Net cash required to settle forward contracts

[Table of Contents](#iedef37dc53354d4baa10c50c5095e29f_25)The initial forward price in the forward equity sale contracts includes a deduction for commissions and will be adjusted on a daily basis over the term based on an interest rate factor and decreased on certain dates by certain predetermined amounts to reflect expected dividend payments. No amounts are recorded on CMS Energy’s consolidated balance sheets until settlements of the forward equity sale contracts occur. If CMS Energy had elected to net cash settle the contracts as of June 30, 2022, it would have been required to pay $9 million. If CMS Energy had elected to net share settle the contracts as of June 30, 2022, CMS Energy would have been required to deliver 139,666 shares.4:    Fair Value MeasurementsAccounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. When measuring fair value, CMS Energy and Consumers are required to incorporate all assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. A fair value hierarchy prioritizes inputs used to measure fair value according to their observability in the market. The three levels of the fair value hierarchy are as follows:•Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities.•Level 2 inputs are observable, market-based inputs, other than Level 1 prices. Level 2 inputs may include quoted prices for similar assets or liabilities in active markets, quoted prices in inactive markets, and inputs derived from or corroborated by observable market data.•Level 3 inputs are unobservable inputs that reflect CMS Energy’s or Consumers’ own assumptions about how market participants would value their assets and liabilities.CMS Energy and Consumers classify fair value measurements within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement in its entirety.Assets and Liabilities Measured at Fair Value on a Recurring BasisPresented in the following table are CMS Energy’s and Consumers’ assets and liabilities recorded at fair value on a recurring basis:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| In Millions |
|  | CMS Energy, including Consumers |  | Consumers |
|  | June 302022 | December 312021 |  | June 302022 | December 312021 |
| Assets1 |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |
| Restricted cash equivalents |  | $ | 19  |  |  | $ | 24  |  |  |  | $ | 18  |  |  | $ | 22  |  |
| Nonqualified deferred compensation plan assets |  | 23  |  |  | 27  |  |  |  | 17  |  |  | 21  |  |
| Derivative instruments |  | 4  |  |  | 2  |  |  |  | 3  |  |  | 2  |  |
| Total assets |  | $ | 46  |  |  | $ | 53  |  |  |  | $ | 38  |  |  | $ | 45  |  |
| Liabilities1 |  |  |  |  |  |  |  |  |  |
| Nonqualified deferred compensation plan liabilities |  | $ | 23  |  |  | $ | 27  |  |  |  | $ | 17  |  |  | $ | 21  |  |
| Derivative instruments |  | 4  |  |  | 7  |  |  |  | —  |  |  | —  |  |
| Total liabilities |  | $ | 27  |  |  | $ | 34  |  |  |  | $ | 17  |  |  | $ | 21  |  |

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