10-K

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended:

December 31, 2016

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________ to _______________

Commission File No.	Name of Registrant, State of Incorporation, Address of Principal Executive Offices, and Telephone No.	IRS Employer Identification No.
000-49965	MGE Energy, Inc. (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 mgeenergy.com	39-2040501
000-1125	Madison Gas and Electric Company (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 mge.com	39-0444025

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

	Title of Class	Name of Each Exchange on which Registered
MGE Energy, Inc.	Common Stock, $1 Par Value Per Share	The Nasdaq Stock Market

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

	Title of Class
Madison Gas and Electric Company	Common Stock, $1 Par Value Per Share

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

MGE Energy, Inc.	Yes [X] No [   ]
Madison Gas and Electric Company	Yes [X] No [   ]

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

MGE Energy, Inc.	Yes [  ] No [X]
Madison Gas and Electric Company	Yes [  ] No [X]

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Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files): Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act:

	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company
MGE Energy, Inc.	X
Madison Gas and Electric Company			X

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

MGE Energy, Inc.	Yes [  ] No [X]
Madison Gas and Electric Company	Yes [  ] No [X]

The aggregate market value of the voting and nonvoting common equity held by nonaffiliates of each registrant as of June 30, 2016, was as follows:

MGE Energy, Inc.	$1,954,670,687
Madison Gas and Electric Company	$0

The number of shares outstanding of each registrant's common stock as of February 1, 2017, were as follows:

MGE Energy, Inc.	34,668,370
Madison Gas and Electric Company	17,347,894

DOCUMENTS INCORPORATED BY REFERENCE

Portions of MGE Energy, Inc.'s definitive proxy statement to be filed on or before March 27, 2017, relating to its annual meeting of shareholders, are incorporated by reference into Part III of this annual report on Form 10-K.

Madison Gas and Electric Company meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore omitting (i.) the information otherwise required by Item 601 of Regulation S-K relating to a list of subsidiaries of the registrant as permitted by General Instruction (I)(2)(b), (ii.) the information otherwise required by Item 6 relating to Selected Financial Data as permitted by General Instruction (I)(2)(a), (iii.) the information otherwise required by Item 10 relating to Directors and Executive Officers as permitted by General Instruction (I)(2)(c), (iv.) the information otherwise required by Item 11 relating to executive compensation as permitted by General Instruction (I)(2)(c), (v.) the information otherwise required by Item 12 relating to Security Ownership of Certain Beneficial Owners and Management as permitted by General Instruction (I)(2)(c), and (vi.) the information otherwise required by Item 13 relating to Certain Relationships and Related Transactions as permitted by General Instruction (I)(2)(c).

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Table of Contents

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Filing Format

This combined Form 10-K is being filed separately by MGE Energy, Inc. (MGE Energy) and Madison Gas and Electric Company (MGE). MGE is a wholly owned subsidiary of MGE Energy and represents a majority of its assets, liabilities, revenues, expenses, and operations. Thus, all information contained in this report relates to, and is filed by, MGE Energy. Information that is specifically identified in this report as relating solely to MGE Energy, such as its financial statements and information relating to its nonregulated business, does not relate to, and is not filed by, MGE. MGE makes no representation as to that information. The terms "we" and "our," as used in this report, refer to MGE Energy and its consolidated subsidiaries, unless otherwise indicated.

Forward-Looking Statements

This report, and other documents filed by MGE Energy and MGE with the Securities and Exchange Commission (SEC) from time to time, contain forward-looking statements that reflect management's current assumptions and estimates regarding future performance and economic conditions—especially as they relate to economic conditions, future load growth, revenues, expenses, capital expenditures, financial resources, regulatory matters, and the scope and expense associated with future environmental regulation. These forward-looking statements are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "expect," "anticipate," "estimate," "could," "should," "intend," "will," and other similar words generally identify forward-looking statements. Both MGE Energy and MGE caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied.

The factors that could cause actual results to differ materially from the forward-looking statements made by a registrant include (a) those factors discussed in Item 1A. Risk Factors, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8. Financial Statements and Supplementary Data, Footnote 17. Commitments and Contingencies, and (b) other factors discussed herein and in other filings made by that registrant with the SEC.

Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. MGE Energy and MGE undertake no obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date of this report, except as required by law.

Where to Find More Information

The public may read and copy any reports or other information that MGE Energy and MGE file with the SEC at the SEC's public reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents also are available to the public from commercial document retrieval services, the website maintained by the SEC at sec.gov, MGE Energy's website at mgeenergy.com, and MGE's website at mge.com. Copies may be obtained from our websites free of charge. Information contained on MGE Energy's and MGE's websites shall not be deemed incorporated into, or to be a part of, this report.

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Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report

Abbreviations, acronyms, and definitions used in the text and notes of this report are defined below.

MGE Energy and Subsidiaries:
CWDC	Central Wisconsin Development Corporation
MAGAEL	MAGAEL, LLC
MGE	Madison Gas and Electric Company
MGE Energy	MGE Energy, Inc.
MGE Power	MGE Power, LLC
MGE Power Elm Road	MGE Power Elm Road, LLC
MGE Power West Campus	MGE Power West Campus, LLC
MGE Services	MGE Services, LLC
MGE State Energy Services	MGE State Energy Services, LLC
MGE Transco	MGE Transco Investment, LLC
MGEE Transco	MGEE Transco, LLC
NGV Fueling Services	NGV Fueling Services, LLC
Other Defined Terms:
AFUDC	Allowance for Funds Used During Construction
AICPA	American Institute of Certified Public Accountants
ANR	ANR Pipeline Company
ARO	Asset Retirement Obligation
ATC	American Transmission Company LLC
ATC Holdco	ATC Holdco, LLC
BART	Best Available Retrofit Technology
Blount	Blount Station
CAA	Clean Air Act
CAVR	Clean Air Visibility Rule
CCR	Coal Combustion Residual
CIAC	Contributions in Aid of Construction
CO2	Carbon Dioxide
Codification	Financial Accounting Standards Board Accounting Standards Codification
Columbia	Columbia Energy Center
Cooling degree days	Measure of the extent to which the average daily temperature is above 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide cooling
COSO	Committee of Sponsoring Organizations
CPP	Clean Power Plan
CSAPR	Cross-State Air Pollution Rule
CWA	Clean Water Act
Dth	Dekatherms
EEI	Edison Electric Institute
EGUs	Electric Generating Units
ELG	Effluent Limitations Guidelines
Elm Road Units	Elm Road Generating Station
EPA	United States Environmental Protection Agency
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FTR	Financial Transmission Rights
GAAP	Generally Accepted Accounting Principles
GHG	Greenhouse Gas
Heating degree days (HDD)	Measure of the extent to which the average daily temperature is below 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide heating
ICF	Insurance Continuance Fund
IRS	Internal Revenue Service
kVA	Kilovolt Ampere
kWh	Kilowatt-hour

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MISO	Midcontinent Independent System Operator Inc. (a regional transmission organization)
MRO	Midwest Reliability Organization
MW	Megawatt
MWh	Megawatt-hour
NAAQS	National Ambient Air Quality Standards
Nasdaq	The Nasdaq Stock Market
NERC	North American Electric Reliability Corporation
NNG	Northern Natural Gas Company
NO2	Nitrogen Dioxide
NOV	Notice of Violation
NOx	Nitrogen Oxides
NYSE	New York Stock Exchange
PCBs	Polychlorinated Biphenyls
PGA	Purchased Gas Adjustment clause
PJM	PJM Interconnection, LLC (a regional transmission organization)
PM	Particulate Matter
PPA	Purchased power agreement
ppb	Parts Per Billion
PSCW	Public Service Commission of Wisconsin
REC	Renewable Energy Credit
Riverside	Riverside Energy Center in Beloit, Wisconsin
ROE	Return on Equity
RTO	Regional Transmission Organization
SCR	Selective Catalytic Reduction
SEC	Securities and Exchange Commission
SIP	State Implementation Plan
SO2	Sulfur Dioxide
the State	State of Wisconsin
Stock Plan	Direct Stock Purchase and Dividend Reinvestment Plan of MGE Energy
UW	University of Wisconsin at Madison
VIE	Variable Interest Entity
WCCF	West Campus Cogeneration Facility
WDNR	Wisconsin Department of Natural Resources
WEPCO	Wisconsin Electric Power Company
Working capital	Current assets less current liabilities
WPDES	Wisconsin Pollutant Discharge Elimination System
WPL	Wisconsin Power and Light Company
WPSC	Wisconsin Public Service Corporation
WRERA	Worker, Retiree and Employer Recovery Act of 2008
XBRL	eXtensible Business Reporting Language

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PART I.

Item 1. Business.

MGE Energy operates in the following business segments:

·

Regulated electric utility operations – generating, purchasing, and distributing electricity through MGE.

·

Regulated gas utility operations – purchasing and distributing natural gas through MGE.

·

Nonregulated energy operations – owning and leasing electric generating capacity that assists MGE through MGE Energy's wholly owned subsidiaries MGE Power Elm Road and MGE Power West Campus.

·

Transmission investments – representing our investment in American Transmission Company LLC, a company engaged in the business of providing electric transmission services primarily in Wisconsin, and our investment in ATC Holdco, a company created to facilitate out-of-state electric transmission development and investments.

·

All other – investing in companies and property that relate to the regulated operations and financing the regulated operations, through its wholly owned subsidiaries CWDC, MAGAEL, MGE State Energy Services, NGV Fueling Services, and Corporate functions.

MGE's utility operations represent a majority of the assets, liabilities, revenues, expenses, and operations of MGE Energy. MGE Energy's nonregulated energy operations currently include an undivided interest in two coal-fired generating units located in Oak Creek, Wisconsin, which we refer to as the Elm Road Units, and an undivided interest in a cogeneration facility located on the Madison campus of the University of Wisconsin, which we refer to as the West Campus Cogeneration Facility or WCCF.

As a public utility, MGE is subject to regulation by the PSCW and the FERC. The PSCW has authority to regulate most aspects of MGE's business including rates, accounts, issuance of securities, and plant siting. The PSCW also has authority over certain aspects of MGE Energy as a holding company of a public utility. FERC has jurisdiction, under the Federal Power Act, over certain accounting practices and certain other aspects of MGE's business.

MGE Energy's subsidiaries are also subject to regulation under local, state, and federal laws regarding air and water quality and solid waste disposal. See "Environmental" below.

MGE Energy was organized as a Wisconsin corporation in 2001. MGE was organized as a Wisconsin corporation in 1896. Their principal offices are located at 133 South Blair Street, Madison, Wisconsin 53788, and their telephone number is (608) 252-7000.

Electric Utility Operations

MGE distributes electricity in a service area covering a 316 square-mile area of Dane County, Wisconsin. The service area includes the city of Madison, Wisconsin. It owns or leases ownership interests in electric generation facilities located in Wisconsin and Iowa.

At December 31, 2016, MGE supplied electric service to approximately 149,000 customers, with approximately 90% located in the cities of Fitchburg, Madison, Middleton, and Monona and 10% in adjacent areas. Of the total number of customers, approximately 87% were residential and 13% were commercial or industrial. Electric retail revenues for 2016, 2015, and 2014 were comprised of the following:

	Year Ended December 31,
	2016	2015	2014
Residential	33.9%	32.6%	33.3%
Commercial	52.9%	53.2%	52.8%
Industrial	4.4%	4.8%	4.8%
Public authorities (including the UW)	8.8%	9.4%	9.1%
Total	100.0%	100.0%	100.0%

Electric operations accounted for approximately 75.2%, 74.2%, and 64.0% of MGE's total 2016, 2015, and 2014 regulated revenues, respectively.

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See Item 2. Properties, for a description of MGE's electric utility plant.

MGE is registered with North American Electric Reliability Corporation (NERC) and one regional entity, the Midwest Reliability Organization (MRO). The essential purposes of these entities are the development and implementation of regional and NERC reliability standards; and determining compliance with those standards, including enforcement mechanisms.

Transmission

American Transmission Company LLC (ATC) was formed by utilities who were required by Wisconsin law to contribute their transmission facilities to it in 2001, and is owned by those utilities and their affiliates. ATC's purpose is to provide reliable, economic transmission service to all customers in a fair and equitable manner. ATC plans, constructs, operates, maintains, and expands transmission facilities that it owns to provide adequate and reliable transmission of power. ATC is regulated by FERC for all rate terms and conditions of service, is regulated by the PSCW as to some aspects of its governance and is a transmission-owning member of the MISO.

