In July 2018, CMS Energy and Consumers sold the DB SERP debt securities and CMS Energy issued a $146 million demand note payable to the DB SERP rabbi trust. The demand note bears interest at an annual rate of 4.10 percent and has a maturity date of 2028. The demand note payable and associated DB SERP investment were eliminated on CMS Energy’s consolidated balance sheets. The portion of the demand note attributable to Consumers was recorded as a note receivable – related party on Consumers’ consolidated balance sheets at September 30, 2018.

Held-to-maturity Debt Securities: Debt securities classified as held to maturity consisted primarily of mortgage-backed securities and Utah Housing Corporation bonds held by EnerBank.

CMS Energy Common Stock: In January 2018, Consumers implemented ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In accordance with the standard, as of January 1, 2018, Consumers removed a $19 million unrealized gain on its investment in CMS Energy common stock from AOCI and recorded the gain in retained earnings.

In January 2018, Consumers transferred substantially all of its shares in CMS Energy common stock to a related charitable foundation. Consumers’ remaining equity investment in CMS Energy common stock was $1 million at September 30, 2018. In accordance with the new standard, as of January 1, 2018, Consumers’ investment in CMS Energy common stock was no longer classified as available for sale. Therefore, this amount is not presented in the table above. There were no material changes in the fair value of Consumers’ investment in CMS Energy common stock during the nine months ended September 30, 2018. For further details on CMS Energy’s and Consumers’ accounting for this new standard, see Note 1, New Accounting Standards.