Regional Transmission Organizations (RTO)

MISO

MGE is a nontransmission owning member of the MISO. MISO, a FERC approved RTO, is responsible for monitoring the electric transmission system that delivers power from generating plants to wholesale power transmitters. MISO's role is to ensure equal access to the transmission system and to maintain or improve electric system reliability in the Midwest.

MISO maintains a bid-based energy market. MGE offers substantially all of its generation on the MISO market and purchases much of its load requirement from the MISO market in accordance with the MISO Tariff. MGE participates in the ancillary services market operated by MISO. That market is an extension of the existing energy market in which MISO assumes the responsibility of maintaining sufficient generation reserves. In the ancillary services market, MISO provides the reserves for MGE's load, and MGE may offer to sell reserves from its generating units.

MGE participates in the voluntary capacity auction, which provides an optional monthly forum for buyers and sellers of aggregate planning resource credits to interact. Load serving entities, such as MGE, may participate in the voluntary capacity auction potentially to obtain the necessary aggregate planning resource credits needed to meet their planning reserve margin requirement established by the PSCW. Generator owners may participate to sell any excess aggregate planning resource credits that are not needed by them.

PJM

MGE is a member of PJM. PJM, an RTO, is a neutral and independent party that coordinates and directs the operation of the transmission grid within its area of coverage, administers a competitive wholesale electricity market, and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

Fuel supply and generation

MGE satisfies its customers' electric demand with internal generation and purchased power. Sources used depend on market prices, generating unit availability, weather, and customer demand. During 2016, 2015, and 2014, MGE's electric energy delivery requirements were satisfied from the following fuel sources:

	Year Ended December 31,
	2016	2015	2014
Coal	48.2%	47.9%	47.8%
Natural gas(a)	18.6%	9.1%	3.2%
Fuel oil	0.1%	0.1%	0.1%
Renewable sources	2.8%	3.0%	3.1%
Purchased power
Renewable	8.0%	8.2%	8.7%
Other	22.3%	31.7%	37.1%
Total	100.0%	100.0%	100.0%

(a)

MGE's electric operations burn natural gas in several of its peaking power plants. The market price of natural gas decreased in 2016, which improved the economics of natural gas-fueled generation over other types of generation.

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Generation Sources

MGE receives electric generation supply from coal-fired, gas-fired, and renewable energy sources. These sources include owned facilities as well as facilities leased from affiliates and accounted for under our nonregulated energy operations. See Item 2. Properties for more information regarding these generation sources, including location, capacity, ownership or lease arrangement, and fuel source. See "Nonregulated Energy Operations" below for more information regarding generating capacity leased to MGE by nonregulated subsidiaries.

Purchased power

MGE enters into short and long-term purchase power commitments with third parties to meet a portion of its anticipated electric energy supply needs. The following table identifies purchase power commitments at December 31, 2016, with unaffiliated parties for the next five years.

(Megawatts)	2017	2018	2019	2020	2021
Purchase power commitments	152.5	102.5	98.5	98.5	98.5

Gas Utility Operations

MGE transports and distributes natural gas in a service area covering 1,682 square miles in seven south-central Wisconsin counties. The service area includes the city of Madison, Wisconsin and surrounding areas.

At December 31, 2016, MGE supplied natural gas service to approximately 154,000 customers in the cities of Elroy, Fitchburg, Lodi, Madison, Middleton, Monona, Prairie du Chien, Verona, and Viroqua; 25 villages; and all or parts of 48 townships. Of the total number of customers, approximately 90% were residential and 10% were commercial or industrial. Gas revenues for 2016, 2015, and 2014 were comprised of the following:

	Year Ended December 31,
	2016	2015	2014
Residential	60.2%	59.4%	53.0%
Commercial	34.9%	35.7%	34.3%
Industrial(a)	1.1%	1.3%	11.0%
Transportation service and other(a)	3.8%	3.6%	1.7%
Total	100.0%	100.0%	100.0%
(a)   During 2015, a large interruptible industrial customer decided to purchase gas from a third party supplier and
to use MGE's facilities for the transport of that gas, resulting in a shift in gas revenues between industrial
and transportation services.

Gas operations accounted for approximately 24.8%, 25.8%, and 36.0% of MGE's total 2016, 2015, and 2014 regulated revenues, respectively.

MGE can curtail gas deliveries to its interruptible customers. Approximately 3% of retail gas deliveries in 2016 and 2015 were to interruptible customers.

Gas supply

MGE has physical interconnections with ANR Pipeline Company (ANR) and Northern Natural Gas Company (NNG). MGE's primary service territory, which includes Madison and the surrounding area, receives deliveries at one NNG and four ANR gate stations. MGE's outlying territory receives deliveries at NNG gate stations located in Elroy, Prairie du Chien, Viroqua, and Crawford County. Interconnections with two major pipelines provide competition in interstate pipeline service and a more reliable and economical gas supply mix, which includes gas from Canada and from the mid-continent and Gulf/offshore regions in the United States.

During the winter months, when customer demand is high, MGE is primarily concerned with meeting its obligation to firm customers. MGE meets customer demand by using firm supplies under contracts finalized before the heating season, supplies in storage (injected during the summer), and other firm supplies purchased during the winter period.

By contract, a total of 5,936,318 Dth of gas can be injected into ANR's storage fields in Michigan from April 1 through October 31. These gas supplies are then available for withdrawal during the subsequent heating season, November 1 through March 31. Using storage allows MGE to buy gas supplies during the summer season, when prices are normally lower, and withdraw these supplies during the winter season, when prices are typically higher. Storage also gives MGE more flexibility in meeting daily load fluctuations.

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MGE's contracts for firm transportation service of gas include winter maximum daily quantities of:

·

162,150 Dth (including 106,078 Dth of storage withdrawals) on ANR.

·

65,828 Dth on NNG.

Nonregulated Energy Operations

MGE Energy, through its subsidiaries, has developed generation sources that assist MGE in meeting the electricity needs of its customers. These sources consist of the Elm Road Units and the WCCF, which are leased by MGE Power Elm Road and MGE Power West Campus, respectively, to MGE. See Item 2. Properties for a description of these facilities, their joint owners, and the related lease arrangements.

Transmission Investments

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which is owned by MGE Energy. At December 31, 2016, MGE Transco held a 3.6% ownership interest in ATC.

In 2011, ATC and Duke Energy announced the creation of a joint venture, Duke-American Transmission Company, LLC, that seeks to build, own, and operate new electric transmission infrastructure in North America to address increasing demand for affordable, reliable transmission capacity.

In 2016, ATC Holdco was formed by several of the members of ATC, including MGE Energy, to facilitate electric transmission development and investments outside of Wisconsin. MGE Energy's ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary. At December 31, 2016, MGEE Transco held a 4.0% ownership interest in ATC Holdco. In the near term, it is expected that ATC Holdco will be pursuing transmission development opportunities that typically have long development and investment lead times before becoming operational.

Environmental

MGE Energy and MGE are subject to frequently changing local, state, and federal regulations concerning air quality, water quality, land use, threatened and endangered species, hazardous materials handling, and solid waste disposal. These regulations affect the manner in which they conduct their operations, the costs of those operations, as well as capital and operating expenditures. Regulatory initiatives, proposed rules, and court challenges to adopted rules, have the potential to have a material effect on our capital expenditures and operating costs. In addition to the regulations discussed below, MGE continues to track state and federal initiatives such as potential changes to regulations governing polychlorinated biphenyl (PCB), potential changes to air and water standards, and potential climate change legislation.

Water Quality

EPA's Effluent Limitations Guidelines (ELG) and Standards for Steam Electric Power Generating Point Source Category

The ELG rule establishes federal limits on the amount of metals and other pollutants that can be discharged in wastewater from new and existing steam electric generation plants. The ELG rule mostly covers pollutants that are captured by certain air pollution control systems and via wet ash handling systems at coal-burning power plants with units greater than 50 MW generation capacity. The operators of our Columbia and Elm Road Units have indicated that equipment upgrades may be necessary to comply with the new discharge standards. The rule will be applied to Wisconsin-based power plants as they renew their WPDES permits, beginning in 2018 but no later than 2023. Management believes that any compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

EPA Cooling Water Intake Rules (Section 316(b))

Section 316(b) of the Clean Water Act requires that the cooling water intake structures at electric power plants meet best available technology standards so that mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens) are reduced. The Wisconsin Department of Natural Resources is currently developing guidance and rules to implement the EPA 316(b) rule.

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Both our Blount plant and our Columbia plant have WPDES permits that are up for renewal in 2017 and will need to comply with the 316(b) requirements, Blount has conducted historical studies that will show that it will likely be in compliance with this rule. The operator of our Columbia plant is conducting an intake study to demonstrate compliance and/or identify design criteria needed to meet the new rule requirements prior to Columbia's 2017 WPDES permit renewal. The exact requirements at Blount and Columbia, however, will not be known until the WDNR finalizes its rule, approves the plant operators' approach, and WPDES permits are modified to account for this rule. Nonetheless, MGE expects that the 316(b) rule will not have material effects on its existing plants.

Energy Efficiency and Renewables

The Wisconsin Energy Efficiency and Renewables Act requires that 10% of the state's electricity be generated from renewable sources. MGE is in compliance with the requirement. The costs to comply with the Act and its accompanying regulations are being recovered in rates.

Air Quality

Air quality regulations promulgated by the EPA and Wisconsin Department of Natural Resources (WDNR) in accordance with the Federal Clean Air Act and the Clean Air Act Amendments of 1990 impose restrictions on emission of particulates, sulfur dioxide (SO₂), nitrogen oxides (NO_x), hazardous air pollutants and other pollutants, and require permits for operation of emission sources. These permits must be renewed periodically. Various newly enacted and/or proposed federal and state initiatives may result in additional operating and capital expenditure costs for fossil-fueled electric generating units.

Ozone NAAQS

In October 2015, the EPA revised the primary and secondary ozone NAAQS, lowering it to 70 ppb. The final standard will likely cause Milwaukee County, where our Elm Road Units are located, to be designated as nonattainment for ozone. A nonattainment designation may have an effect on operations at our facilities, however, the NAAQS process involves many steps and any effect on our generation units will not be fully understood until the State of Wisconsin develops, receives approval for, and finalizes an implementation plan for any counties found to be in nonattainment.

The State of Wisconsin has joined a lawsuit filed by several states challenging the EPA's new ozone standard. Oral arguments in this case are scheduled to begin in April 2017. MGE will continue to monitor the EPA's progress on attainment designations and related litigation to assess potential impacts at our facilities, particularly our Elm Road Units.

Nitrogen Dioxide (NO₂) NAAQS

The WDNR has revised its state rules to incorporate the EPA's one hour NO₂ NAAQS rule that was finalized in 2010. The effective date of the state rule was August 1, 2016. The WDNR is currently seeking input from the public on ideas for implementing this one-hour standard. Wisconsin's NO₂ NAAQS rule will affect our stationary fossil-fuel generation sources by requiring that we demonstrate consistency with the NAAQS when applying for certain air permits. Sources that cannot demonstrate compliance with the NAAQS may be required to install emission controls or restrict operations. MGE will continue to monitor developments while the WDNR implements guidance for compliance with the one-hour NAAQS.

EPA's Cross-State Air Pollution Rule: Proposed Ozone Season Update based on 2008 Ozone NAAQS

The EPA's Cross-State Air Pollution Rule (CSAPR) is an interstate air pollution transport rule designed to reduce ozone and fine particulate (PM2.5) air levels in areas that the EPA has determined are being affected by pollution from neighboring and upwind states. This is accomplished in the CSAPR through a reduction in SO₂ and NO_x from qualifying fossil-fuel fired power plants in upwind or "contributing" states. NO_x and SO₂ contribute to fine particulate pollution, and NO_x contributes to ozone formation. Reductions are achieved through a cap and trade system. Individual plants can meet their caps through modifications and/or buying allowances on the market.

In October 2016, the EPA finalized rulemaking for an update to CSAPR that incorporated 2008 Ozone NAAQS levels into the rule (the original CSAPR is based on 1997 Ozone NAAQS levels). The update affects 22 states, including Wisconsin, by further limiting statewide NO_x allowances in each of those states. The rule also includes revisions to CSAPR that are designed to address issues remaining from the D.C. Circuit remand of CSAPR, including Wisconsin's inclusion in the NO_x ozone season portion of the rule. The State of Wisconsin filed a legal challenge to the CSAPR update rule asserting, among other things, that the rule over-controls NO_x emissions in Wisconsin.

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The CSAPR Update rule will further reduce summertime (or Ozone Season) NO_x emissions allocations from power plants starting in 2017. MGE intends to meet the rule requirements through a combination of allocations owned, received, or purchased. Depending on the number of allocations MGE receives for ozone season, the number of allocations that MGE must purchase, and the cost of allocations, this requirement could be material for MGE.

Clean Air Visibility Rule (CAVR)

Columbia is subject to the best available retrofit technology (BART) regulations, a subsection of the EPA's Clean Air Visibility Rule (CAVR), which may require pollution control retrofits. Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR equals compliance with BART, should mean that Columbia will not need to do additional work to meet BART requirements. At this time, however, the BART regulatory obligations, compliance strategies, and costs remain uncertain due to the continued legal challenges surrounding CSAPR and CAVR.

In December 2016, the EPA introduced a final rule (posted online but not yet scheduled for publication in the Federal Register) extending state implementation plan deadlines by three years from 2018 to 2021 for the next implementation phase of the CAVR, which goes beyond BART and may affect utilities. This extension would allow for states to coordinate their CAVR compliance with other compliance efforts, which should lessen the burden to comply. It is too early to determine if the rule will affect MGE. MGE will continue to monitor developments.

Global Climate Change

MGE is a producer of GHG emissions, primarily from the fossil fuel generating facilities it uses to meet customers' energy needs, as well as from its natural gas pipeline system and fleet vehicles. Climate change and the regulatory response to it could significantly affect our operations in a number of ways, including increased operating costs and capital expenditures, restrictions on energy supply options, operational limits on our coal plants, permitting difficulties, and emission limits. MGE management would expect to seek and receive rate recovery of such compliance costs, if and when required. MGE continues to monitor proposed climate change legislation and regulation.

MGE has taken steps to address GHG emissions through voluntary actions. In 2005, MGE implemented its Energy 2015 Plan, which committed to ensuring a balanced, economic energy supply with reduced environmental emissions. The Plan emphasized increased renewable energy, energy efficiency, and new cleaner generation – three strategies that reduced GHG emissions. Under the Plan and other actions, our CO₂ emissions declined from 2005 to 2015 by approximately 20% even though total system energy increased. In 2015, MGE announced its Energy 2030 framework that continues steps to reduce CO₂ emissions. Subject to regulatory approvals and other conditions, MGE aims to increase renewable energy to 25% of retail electric sales by 2025 and to 30% by 2030. Under our Energy 2030 framework, we will also work to reduce CO₂ emissions by 40% from 2005 levels by 2030.

Climate Change Legislation

It is not anticipated that U.S. Congress will enact broad GHG reduction legislation in 2017.

It is not expected that the Wisconsin Legislature will enact broad GHG regulation in 2017.

Greenhouse Gas Regulation

EPA's Greenhouse Gas (GHG) Reduction Guidelines under the Clean Air Act 111d Rule

The EPA's Clean Power Plan (CPP) rule became effective in December 2015, setting guidelines for states to use in developing plans to control GHG emissions from existing fossil fuel-fired EGUs and systems. When fully implemented in 2030, the Clean Power Plan is projected to reduce GHG emissions from this sector by 32% below 2005 levels. States are given up to three years to submit a plan or be subject to a federal plan to meet the reduction goals, and states are expected to meet interim goals starting in 2022 and the final goals in 2030. Implementation of the rule is expected to have a direct impact on coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs.

In October 2015, many states (including Wisconsin) and other litigants filed petitions with the U.S. Court of Appeals for the District of Columbia Circuit. On January 26, 2016, several parties filed a request for a stay of the CPP with the U.S. Supreme Court; and on February 9, 2016, the U.S. Supreme Court granted that request. The CPP may not be implemented until the courts ultimately resolve the underlying legality of the rule, which is expected in 2017.

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Given the pending legal proceedings the nature and timing of any final requirements is subject to uncertainty. If the rule remains substantially in its present form, it is expected to have a material impact on MGE.

Solid Waste

EPA's Coal Combustion Residuals Rule

In December 2014, the EPA finalized its Disposal of Coal Combustion Residuals from Electric Utilities (CCR) rule. The rule became effective in October 2015. It provides that coal ash will be regulated as a solid waste, and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash. The rule also regulates landfills, ash ponds, and other surface impoundments for coal combustion residuals by regulating their design, location, monitoring, and operation. This portion of the rule is accomplished in phases to allow for sites with onsite storage and/or disposal to evaluate their compliance with the rule's design criteria. Landfills and impoundments that cannot meet design criteria will need to close formally within defined timeframes.

The Columbia and Elm Road Units co-owners and plant operators are working through the phased requirements to plan and implement changes necessary at those facilities to meet design criteria. Review of our Elm Road Units has indicated that the costs to comply with this rule are not expected to be significant. Columbia's operator has developed a preliminary implementation schedule for meeting the various deadlines spelled out in the rule. Costs at Columbia will be dependent on what is determined during the evaluation stage. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

Columbia

Based upon current available information, compliance with various environmental requirements and initiatives is expected to result in significant additional operating and capital expenditures at Columbia as noted below.

Columbia Clean Air Act Litigation

Columbia is a coal-fired generating station operated by WPL in which WPL, WPSC, and MGE have ownership interests. In December 2009, the EPA sent a Notice of Violation (NOV) to the co-owners, including MGE. The NOV alleged that WPL and the Columbia co-owners failed to comply with appropriate pre-construction review and permitting requirements and, as a result, violated the Prevention of Significant Deterioration program requirements, Title V Operating Permit requirements of the CAA, and the Wisconsin SIP. In June 2013, the court approved and entered a consent decree entered by the EPA, Sierra Club, and the co-owners of Columbia. One of the requirements of the consent decree requires installation of an SCR system at Columbia Unit 2 by December 31, 2018. Installation of the SCR has been approved by the PSCW and is currently under construction. MGE's share of the projected cost for the SCR system is estimated to be $22-$24 million, with expected completion in 2018.

Employees

As of December 31, 2016, MGE had 704 employees. MGE employs 227 employees who are covered by a collective bargaining agreement with Local Union 2304 of the International Brotherhood of Electrical Workers and 84 employees who are covered by a collective bargaining agreement with Local Union No. 39 of the Office and Professional Employees International Union. Both of these collective bargaining agreements expire on April 30, 2018. There are also 5 employees covered by a collective bargaining agreement with Local Union No. 2006, Unit 6 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial, and Service Workers International Union. This collective bargaining agreement expires on October 31, 2018.

Financial Information About Segments

See Footnote 20 of the Notes to the Consolidated Financial Statements for financial information relating to MGE Energy's and MGE's business segments.

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Executive Officers of the Registrants

As of December 31, 2016, the executive officers of the registrants were as follows:

Executive	Title	Effective Date	Service Years as an Officer
Gary J. Wolter(a) Age: 62	Chairman of the Board, President and Chief Executive Officer	02/01/2002	27
Jeffrey M. Keebler(b) Age: 45	Senior Vice President - Energy Supply and Planning Assistant VP - Energy Supply and Customer Service	07/23/2015 01/01/2012	5
Craig A. Fenrick(b) Age: 57	Senior Vice President - Energy Operations Vice President - Energy Delivery Vice President - Electric Transmission and Distribution	07/23/2015 02/10/2015 01/01/2012	10
Lynn K. Hobbie(b) Age: 58	Senior Vice President - Marketing and Communications	02/01/2000	22
Jeffrey C. Newman(a) Age: 54	Senior Vice President, Chief Financial Officer, Secretary and Treasurer Vice President, Chief Financial Officer, Secretary and Treasurer	07/23/2015 01/01/2009	19
Cari Anne Renlund(b) Age: 43	Vice President and General Counsel Dewitt Ross & Stevens S.C. (law firm) - Partner	11/02/2015 06/11 – 10/15	1

Note: Ages, years of service, and positions as of December 31, 2016.

(a) Executive officer of MGE Energy and MGE.

(b) Executive officer of MGE.

Item 1A. Risk Factors.

MGE Energy and its subsidiaries, including MGE, operate in a market environment that involves significant risks, many of which are beyond their control. The following risk factors may adversely affect their results of operations, cash flows and market price for their publicly traded securities. While MGE Energy and MGE believe they have identified and discussed below the key risk factors affecting their business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect their performance or financial condition in the future.

Regulatory Risk

We are subject to extensive government regulation in our business, which affects our costs and responsiveness to changing events and circumstances.

Our business is subject to regulation at the State and Federal levels. We are subject to regulation as a holding company by the PSCW. MGE is regulated by the PSCW as to its rates, terms and conditions of service; various business practices and transactions; financing; and transactions between it and its affiliates, including MGE Energy. MGE is also subject to regulation by the FERC, which regulates certain aspects of its business. The regulations adopted by the State and Federal agencies affect the manner in which we do business, our ability to undertake specified actions since pre-approval or authorization may be required, the costs of operations, and the level of rates charged to recover such costs. Our ability to attract capital is also dependent, in part, upon our ability to obtain a fair return from the PSCW.

We could be subject to higher costs and potential penalties resulting from mandatory reliability standards.

MGE must adhere to mandatory reliability standards for its electric distribution system established by NERC. These standards cover areas such as critical infrastructure protection, emergency preparedness, facility design, and transmission operations, among others. The critical infrastructure protection standards focus on physical and access security of cyber assets, as well as incident response and recovery planning. MGE could be subject to higher operating costs in order to maintain compliance with the mandatory reliability standards, and any noncompliance could result in sanctions including monetary penalties.

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We are subject to changing environmental laws and regulations that may affect our costs and business plans.

Our subsidiaries are subject to environmental laws and regulations that affect the manner in which they conduct business, including capital expenditures, operating costs and potential liabilities. Changes and developments in these laws and regulations may alter or limit our business plans, make them more costly, or expose us to liabilities for past or current operations.

Numerous environmental laws and regulations govern many aspects of our present and future operations, including air emissions, water quality, wastewater discharges, solid waste, threatened and endangered species, and hazardous waste. These evolving regulations can introduce uncertainty with respect to capital expenditures and operational planning, and can introduce costly delays if previous decisions need to be revisited as a result of judicial mandate or regulatory change. These regulations generally require us to obtain and comply with a wide variety of environmental permits and approvals, and can result in increased capital, operating, and other costs and operating restrictions, particularly with regard to enforcement efforts focused on obligations under existing regulations with respect to power plant emissions and compliance costs associated with regulatory requirements. These effects can be seen not only with respect to new construction but could also require the installation of additional control equipment or other compliance measures such as altered operating conditions at existing facilities.

In addition, we may be a responsible party for environmental clean-up at current or future sites identified as containing hazardous materials or to which waste was sent that is subsequently determined to be hazardous. It is difficult to predict the costs potentially associated with a site clean-up due to the potential joint and several liability for all potentially responsible parties, the nature of the clean-up required, and the availability of recovery from other potentially responsible parties.

The following are significant proposed regulations that are expected to impact our operations:

The EPA's Cross-State Air Pollution Rule (CSAPR) is an interstate air pollution transport rule designed to reduce ozone and fine particulate (PM2.5) air levels in areas that the EPA has determined are being affected by pollution from neighboring and upwind states. In October 2016, the EPA finalized rulemaking for an update to CSAPR that incorporated 2008 Ozone NAAQS levels into the rule (the original CSAPR is based on 1997 Ozone NAAQS levels). The update affects 22 states, including Wisconsin, by further limiting statewide NO_x allowances in each of those states. Depending on the number of allocations MGE receives for ozone season, the number of allocations that MGE must purchase, and the cost of allocations, this requirement could be material for MGE.

In October 2015, the EPA finalized its Clean Power Plan (CPP) rule with an effective date of December 2015, setting guidelines and approval criteria for states to use in developing plans to control GHG emissions from existing fossil fuel-fired electric generating units (EGUs) and systems. Implementation of the rule is expected to have a direct impact on existing coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs. Given the pending legal proceedings, the nature and timing of any final requirements is subject to uncertainty. If the rule remains substantially in its present form, it is expected to have a material impact on MGE.

We face risk for the recovery of fuel and purchased power costs.

MGE has price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE burns natural gas in several of its peak electric generation facilities, and in many cases, the cost of purchased power is tied to the cost of natural gas. Under the electric fuel rules, MGE is required to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band that is currently plus or minus 2% around the amount approved in its most recent rate order. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. Under the electric fuel rules, MGE is required to defer the benefit of lower costs, if its actual fuel costs fall outside the lower end of the range, and is required to defer costs, less any excess revenues, if its actual fuel costs exceed the upper end of the range. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. MGE assumes the risks and benefits of variances that are within the cost tolerance band.

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Operating Risk

We are affected by weather, which affects customer demand and can affect the operation of our facilities.

The demand for electricity and gas is affected by weather. Very warm and very cold temperatures, especially for prolonged periods, can dramatically increase the demand for electricity and gas for cooling and heating, respectively, as opposed to the softening effect of more moderate temperatures. Our electric revenues are sensitive to the summer cooling season and, to a lesser extent, the winter heating season. Similarly, very cold temperatures can dramatically increase the demand for gas for heating. A significant portion of our gas system demand is driven by heating. Extreme summer conditions or storms may stress electric transmission and distribution systems, resulting in increased maintenance costs and limiting the ability to meet peak customer demand.

We could be adversely affected by changes in the development, and utilization by our customers, of power generation, storage, and use technology.

Our revenues and the timing of the recovery of our costs could be adversely affected by improvements in power generation, storage, and use technology.

Advancements in power generation technology, including commercial and residential solar generation installations and commercial micro turbine installations, are improving the cost-effectiveness of customer self-supply of electricity. Improvements in energy storage technology, including batteries and fuel cells, could also better position customers to meet their around-the-clock electricity requirements. Improvements in the energy efficiency of lighting, appliances, and equipment will also affect energy consumption by customers. Such developments could reduce customer purchases of electricity, but may not necessarily reduce our investment and operating requirements due to our obligation to serve customers, including those self-supply customers whose equipment has failed for any reason to provide the power they need whether due to inadequate on-site resources, restricted operating hours, or equipment failure. In addition, since a portion of our costs are recovered through charges based upon the volume of power delivered, reductions in electricity deliveries will affect the timing of our recovery of those costs and may require changes to our rate structures.

Changes in power generation, storage, and use technology could have significant effects on customer behaviors and their energy consumption. Customers could engage in individual conservation efforts by voluntarily reducing their consumption of electricity through voluntary changes in energy use and through the use of more energy efficient lighting, appliances, and equipment. They could also change their consumption of electricity from us through the installation of alternative energy sources, such as roof top solar panels and micro turbines for self-supply. Customer energy conservation could adversely affect our results of operations by reducing our revenues without necessarily changing our operating costs due to our obligation to serve.

We are affected by economic activity within our service area.

Higher levels of development and business activity generally increase the numbers of customers and their use of electricity and gas. Likewise, periods of recessionary economic conditions generally adversely affect our results of operations.

Our ability to obtain an adequate supply of coal could limit our ability to operate our coal-fired facilities.

The availability of coal and the means to transport coal could:

·

Affect our operating costs due to increased costs associated with lower levels of generation or the need for alternate supply or alternate transportation,

·

Limit our ability to generate electricity if we are unable to arrange adequate deliveries of coal, and

·

Result in potentially higher costs for replacement purchased power as well as potential lost market sales opportunities.

A significant portion of our electric generating capacity is dependent on coal. Demand for coal has been impacted by prevailing prices for natural gas and may affect mine performance. Consequently, we are exposed to the risk that counterparties to these contracts will not be able to fulfill their obligations. Disruption in the delivery of fuel, including disruptions as a result of transportation delays, weather, labor relations, force majeure events, or

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environmental regulations affecting any of these fuel suppliers, could limit our ability to generate electricity at our facilities at the desired level. Should counterparties fail to perform, or other unplanned disruptions occur, we may be forced to replace the underlying commitment at higher prices, or we may be forced to reduce generation at our coal units and replace this lost generation through additional power purchases from third parties. These factors may also affect the terms under which any of our existing coal supply or transportation agreements are renewed or replaced upon the expiration of their current terms.

Our ability to manage our purchased power costs is influenced by a number of uncontrollable factors.

We are exposed to additional purchased power costs to the extent that our power needs cannot be fully covered by the supplies available from our existing facilities and contractual arrangements. Those needs, and our costs, could be affected by:

·

Increased demand due to, for example, abnormal weather, customer growth, or customer obligations,

·

The inability to transmit our contracted power from its generation source to our customers due to transmission line constraints, outages, or equipment failures,

·

Reductions in the availability of power from our owned or contracted generation sources due to equipment failures, shortages of fuel or environmental limitations on operations, and

·

Failure to perform on the part of any party from which we purchase capacity or energy, whether due to equipment failures or other causes.

An unexpected change in demand or the availability of generation or transmission facilities can expose us to increased costs of sourcing electricity in the short-term market where pricing may be more volatile.

The equipment and facilities in our operational system are subject to risks which may adversely affect our financial performance.

Weather conditions, accidents, and catastrophic events can result in damage or failures of equipment or facilities and disrupt or limit our ability to generate, transmit, transport, purchase, or distribute electricity and gas. Efforts to repair or replace equipment and facilities may take prolonged periods or may be unsuccessful, or we may be unable to make the necessary improvements to our operational system, causing service interruptions. The resulting interruption of services would result in lost revenues and additional costs. We are also exposed to the risk of accidents or other incidents that could result in damage to or destruction of our facilities or damage to persons or property. Such issues could adversely affect revenues or increase costs to repair and maintain our systems.

Our operations and confidential information are subject to the risk of cyber-attacks.

Our operations rely on sophisticated information technology systems and networks. Cyber-attacks targeting our electronic control systems used at our generating facilities and for electric and gas distribution systems, could result in a full or partial disruption of our operations. Any disruption of these operations could result in a loss of service to customers and loss of revenue, as well as significant expense to repair system damage and remedy security breaches.

Our business requires the collection and retention of personally identifiable information of our customers, shareholders, and employees, who expect that we will adequately protect such information. A significant theft, loss, or fraudulent use of personally identifiable information may cause our business reputation to be adversely impacted and could lead to potentially large costs to notify and protect the impacted persons. The occurrence of such an event may cause us to become subject to legal claims, fines, or penalties, any of which could adversely impact our results of operations.

The safeguards we have may not always be effective due to the evolving nature of cyber-attacks. We cannot guarantee that such protections will be completely successful in the event of a cyber-attack. If the technology systems were to fail or be breached by a cyber-attack, and not be recovered in a timely fashion, we may be unable to fulfill critical business functions and confidential data could be compromised, adversely impacting our financial condition and results of operations.

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We rely on the performance of our information technology systems, the failure of which could have an adverse effect on our business and performance.

We operate in a highly engineered industry that requires the continued operation of sophisticated information technology systems and network infrastructure to manage our finances, to operate our control facilities, to provide electric and gas service to our customers, and to enable compliance with applicable regulatory requirements. Our computer-based systems are vulnerable to interruption or failure due to the age of certain systems, the introduction of viruses, malware, security breaches, fire, power loss, system malfunction, network outages and other events, which may be beyond our control. System interruptions or failures, whether isolated or more widespread, could impact our ability to provide service to our customers, which could have a material adverse effect on our operations and financial performance.

Acts of terrorism could materially and adversely impact our operations and financial condition.

Facilities for electric generation, transmission, and gas distribution are subject to the risk of being potential targets of terrorist threats and activities. A terrorist act at our facilities could result in a disruption of our ability to generate, transmit, transport, purchase, or distribute electricity or natural gas. A possible attack would have additional adverse effects, including environmental ramifications, increased security and insurance costs, as well as general economic volatility or uncertainty within our service territories. The inability to maintain operational continuity and any additional costs incurred for repairing our facilities could materially and adversely affect our financial condition and results of operations.

Failure to attract and retain an appropriately qualified workforce could affect our operations.

Events such as an aging workforce and retirement of key employees without appropriate replacements may lead to operating challenges and increased costs. Some of the challenges include lack of resources, loss of knowledge, and length of time period associated with skill development. Failure to identify qualified replacement employees could result in decreased productivity and increased safety costs. If we are unable to attract and retain an appropriately qualified workforce, our operations could be negatively affected.

Financial Risk

We are exposed to commodity price risk relating to our purchases of natural gas, electricity, coal and oil.

We face commodity price risk exposure with respect to our purchases of natural gas, electricity, coal, oil, and environmental allowances and risk through our use of derivatives, such as futures, forwards and swaps, to manage that commodity price risk. We could experience increased costs as a result of volatility in the market values of those commodities. We could also experience losses on our derivative contracts as a result of that market value volatility or if a counterparty fails to perform under a contract. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these derivative contracts involves our exercise of judgment and use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of these contracts.

Interest rate movements and market performance affects our employee benefit plan costs.

Prevailing interest rates affect our assessment and determination of discount rates that are a key assumption in the determination of the costs and funding of our defined benefit pension plans and may impact the amount of expense and timing of contributions to those plans. The performance of the capital markets affects the values of the assets that are held in trust to satisfy the future obligations under our pension and postretirement benefit plans. We have significant obligations in these areas and hold significant assets in these trusts. A decline in the market value of those assets may increase our current and longer-term funding requirements for these obligations. Changes in the value of trust fund assets may affect the level of required contributions to these trusts to meet benefit obligations. Reduced benefit plan assets could result in increased benefit costs in future years and may increase the amount and accelerate the timing of required future funding contributions.

We are exposed to interest rate risk.

We are exposed to interest rate risk on our variable rate financing. Borrowing levels under commercial paper arrangements vary from period to period depending upon capital investments and other factors. Such interest rate risk means that we are exposed to increased financing costs and associated cash payments as a result of changes in the short-term interest rates.

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We are exposed to credit risk primarily through our regulated energy business.

Credit risk is the loss that may result from counterparty nonperformance. We face credit risk primarily through MGE's regulated energy business. Failure of contractual counterparties to perform their obligations under purchase power agreements, commodity supply arrangements or other agreements may result in increased expenses for MGE as a result of being forced to cover the shortfall in the spot or short-term market, where prices may be more volatile.

As a holding company, we are dependent on upstream cash flows from our subsidiaries for the payment of dividends on our common stock.

As a holding company, we have no operations of our own, and our ability to pay dividends on our common stock is dependent on the earnings and cash flows of our operating subsidiaries and their ability to pay upstream dividends or to repay funds to us. Prior to funding us, our subsidiaries have financial obligations that must be satisfied, including among others, debt service and obligations to trade creditors, and are subject to contractual and regulatory restrictions on the payment of dividends.

Disruptions in the financial markets or changes to our credit ratings may affect our ability to finance at a reasonable cost and in accordance with our planned schedule.

The credit markets have experienced disruption and uncertainty in recent years. To the extent that such issues affect the ability or willingness of credit providers or investors to participate in the credit markets or particular types of investments, or affect their perception of the risk associated with particular types of investments, our cost of borrowing could be affected. We also rely on our strong credit ratings to access the credit markets. If our credit ratings are downgraded for any reason, borrowing costs could increase, potential investors could decrease, or we could be required to provide additional credit assurance, including cash collateral, to contract counterparties.

General economic conditions may affect our operating revenues and our counterparty risks.

Operational

MGE Energy's and MGE's operations are affected by local, national and worldwide economic conditions. The consequences of a prolonged period of reduced economic activity may include lower demand for energy, uncertainty regarding energy prices and the capital and commodity markets, and increased credit risk. A decline in energy consumption may adversely affect our revenues and future growth. Increased credit risk reflects the risk that our retail customers will not pay their bills in a timely manner or at all, which may lead to a reduction in liquidity and an eventual increase in bad debt expense.

Counterparty creditworthiness

Credit risk also includes the risk that trading counterparties that owe us money or product will breach their obligations. MGE's risk management policy is to limit transactions to a group of high quality counterparties. Should the counterparties to these arrangements fail to perform, we may be forced to enter into alternative arrangements. In that event, our financial results could be adversely affected and we could incur losses.

Item 1B. Unresolved Staff Comments.

MGE Energy and MGE

None.

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Item 2. Properties.

Electric Generation

Net summer rated capacity in service at December 31, 2016, was as follows:

Plants	Location	Commercial Operation Date	Fuel	Net Summer Rated Capacity (MW)(a)	No. of Units
Steam plants:
Columbia	Portage, WI	1975 & 1978	Low-sulfur coal	225(b,c)	2
Blount	Madison, WI	1957 & 1961	Gas	103(g)	2
WCCF	Madison, WI	2005	Gas/oil	120(d)	2
Elm Road Units	Oak Creek, WI	2010 & 2011	Coal	106(b,e)	2
Combustion turbines	Madison, WI	1964-2000	Gas/oil	151(f)	6
	Marinette, WI
Portable generators	Madison, WI	1998-2001	Diesel	49(g)	54
Wind turbines	Townships of Lincoln
	and Red River, WI	1999	Wind	1(g,h)	17
	Township of
	Brookfield, IA	2008	Wind	4(g,i)	18
Total				759

(a)

Net summer rated capacity is determined by annual testing and may vary from year to year due to, among other things, the operating and physical conditions of the units.

(b)

Baseload generation.

(c)

MGE's share. See "Columbia" below.

(d)

Facility is jointly owned. Based on the terms of the joint plant agreement between MGE and the UW, the UW has the ability to reduce net capability of these units by approximately 17 MW in the summer. The net summer rated capacity shown reflects this decrease. See "WCCF" below.

(e)

MGE's share. See "Elm Road" below.

(f)

Three facilities are owned by MGE, and three facilities are leased.

(g)

These facilities are owned by MGE.

(h)

Nameplate capacity rating is 11 MW.

(i)

Nameplate capacity rating is 30 MW.

Columbia

MGE and two other utilities jointly own Columbia, a coal-fired generating facility consisting of two 512 MW units, which, at December 31, 2016, accounts for 30% of MGE's net summer rated capacity. Power from this facility is shared in proportion to each owner's ownership interest. At December 31, 2016, MGE had a 22% ownership interest in Columbia. The other owners are WPL, which operates Columbia, and WPSC. The Columbia units burn low-sulfur coal obtained from the Powder River Basin coal fields located in Wyoming. The coal inventory supply for the Columbia units decreased from approximately 88 days on December 31, 2015, to approximately 65 days on December 31, 2016. See "Executive Overview" under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of the reduction in MGE's ownership share in Columbia commencing January 2017 and continuing through June 2020.

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Elm Road Units

MGE Power Elm Road and two other owners own undivided interests in the Elm Road Units, consisting of two 615 MW units, which, at December 31, 2016, account for 14% of MGE's net summer rated capacity. Power from these units is shared in proportion to each owner's ownership interest. MGE Power Elm Road owns an 8.33% ownership interest in the Elm Road Units, and its interest in the Elm Road Units is leased to MGE. The other owners are Wisconsin Energy Corporation, which operates the Units, and WPPI Energy, Inc. The Elm Road Units burn bituminous coal obtained from northern West Virginia and southwestern Pennsylvania, and Powder River Basin coal from Wyoming. MGE's share of the coal inventory supply for the Elm Road Units increased from approximately 50 days on December 31, 2015, to approximately 51 days on December 31, 2016.

MGE leases MGE Power Elm Road's ownership interest in the Elm Road Units pursuant to two separate facility leases. The financial terms of each facility lease include a capital structure of 55% equity and 45% long-term debt, return on equity of 12.7%, and a lease term of 30 years. At the end of the respective lease terms, MGE may, at its option, renew the facility lease for an additional term, purchase the leased ownership interest at fair market value, or allow the lease to end. The Unit 1 and Unit 2 leases commenced with the commercial operation of each respective unit.

WCCF

MGE Power West Campus and the UW jointly own undivided interests in a natural gas-fired cogeneration facility on the UW campus. The facility has the capacity to produce 20,000 tons of chilled water, 500,000 pounds per hour of steam, and approximately 150 MW of electricity. The UW owns 45% of the facility, which represents its interest in the chilled-water and steam assets. These assets are used to meet a part of the UW's need for air-conditioning and steam-heat capacity. MGE Power West Campus owns 55% of the facility, which represents its interest in the electric generating assets. These assets are used to provide electricity to MGE's customers. The UW's share of the plant and portion of the earnings from the WCCF are not reflected in the consolidated financial statements of MGE Energy or MGE. MGE Power West Campus' share of the plant is reflected in property, plant, and equipment on MGE Energy's and MGE's consolidated balance sheets.

MGE leases the electric generating assets owned by MGE Power West Campus and is responsible for operating the entire facility. The financial terms of the facility lease include a capital structure of 53% equity and 47% long-term debt, return on equity of 12.1%, and a lease term of 30 years. At the end of the lease term in 2035, MGE may, at its option, renew the facility lease for an additional term, purchase the generating facility at fair market value, or allow the lease contract to end.

Electric and Gas Distribution Facilities

At December 31, 2016, MGE owned 872 miles of overhead electric distribution line and 1,236 miles of underground electric distribution cable, all of which are located in Wisconsin. These electric distribution facilities are connected by approximately 52 substations, installed with a capacity of 1,190,500 kVA. MGE's gas facilities include 2,765 miles of distribution mains, which are all owned by MGE.

A significant portion of MGE's electric and gas distribution facilities are located above or underneath highways, streets, other public places or property that others own. MGE believes that it has satisfactory rights to use those places or property in the form of permits, grants, easements, and licenses; however, it has not necessarily undertaken to examine the underlying title to the land upon which the rights rest.

Encumbrances

The principal plants and properties of MGE are subject to the lien of its Indenture of Mortgage and Deed of Trust dated as of January 1, 1946, as amended and supplemented, under which MGE's first mortgage bonds are issued. As of December 31, 2016, there were $1.2 million of first mortgage bonds outstanding. See Footnote 9 of the Notes to Consolidated Financial Statements for additional information regarding MGE's first mortgage bonds.

MGE Power Elm Road has collaterally assigned its right to lease payments from MGE for the Elm Road Units in order to secure the repayment of $62.6 million of senior secured notes issued by MGE Power Elm Road. See Footnote 9 of the Notes to Consolidated Financial Statements for additional information regarding these senior notes.

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MGE Power West Campus has collaterally assigned its right to lease payments from MGE for the WCCF in order to secure the repayment of $45.1 million of senior secured notes issued by MGE Power West Campus. See Footnote 9 of the Notes to Consolidated Financial Statements for additional information regarding these senior notes.

Item 3. Legal Proceedings.

MGE Energy and MGE

MGE Energy and its subsidiaries, including MGE, from time to time are involved in various legal proceedings that are handled and defended in the ordinary course of business.

See "Environmental" under Item 1. Business and Footnote 17.c. of the Notes to Consolidated Financial Statements for a description of several environmental proceedings involving MGE. See Footnote 17.d. of the Notes to Consolidated Financial Statements for a description of other legal matters.

Item 4. Mine Safety Disclosures.

MGE Energy and MGE

Not applicable.

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PART II.

Item 5. Market for Registrants' Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Market for Common Equity

MGE Energy

MGE Energy common stock is traded on Nasdaq under the symbol MGEE. On February 1, 2017, there were approximately 38,688 shareholders of record. The following table shows high and low sale prices for the common stock on Nasdaq for each quarter over the past two years.

		Common Stock Price Range
		2016				2015
		High		Low		High		Low
Fourth quarter	$	66.85	$	53.48	$	47.23	$	39.18
Third quarter	$	59.49	$	53.78	$	41.97	$	36.75
Second quarter	$	56.54	$	47.90	$	45.33	$	36.46
First quarter	$	53.48	$	44.83	$	47.97	$	40.66

MGE

As of February 1, 2017, there were 17,347,894 outstanding shares of common stock, all of which were held by MGE Energy. There is no market for shares of common stock of MGE.

Dividends

MGE Energy

The following table sets forth MGE Energy's quarterly cash dividends per share declared during 2016 and 2015:

(Per share)		2016		2015
Fourth quarter	$	0.308	$	0.295
Third quarter	$	0.308	$	0.295
Second quarter	$	0.295	$	0.283
First quarter	$	0.295	$	0.283

MGE

The following table sets forth MGE's quarterly cash dividends declared during 2016 and 2015:

(In thousands)		2016		2015
Fourth quarter	$	10,000	$	10,000
Third quarter	$	15,000	$	10,000
Second quarter	$	15,000	$	10,000
First quarter	$	10,000	$	-

See discussion below as well as "Liquidity and Capital Resources - Financing Activities" under Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, for a description of restrictions applicable to dividend payments by MGE.

Dividend Restrictions

Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends, above the PSCW authorized amount of $43 million, that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. MGE's thirteen month rolling average common equity ratio at December 31, 2016, is 60.2%, as determined under the calculation used in the rate proceeding. This restriction did not impact

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MGE's payment of dividends in 2016. Cash dividends of $50.0 million and $30.0 million were paid by MGE to MGE Energy in 2016 and 2015, respectively. In 2016, MGE also transferred its ownership interest in MGE Transco to MGE Energy in the form of a dividend in kind of $15.8 million. The rate proceeding calculation includes as indebtedness imputed amounts for MGE's outstanding purchase power capacity payments and other PSCW adjustments, but does not include the indebtedness associated with MGE Power Elm Road and MGE Power West Campus, which are consolidated into MGE's financial statements but are not direct obligations of MGE.

MGE has covenanted with the holders of its first mortgage bonds not to declare or pay any dividend or make any other distribution on or purchase any shares of its common stock unless, after giving effect thereto, the aggregate amount of all such dividends and distributions and all amounts applied to such purchases, after December 31, 1945, shall not exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2016, approximately $338.5 million was available for the payment of dividends under this covenant.

Stock Split

On December 20, 2013, MGE Energy's Board of Directors declared a three-for-two stock split of MGE Energy's outstanding shares of common stock, effective in the form of a stock dividend. Shareholders of record at the close of business on January 24, 2014, received one additional share of MGE Energy common stock for every two shares of common stock owned on that date. The additional shares were distributed on February 7, 2014. Shareholders received cash in lieu of any fractional shares of common stock they otherwise would have received in connection with the dividend. All share and per share data provided in this report give effect to this stock split.

Issuer Purchases of Equity Securities

MGE Energy

Period	Total Number of Shares Purchased		Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs*	Maximum number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs*
October 1-31, 2016	21,025	$	55.21	-	-
November 1-30, 2016	15,905		60.17	-	-
December 1-31, 2016	55,400		64.86	-	-
Total	92,330	$	61.85	-	-

*

Under the MGE Energy, Inc. Direct Stock Purchase and Dividend Reinvestment Plan (Stock Plan), common stock shares deliverable to plan participants may be either newly issued shares or shares purchased on the open market, as determined from time to time by MGE Energy. MGE Energy uses open market purchases to provide shares to meet obligations to participants in the Stock Plan. The shares are purchased on the open market through a securities broker-dealer and then are reissued under the Stock Plan as needed to meet share delivery requirements. The volume and timing of share repurchases in the open market depends upon the level of dividend reinvestment and optional share purchases being made from time to time by plan participants. As a result, there is no specified maximum number of shares to be repurchased and no specified termination date for the repurchases. All shares issued through the Stock Plan, whether newly issued or reissued following open market purchases, are issued and sold by MGE Energy pursuant to a registration statement that was filed with the SEC and is currently effective.

MGE

None.

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Stock Performance Graph

The performance graph below illustrates a five-year comparison of cumulative total returns based on an initial investment of $1,000 in MGE Energy common stock, as compared with the Russell 2000 and the EEI Index for the period 2011 through 2016. The EEI Index reflects the consolidated performance of Edison Electric Institute investor-owned electric utilities.

Cumulative Five-Year Total Return Comparison

(assumes $1,000 invested on 12/31/2011 with dividends reinvested)

Value of Investment at December 31,

		2011		2012		2013		2014		2015		2016
MGEE	$	1,000	$	1,126	$	1,315	$	1,602	$	1,677	$	2,414
Russell 2000		1,000		1,163		1,615		1,694		1,619		1,965
EEI Index		1,000		1,021		1,154		1,487		1,429		1,678

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Item 6. Selected Financial Data.

MGE Energy, Inc.

(In thousands, except per share amounts)

		For the Years Ended December 31,
		2016		2015		2014		2013		2012
Summary of Operations
Operating revenues:
Electric	$	410,202	$	420,291	$	398,132	$	409,425	$	401,596
Gas		134,543		143,737		221,720		181,462		139,727
Total operating revenues		544,745		564,028		619,852		590,887		541,323
Operating expenses		396,455		419,894		462,102		444,293		410,200
Other general taxes		20,062		19,879		19,652		18,607		18,360
Operating income		128,228		124,255		138,098		127,987		112,763
Other income, net		9,711		8,613		10,079		10,701		10,069
Interest expense, net		(19,866)		(20,162)		(19,673)		(18,924)		(19,467)
Income before taxes		118,073		112,706		128,504		119,764		103,365
Income tax provision		(42,513)		(41,363)		(48,185)		(44,859)		(38,919)
Net income	$	75,560	$	71,343	$	80,319	$	74,905	$	64,446
Average shares outstanding		34,668		34,668		34,668		34,668		34,668
Basic and diluted earnings per share	$	2.18	$	2.06	$	2.32	$	2.16	$	1.86
Dividends declared per share	$	1.21	$	1.16	$	1.11	$	1.07	$	1.04
Assets(a)
Electric	$	1,021,905	$	974,235	$	945,790	$	896,864	$	889,889
Gas		318,603		298,435		306,106		264,099		282,815
Assets not allocated		27,338		49,753		41,124		19,853		18,549
Nonregulated energy operations		271,277		277,858		280,542		287,042		290,889
Transmission investments		74,535		69,470		67,697		64,504		61,064
All others		465,202		434,868		438,898		431,436		412,840
Eliminations		(377,800)		(378,216)		(390,636)		(389,800)		(397,372)
Total assets	$	1,801,060	$	1,726,403	$	1,689,521	$	1,573,998	$	1,558,674
Capitalization including Short-Term Debt
Common shareholders' equity	$	724,088	$	690,458	$	659,401	$	617,510	$	579,429
Long-term debt(a,b)		387,124		391,010		394,775		398,454		356,737
Short-term debt		-		-		7,000		-		-
Total capitalization and short-term debt	$	1,111,212	$	1,081,468	$	1,061,176	$	1,015,964	$	936,166
(a) Reflects retrospective application of new accounting pronouncement related to debt issuance costs. See Footnote 19 of the
Notes to the Consolidated Financial Statements for additional information.
(b) Includes long-term debt due within one year, debt issuance costs, and unamortized discount.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

MGE Energy is an investor-owned public utility holding company operating through subsidiaries in five business segments:

·

Regulated electric utility operations, conducted through MGE,

·

Regulated gas utility operations, conducted through MGE,

·

Nonregulated energy operations, conducted through MGE Power and its subsidiaries,

·

Transmission investments, representing our equity investment in ATC and ATC Holdco, and

·

All other, which includes corporate operations and services.

Our principal subsidiary is MGE, which generates and distributes electric energy, distributes natural gas, and represents a majority portion of our assets, liabilities, revenues, and expenses. MGE generates and distributes electricity to approximately 149,000 customers in Dane County, Wisconsin, including the city of Madison, and purchases and distributes natural gas to approximately 154,000 customers in the Wisconsin counties of Columbia, Crawford, Dane, Iowa, Juneau, Monroe, and Vernon.

Our nonregulated energy operations own interests in electric generating capacity that is leased to MGE. The ownership/leasing structure was adopted under applicable state regulatory guidelines for MGE's participation in these generation facilities, consisting principally of a stable return on the equity investment in the new generation facilities over the term of the related leases. The nonregulated energy operations include an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin and a partial ownership of a cogeneration project on the UW-Madison campus. A third party operates the units in Oak Creek, and MGE operates the cogeneration project. Due to the nature of MGE's participation in these facilities, the results of our nonregulated operations are also consolidated into MGE's consolidated financial position and results of operations under applicable accounting standards.

Executive Overview

Our primary focus today and for the foreseeable future is our core utility customers at MGE as well as creating long-term value for our shareholders. MGE continues to face the challenge of providing its customers with reliable power at competitive prices. MGE meets this challenge by investing in more efficient generation projects, including renewable energy sources. MGE will continue to focus on growing earnings while controlling operating and fuel costs. MGE maintains safe and efficient operations in addition to providing customer value. We believe it is critical to maintain a strong credit standing consistent with financial strength in MGE as well as the parent company in order to accomplish these goals.

We earn our revenue and generate cash from operations by providing electric and natural gas utility services, including electric power generation and electric power and gas distribution. The earnings and cash flows from the utility business are sensitive to various external factors, including:

·

Weather, and its impact on customer sales,

·

Economic conditions, including current business activity and employment and their impact on customer demand,

·

Regulation and regulatory issues, and their impact on the timing and recovery of costs,

·

Energy commodity prices, including natural gas prices,

·

Equity price risk pertaining to pension related assets,

·

Credit market conditions, including interest rates and our debt credit rating,

·

Environmental laws and regulations, including adopted and pending environmental rule changes, and

·

Other factors listed in Item 1A. Risk Factors.

For the year ended December 31, 2016, MGE Energy's earnings were $75.6 million or $2.18 per share compared to $71.3 million or $2.06 per share for the same period in the prior year. MGE's earnings for the year ended December 31, 2016, were $51.2 million compared to $45.4 million for the same period in the prior year.

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MGE Energy's net income was derived from our business segments as follows:

(In millions)		Year Ended December 31,
Business Segment:		2016		2015		2014
Electric Utility	$	40.6	$	36.4	$	41.4
Gas Utility		10.6		10.4		15.8
Nonregulated Energy		19.1		20.1		19.3
Transmission Investments		5.6		4.6		5.5
All Others		(0.3)		(0.2)		(1.7)
Net Income	$	75.6	$	71.3	$	80.3

Our net income during 2016 compared to 2015 primarily reflects the effects of the following factors:

·

Electric net income increased due to a 5.4% increase in residential electric retail sales as the result of more favorable weather conditions in 2016 compared to 2015. Electric utility operations experienced an increase in operating and maintenance costs partially offsetting the increase in net income compared to the same period in the prior year.

·

Carrying costs incurred during construction of the Elm Road Units and WCCF were recognized by MGE Power Elm Road and MGE Power West Campus over the period allowed for recovery in rates. The recovery period ended in 2015, contributing to a reduction in nonregulated earnings in 2016. The reduction in earnings was partially offset by an increase in lease revenue.

·

Transmission investment income reflects our share of ATC's earnings. ATC's earnings for 2015 reflected a charge representing its estimate of its refund liability covering 2015, 2014, and a portion of 2013 associated with the return on equity complaint filed with FERC. See "Other Matters" below for additional information concerning ATC.

Our net income during 2015 compared to 2014 primarily reflects the effects of the following factors:

·

Electric net income decreased due to lower AFUDC and higher depreciation expense primarily related to the Columbia environmental project being placed in service in April (Unit 2) and July 2014 (Unit 1). In addition, there was a 0.3% decrease in electric retail sales in 2015 compared to 2014.

·

Gas net income decreased due to a 27.0% decrease in gas retail sales reflecting lower customer demand compared to the demand resulting from the extremely cold weather experienced in 2014. Heating degree days (a measure for determining the impact of weather during the heating season) decreased by 18.9% compared to 2014. The average temperature in January 2015 was 20.1 degrees compared to 11.5 degrees in 2014.

·

ATC's earnings for 2015 reflected a charge representing its estimate of its refund liability covering 2015, 2014, and a portion of 2013 associated with the return on equity complaint filed with FERC. See "Other Matters" below for additional information concerning ATC.

·

The increase in all other income primarily results from a decrease in voluntary contributions.

During 2016, the following events occurred:

2016 Rates: In July 2015, the PSCW approved MGE's request to extend the current accounting treatment for transmission related costs through 2016, conditioned upon MGE not filing a base rate case for 2016. This accounting treatment allows MGE to reflect any differential between transmission costs reflected in rates and actual costs incurred in its next rate case filing.

2016 Annual Fuel Proceeding: In August 2015, the PSCW approved a $0.00256/kWh fuel credit that began on September 1, 2015, and continued throughout 2016. The fuel credit established a mechanism to return $10.9 million of fuel savings to electric customers as a bill credit. MGE returned $8.3 million of electric fuel-related savings to customers through bill credits during the year ended December 31, 2016.

In January 2016, the PSCW lowered MGE's 2016 fuel rules monitored costs by $14.8 million as a result of continued lower projected fuel costs in 2016. Also, in March 2016, MGE filed its 2015 fuel plan reconciliation application showing an overcollection of 2015 fuel rules monitored costs. In July 2016, the PSCW issued a final

28

order stating that MGE shall refund the additional fuel savings incurred during 2015 and 2016 for a total of $15.7 million to its retail electric customers over a one-month period. In September 2016, MGE returned $15.5 million to customers through bill credits.

As of December 31, 2016, MGE has deferred $5.6 million of 2016 fuel savings that were in excess of the fuel savings included within the fuel credits referenced above. These costs will be subject to the PSCW's annual review of 2016 fuel costs, expected to be completed in 2017.

Loss of Industrial Customer: In November 2015, a large industrial customer announced its intention to relocate its operations out of state and to close its manufacturing facilities within our service territory. That closure is expected to occur in early 2017. For the years ended December 31, 2016 and 2015, this customer contributed approximately $3.4 million and $3.8 million, respectively, of pre-tax earnings. Our rate case filing for 2017 addressed the effects of the closure.

ATC Return on Equity: Several parties have filed complaints with the FERC seeking to reduce the base return on equity (ROE) used by MISO transmission owners, including ATC. In June 2016, an administrative law judge issued an initial decision regarding a second filed complaint for the period February 2015 through May 2015 that would reduce the transmission owners' base ROE to 9.7%. ATC recorded an estimated refund liability with respect to the administrative law judge's order, which was reflected within our share of ATC earnings. On September 28, 2016, FERC issued an order on the first complaint, for the period November 2013 through February 2015, reducing the base ROE to 10.32%. This base ROE also became effective September 28, 2016, and will apply to future periods until FERC rules in the second complaint, at which time the base ROE ordered by FERC in the second complaint will prospectively become the authorized base ROE. See "Other Matters" below for additional information concerning ATC.

During 2017, several items may affect us, including:

2017 Rate Case Filing: On December 15, 2016, the PSCW authorized MGE to decrease 2017 rates for retail electric customers by 0.8% or $3.3 million and to increase rates for retail gas customers by 1.9% or $3.1 million. The decrease in retail electric rates reflects declining fuel and purchased power costs. The increase in retail gas rates covers costs associated with MGE's natural gas system infrastructure improvements. The authorized return on common stock equity for 2017 is 9.8% on 57.2% common equity. The PSCW also approved MGE's request to extend the current accounting treatment for transmission related costs through 2018.

ATC Return on Equity: Several parties have filed complaints with the FERC seeking to reduce the ROE used by MISO transmission owners, including ATC. Any change to ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 6.8% and 6.4% of our net income for the years ended December 31, 2016 and 2015, respectively, from our investment in ATC. See "Other Matters" below for additional information concerning ATC.

Environmental Initiatives: There are proposed legislation, rules, and initiatives involving matters related to air emissions, water effluent, hazardous materials, and greenhouse gases, all of which affect generation plant capital expenditures and operating costs as well as future operational planning. At present, it is unclear how the changes in the Presidential and EPA administration may affect pending or new legislative or rulemaking proposals or regulatory initiatives. Such legislation and rulemaking could significantly affect the costs of owning and operating fossil-fueled generating plants, such as Columbia and the Elm Road Units, from which we derive approximately 43% of our electric generating capacity as of December 31, 2016. We would expect to seek and receive recovery of any such costs in rates; however, it is difficult to estimate the amount of such costs due to the uncertainty as to the timing and form of the legislation and rules, and the scope and time of the recovery of costs in rates, which may lag the incurrence of those costs.

EPA's Clean Power Plan: In October 2015, the EPA finalized its Clean Power Plan (CPP) rule with an effective date of December 2015, setting guidelines and approval criteria for states to use in developing plans to control GHG emissions from existing fossil fuel-fired electric generating units (EGUs) and systems. Implementation of the rule is expected to have a direct impact on existing coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs. Given the pending legal proceedings, the nature and timing of any final requirements is subject to uncertainty. If the rule remains substantially in its present form, it is expected to have a material impact on MGE.

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Future Generation: During the first quarter of 2016, MGE entered into an agreement with WPL under which MGE may acquire up to 50 MW of capacity in a gas-fired generating plant to be constructed by WPL at its Riverside Energy Center in Beloit, Wisconsin, during the five-year period following the in-service date of the plant. The plant is expected to be completed by early 2020. MGE and WPL have negotiated an amendment to the existing Columbia joint operating agreement, effective January 1, 2017, under which MGE will reduce its obligation to pay certain capital expenditures (other than SCR-related expenditures) at Columbia prior to the expected in-service date of the Riverside gas-fired generating plant in exchange for a proportional reduction in MGE's ownership in Columbia. On January 1 of each year, beginning in 2017 and ending June 1, 2020, the ownership percentage will be adjusted, through a partial sale, based on the amount of capital expenditures foregone. During 2016, MGE accrued $14.8 million of 2016 capital expenditures that MGE has forgone as part of the ownership transfer agreement with WPL. As of December 31, 2016, MGE classified $14.8 million of Columbia assets as held-for-sale on the consolidated balance sheets. In January 2017, MGE reduced its ownership interest in Columbia from 22.0% to 20.4% through the partial sale of plant assets to WPL. By June 2020, MGE's ownership in Columbia is forecasted to be approximately 19%.

Saratoga Wind Farm: On February 21, 2017, MGE filed with the PSCW a letter notifying the commission of MGE's intent to seek approval to construct, own and operate a 66MW wind farm, consisting of 33 turbines, located near Saratoga, Iowa. MGE anticipates filing its formal application with the PSCW in March. If approved, construction of the project is expected to begin in early 2018, with an estimated capital cost of $107 million.

Financing Plans: In January 2017, MGE issued $40 million of new long-term unsecured debt carrying an interest rate of 3.76% per annum over its 35-year term. The proceeds of this debt financing were used to refinance the maturing $30 million medium-term notes and, assist with the financing of additional capital expenditures. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt. In accordance with applicable accounting guidance, MGE has classified the $30 million of maturing medium-term notes as long-term debt on the consolidated balance sheets for 2016. MGE also plans to issue an additional $30 million of new long-term debt during 2017 to cover capital expenditures and other corporate obligations.

The following discussion is based on the business segments as discussed in Footnote 20 of the Notes to Consolidated Financial Statements.

Results of Operations

Year Ended December 31, 2016, Versus the Year Ended December 31, 2015

Electric Utility Operations - MGE Energy and MGE

Electric sales and revenues

The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the years indicated:

		Revenues				Sales (kWh)
(In thousands, except cooling degree days)		2016		2015	% Change	2016	2015	% Change
Residential	$	136,792	$	135,201	1.2 %	828,887	786,741	5.4 %
Commercial		213,101		220,745	(3.5)%	1,866,035	1,831,251	1.9 %
Industrial		17,589		20,283	(13.3)%	232,854	248,443	(6.3)%
Other-retail/municipal		35,559		38,824	(8.4)%	395,662	422,188	(6.3)%
Total retail		403,041		415,053	(2.9)%	3,323,438	3,288,623	1.1 %
Sales to the market		6,135		2,154	N/A%	183,195	68,886	N/A%
Return of fuel savings		(423)		-	-%	-	-	-%
Adjustments to revenues		253		(4,679)	(105.4)%	-	-	-%
Total	$	409,006	$	412,528	(0.9)%	3,506,633	3,357,509	4.4 %
Cooling degree days (normal 647)						780	666	17.1 %

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Electric operating revenues decreased $3.5 million or 0.9% during 2016, due to the following:

(In millions)
Deferral of fuel savings/fuel credit	$	(21.5)
Volume		6.7
Adjustments to revenues		4.9
Sales to the market		4.0
Other		2.4
Total	$	(3.5)

In July 2015, the PSCW authorized MGE to freeze 2016 rates at 2015 levels for retail electric customers.

·

Deferral of fuel savings/fuel credit. During 2016, customers received a fuel credit on their bill related to the fuel savings of $21.1 million, which decreased electric revenues when compared to 2015. This amount was partially offset by the 2016 deferred fuel rules monitored costs. In January 2016, the PSCW lowered MGE's 2016 fuel rules monitored costs as a result of continued lower projected fuel costs in 2016.

·

Volume. During 2016, there was a 5.4% increase in total residential sales volumes compared to the same period in the prior year driven by increased customer demand due, at least in part, to more favorable weather conditions, as evidenced by the higher number of cooling degree days.

·

Adjustments to Revenue. The adjustments to revenues amount includes the elimination of carrying costs for the Elm Road Units and the WCCF that were collected in electric rates ending in 2015, which were recognized as operating revenues in our Nonregulated Energy Operations segment.

MGE leases electric generating capacity from MGE Power Elm Road. MGE collects in rates the lease payments associated with the electric generating capacity as authorized by the PSCW. Any differential between estimated lease payments collected in rates and actual lease payments paid to MGE Power Elm Road are included in adjustments to revenues.

·

Sales to the market. Sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may include spot market transactions on the markets operated by MISO. These sales may also include bilateral sales to other utilities or power marketers. Generating units are dispatched by MISO based on cost considerations as well as reliability of the system. Sales to the market typically occur when MGE has more generation and purchases online than are needed for its own system demand. The excess electricity is then sold to others in the market. For 2016, market volumes increased compared to the same period in the prior year, reflecting increased opportunities for sales, and those sales were made at higher market prices. The revenue generated from these sales is included in fuel rules monitored costs. See fuel rules discussion in Footnote 16.b. of the Notes to Consolidated Financial Statements.

·

Other. During 2016, other items affecting electric operating revenues increased $2.4 million. MGE experienced an increase in residential and small commercial customers contributing to the increase in other electric revenue. Higher monthly on-peak sales also attributed to the increase.

Electric fuel and purchased power

Electric fuel and purchased power costs reflect an increase in internal generation volumes partially offset by a decrease in the volume of purchased power when compared to the prior year. Adjustments related to the regulatory recovery for fuel costs, known as fuel rules, decreased purchased power expense. These items are explained below.

Fuel for electric generation

The expense for fuel for internal electric generation increased $6.9 million during 2016 compared to 2015 due to the following:

(In millions)
Increase in volume	$	10.5
Decrease in per-unit cost		(3.6)
Total	$	6.9

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This increase in expense reflects a 21.0% increase in internal generation volume delivered to the system primarily as a result of increased generation at WCCF based on market prices, partially offset by a 6.8% decrease in per-unit cost of internal electric generation, reflective of lower natural gas prices.

Purchased power

Purchased power expense decreased $24.9 million during 2016 compared to 2015 due to the following:

(In millions)
Decrease in volume	$	(15.2)
Increase in per-unit cost		3.0
Change in fuel rule adjustments, net of recoveries		(12.7)
Total	$	(24.9)

The decrease in expense (before fuel rules adjustments) reflects a 21.1% decrease in the volume of power purchased from third parties primarily as a result of the increased internal generation, partially offset by a 5.2% increase in the per-unit cost of purchased power.

Under fuel rules, MGE is required to defer electric fuel-related costs that fall outside a 2% cost tolerance band around the amount used in the most recent rate proceeding. Any fuel rules adjustments are reflected in purchased power expense.

Electric operating and maintenance expenses

Electric operating and maintenance expenses increased $2.5 million during 2016 compared to 2015. The following changes contributed to the net change:

(In millions)
Increased customer accounts costs	$	0.9
Increased production costs		0.7
Increased distribution costs		0.5
Increased other costs		0.4
Total	$	2.5

For 2016, increased customer accounts costs are primarily related to higher customer billing expenses.

Electric depreciation expense

Electric depreciation expense decreased $0.8 million for 2016, compared to the prior year. A new depreciation study approved by the PSCW, effective January 1, 2016, resulted in a decrease in expense.

Gas Utility Operations - MGE Energy and MGE

Gas deliveries and revenues

The following table compares MGE's gas revenues and gas therms delivered by customer class during each of the years indicated:

(In thousands, except HDD and average rate per therm of retail customer)		Revenues				Therms Delivered
		2016		2015	% Change	2016	2015	% Change
Residential	$	81,014	$	85,438	(5.2)%	91,791	92,970	(1.3)%
Commercial/Industrial		48,497		53,161	(8.8)%	86,641	88,489	(2.1)%
Total retail		129,511		138,599	(6.6)%	178,432	181,459	(1.7)%
Gas transportation		4,635		4,652	(0.4)%	72,922	75,572	(3.5)%
Other revenues		397		486	(18.3)%	-	-	-%
Total	$	134,543	$	143,737	(6.4)%	251,354	257,031	(2.2)%
Heating degree days (normal 7,083)						6,417	6,395	0.3 %
Average rate per therm of retail customer	$	0.726	$	0.764	(5.0)%

32

Gas revenues decreased $9.2 million or 6.4% during 2016. These changes are related to the following factors:

(In millions)
Rate/PGA changes	$	(5.6)
Volume		(3.5)
Transportation and other effects		(0.1)
Total	$	(9.2)

·

Rate/PGA changes. MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. Changes in PGA recoveries affect revenues but do not impact net income.

The average retail rate per therm for 2016, decreased 5.0% compared to 2015, reflecting a $6.3 million decrease in natural gas commodity costs (recovered through the PGA), partially offset by an increase in fixed rate charges.

•

Volume. For 2016, retail gas deliveries decreased 1.7% compared to the prior year.

Cost of gas sold

For 2016, cost of gas sold decreased by $9.3 million, compared to the prior year. The cost per therm of natural gas decreased 10.3%, which resulted in $7.6 million of decreased expense. The volume of gas purchased decreased 2.2%, which resulted in $1.7 million of decreased expense.

Gas operating and maintenance expenses

Gas operating and maintenance expenses increased $1.0 million for 2016 compared to 2015. The following changes contributed to the net change.

(In millions)
Increased customer accounts costs	$	0.8
Increased administrative and general costs		0.5
Decreased distribution costs		(0.3)
Total	$	1.0

For 2016, increased customer accounts costs are due to higher customer billing expenses.

Gas depreciation expense

Gas depreciation expense increased $1.4 million for 2016, compared to the prior year. This increase is primarily driven by an increase in gas utility plant in-service in 2016 and a new depreciation study approved by the PSCW, effective January 1, 2016.

Nonregulated Energy Operations - MGE Energy and MGE

For 2016 and 2015, net income at the nonregulated energy operations segment was $19.1 million and $20.1 million, respectively. The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. Carrying costs incurred during construction of the Elm Road Units and WCCF were recognized by MGE Power Elm Road and MGE Power West Campus over the period allowed for recovery in rates. The recovery period ended in 2015, contributing to a reduction in nonregulated earnings in 2016. The reduction in earnings was partially offset by an increase in lease revenue.

Transmission Investment Operations - MGE Energy and MGE

Transmission investment other income

For 2016 and 2015, other income at the transmission investment segment was $8.4 million and $7.7 million, respectively. The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of ATC. ATC Holdco was formed in 2016. In the near term, it is expected that ATC Holdco will be pursuing transmission development opportunities that typically have long development and

33

investment lead times before becoming operational. See Footnote 4.b. of the Notes to Consolidated Financial Statements and "Other Matters" below for additional information concerning the transmission investments and summarized financial information regarding ATC.

Consolidated Income Taxes - MGE Energy and MGE

MGE Energy's effective income tax rate for 2016 and 2015 was 36.0% and 36.7%, respectively. MGE's effective income tax rate for 2016 and 2015 was 35.9% and 36.7%, respectively. The decrease in the effective tax rate is due in part to a combination of individually insignificant fluctuations. See Footnote 12 of the Notes to Consolidated Financial Statements for details of effective income tax rates for continuing operations.

Noncontrolling Interest, Net of Tax - MGE

The noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus; however, due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with those of MGE, the primary beneficiary of the VIEs. Also included in noncontrolling interest, net of tax, is MGE Energy's interest in MGE Transco, which holds our investment in ATC. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statements of income:

		Year Ended December 31,
(In millions)		2016		2015
MGE Power Elm Road	$	14.8	$	16.6
MGE Power West Campus	$	7.2	$	7.3
MGE Transco(a)	$	1.4	$	2.2

(a)

MGE Transco holds an ownership interest in ATC. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. See Footnote 8 of the Notes to Consolidated Financial Statements for further discussion of noncontrolling interest. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see Footnote 4 of the Notes to Consolidated Financial Statements for additional information.

Results of Operations

Year Ended December 31, 2015, Versus the Year Ended December 31, 2014

Electric Utility Operations - MGE Energy and MGE

Electric sales and revenues

The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the years indicated:

		Revenues				Sales (kWh)
(In thousands, except cooling degree days)		2015		2014	% Change	2015	2014	% Change
Residential	$	135,201	$	132,359	2.1 %	786,741	807,265	(2.5)%
Commercial		220,745		210,141	5.0 %	1,831,251	1,834,473	(0.2)%
Industrial		20,283		19,163	5.8 %	248,443	246,267	0.9 %
Other-retail/municipal		38,824		36,281	7.0 %	422,188	409,737	3.0 %
Total retail		415,053		397,944	4.3 %	3,288,623	3,297,742	(0.3)%
Sales to the market		2,154		2,547	(15.4)%	68,886	68,727	0.2 %
Other revenues		1,705		1,489	14.5 %	-	-	-%
Adjustments to revenues		(6,384)		(7,131)	10.5 %	-	-	-%
Total	$	412,528	$	394,849	4.5 %	3,357,509	3,366,469	(0.3)%
Cooling degree days (normal 665)						666	620	7.4 %

34

Electric operating revenues increased $17.7 million or 4.5% during 2015 compared to 2014 due to the following:

(In millions)
Rate changes	$	14.4
Fuel credit		3.9
Adjustments to revenues		0.8
Other revenues		0.4
Volume		(1.4)
Sales to the market		(0.4)
Total	$	17.7

·

Rate changes. Rates charged to retail customers for 2015 were $14.4 million or 3.6% higher than those charged during 2014.

In December 2014, the PSCW authorized MGE to increase 2015 rates for retail electric customers by $15.4 million or 3.8%.

·

Fuel Credit. During 2015 and 2014, customers received a fuel credit on their bill related to the fuel savings of $2.6 million and $6.5 million, respectively, which increased electric revenues when compared to 2014.

·

Adjustments to Revenue. The adjustments to revenues amount includes the elimination of carrying costs for the Elm Road Units and the WCCF that were collected in electric rates, which are recognized as nonregulated energy operating revenues in our Nonregulated Energy Operations segment.

·

Volume. During 2015, there was a 0.3% decrease in total retail sales volumes compared to 2014 primarily driven by lower use per residential customer.

·

Sales to the market. Sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may include spot market transactions on the markets operated by MISO. These sales may also include bilateral sales to other utilities or power marketers. Generating units are dispatched by MISO based on cost considerations as well as reliability of the system. Sales to the market typically occur when MGE has more generation and purchases online than are needed for its own system demand. The excess electricity is then sold to others in the market. For 2015, market volumes increased compared to 2014, reflecting increased opportunities for sales. In addition, market settlement resulted in lower revenue per kWh for 2015, reflecting lower market prices. The revenue generated from these sales is included in fuel rules monitored costs. See fuel rules discussion in Footnote 16.b. of the Notes to Consolidated Financial Statements.

Electric fuel and purchased power

Electric fuel and purchased power costs reflect an increase in internal generation volumes during 2015 partially offset by a decrease in the volume of purchased power when compared to 2014. Adjustments related to the regulatory recovery for fuel costs, known as fuel rules, increased purchased power expense. These items are explained below.

Fuel for electric generation

The expense for fuel for internal electric generation increased $11.0 million during 2015 compared to 2014 due to the following:

(In millions)
Increase in per-unit cost	$	5.8
Increase in volume		5.2
Total	$	11.0

This increase in expense reflects a 13.6% increase in per-unit cost of internal electric generation primarily at Columbia and a 10.7% increase in internal generated volume delivered to the system.

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Purchased power

Purchased power expense increased $8.0 million during 2015 compared to 2014 due to the following:

(In millions)
Decrease in volume	$	(11.0)
Decrease in per-unit cost		(2.8)
Change in fuel rule adjustments, net of recoveries		21.8
Total	$	8.0

The decrease in expense (before fuel rules adjustments) reflects a 3.8% decrease in the per-unit cost of purchased power and a 12.8% decrease in the volume of power purchased from third parties primarily as a result of increased internal generation.

Under fuel rules, MGE is required to defer electric fuel-related costs that fall outside a 2% cost tolerance band around the amount used in the most recent rate proceeding. Any fuel rules adjustments are reflected in purchased power expense.

Electric operating and maintenance expenses

Electric operating and maintenance expenses increased $4.0 million during 2015 compared to 2014. The following changes contributed to the net change:

(In millions)
Increased transmission costs	$	3.3
Increased administrative and general costs		1.6
Increased customer service costs		0.5
Increased production costs		0.1
Decreased customer accounts costs		(1.5)
Total	$	4.0

For 2015, increased transmission costs are primarily related to an increase in transmission reliability enhancements. In addition, increased administrative and general costs are primarily due to increased pension and other postretirement benefits costs predominantly driven by a reduction in the discount rate, which has the effect of increasing the related costs. Decreased customer account costs are primarily related to lower uncollectible accounts receivable.

Electric depreciation expense

Electric depreciation expense increased $3.0 million for 2015 compared to 2014. This increase is primarily related to the completion of the Columbia environmental project. The systems and equipment for Unit 2 and Unit 1 were placed into service in April 2014 and July 2014, respectively.

Other Electric Income

Other electric income decreased $2.4 million, primarily due to AFUDC equity related to the completion of the Columbia environmental project. Unit 2 and Unit 1 were placed into service in April and July 2014, respectively.

36

Gas Utility Operations - MGE Energy and MGE

Gas deliveries and revenues

The following table compares MGE's gas revenues and gas therms delivered by customer class during each of the years indicated:

(In thousands, except HDD and average rate per therm of retail customer)		Revenues				Therms Delivered
		2015		2014	% Change	2015	2014	% Change
Residential	$	85,438	$	117,523	(27.3)%	92,970	110,422	(15.8)%
Commercial/Industrial		53,161		100,338	(47.0)%	88,489	138,151	(35.9)%
Total retail		138,599		217,861	(36.4)%	181,459	248,573	(27.0)%
Gas transportation		4,652		3,373	37.9 %	75,572	46,905	61.1 %
Other revenues		486		486	-%	-	-	-%
Total	$	143,737	$	221,720	(35.2)%	257,031	295,478	(13.0)%
Heating degree days (normal 7,080)						6,395	7,887	(18.9)%
Average rate per therm of retail customer	$	0.764	$	0.876	(12.8)%

Gas revenues decreased $78.0 million or 35.2% for 2015 compared to 2014. These changes are related to the following factors:

(In millions)
Volume	$	(58.8)
Rate/PGA changes		(20.5)
Transportation and other effects		1.3
Total	$	(78.0)

•

Volume. For 2015, retail gas deliveries decreased 27.0% compared to 2014, as a result of extremely cold weather experienced in the first quarter of 2014. The decrease was also attributable to a large commercial customer's decision to purchase gas from a third party supplier and to use MGE's facilities for the transport of that gas. While the shift affects revenues, the impact to gas income of this shift is not material as we do not earn margin on the natural gas commodity cost billed to customers.

·

Rate/PGA changes. In December 2014, the PSCW approved changes to customer rates and rate design for gas service. Rates were reduced by 2.0%, effective January 1, 2015. Gas rate design consists of a fixed monthly customer charge and a variable charge tied to actual usage, in addition to the separate charge for natural gas commodity costs that is recovered through the PGA. The change shifted more of the rate recovery to the monthly charge, reflecting the related fixed costs of providing gas services, and reduced the variable usage-based charge. Thus, gas net income was more evenly distributed during the year and less sensitive to weather.

MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. Changes in PGA recoveries affect revenues but do not impact net income.

The average retail rate per therm for 2015 decreased 12.8% compared to 2014, reflecting a $28.7 million decrease in natural gas commodity costs (PGA) offset by an $8.2 million increase (comprised of a decrease in variable rate costs offset by an increase in fixed rate charges) related to rate design changes. As noted previously, as a result of the rate design changes, revenues in the first and fourth quarters, when usage is higher, were lower than in past years; and revenues in the second and third quarters, when usage is lower, were higher than in past years.

·

Transportation and other effects. During 2015, transportation and other effects increased $1.3 million primarily attributable to a large commercial customer's decision to purchase gas from a third party supplier and to use MGE's facilities for the transport of that gas. The impact to gas income of this shift is not material.

37

Cost of gas sold

For 2015, cost of gas sold decreased by $67.5 million compared to 2014. The volume of gas purchased decreased 26.8%, which resulted in $38.5 million of decreased expense. The cost per therm of natural gas decreased 27.6%, which resulted in $29.0 million of decreased expense.

Gas operating and maintenance expenses

Gas operating and maintenance expenses decreased $1.2 million for 2015 compared to 2014. The following changes contributed to the net change.

(In millions)
Decreased customer service costs	$	(1.0)
Decreased customer accounts costs		(0.9)
Increased administrative and general costs		0.7
Total	$	(1.2)

For 2015, decreased customer service costs are due to lower Focus on Energy payments, Wisconsin's statewide energy efficiency and renewable resource program to promote energy efficiency on customer's premises. Decreased customer accounts costs are due to lower uncollectible accounts receivable. Increased administrative and general costs are primarily due to increased pension and other postretirement benefit costs predominantly driven by a reduction in the discount rate.

Nonregulated Energy Operations - MGE Energy and MGE

For 2015 and 2014, net income at the nonregulated energy operations segment was $20.1 million and $19.3 million, respectively. The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE.

Transmission Investment Operations - MGE Energy and MGE

Transmission investment other income

For 2015 and 2014, other income at the transmission investment segment was $7.7 million and $9.2 million, respectively. The transmission investment segment holds our interest in ATC, and its income reflects our equity in the earnings of ATC. See Footnote 4.b. of the Notes to Consolidated Financial Statements and "Other Matters" below for additional information concerning ATC and summarized financial information regarding ATC.

All Other Operations - MGE Energy and MGE

Other income

The increase in all other income primarily results from a decrease in voluntary contributions.

Consolidated Income Taxes - MGE Energy and MGE

Both MGE Energy's and MGE's effective income tax rate for 2015 and 2014, was 36.7% and 37.5%, respectively. The decrease in the effective tax rate is due in part to a higher estimated domestic manufacturing deduction, offset by lower AFUDC equity earnings in 2015. See Footnote 12 of the Notes to Consolidated Financial Statements for details of effective income tax rates for continuing operations.

Noncontrolling Interest, Net of Tax - MGE

The noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus; however, due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with those of MGE, the primary beneficiary of the VIEs. Also included in noncontrolling interest, net of tax, is MGE Energy's interest in

38

MGE Transco, which holds our investment in ATC. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statements of income:

		Year Ended December 31,
(In millions)		2015		2014
MGE Power Elm Road	$	16.6	$	16.2
MGE Power West Campus	$	7.3	$	7.7
MGE Transco	$	2.2	$	2.4

Liquidity and Capital Resources

MGE Energy and MGE have adequate liquidity to fund operations and capital expenditures over the next twelve months. Available resources include cash and cash equivalents, operating cash flows, liquid assets, borrowing capacity under revolving credit facilities, and access to equity and debt capital markets.

Cash Flows

The following summarizes cash flows for MGE Energy and MGE during 2016, 2015, and 2014:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Cash provided by/(used for):
Operating activities	$	147,513	$	141,185	$	128,762	$	146,501	$	148,460	$	128,538
Investing activities		(86,826)		(73,313)		(96,158)		(85,648)		(72,920)		(95,597)
Financing activities		(46,112)		(52,243)		(35,662)		(76,845)		(53,342)		(43,187)

Cash Provided by Operating Activities

MGE Energy

MGE Energy's consolidated net cash provided by operating activities is derived mainly from the electric and gas operations of its principal subsidiary, MGE.

2016 vs. 2015

Cash provided by operating activities for 2016 was $147.5 million, an increase of $6.3 million when compared to the prior year.

MGE Energy's net income increased $4.2 million for 2016 when compared to the prior year.

In both 2016 and 2015, MGE received a $10.0 million refund from the IRS for the 2015 and 2014 tax years, respectively. Excluding the 2016 and 2015 refund, MGE Energy's federal and state taxes paid decreased $1.8 million during 2016, when compared to the prior year.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $5.2 million in cash provided by operating activities for 2016, primarily due to increased accounts payable, decreased inventories, and decreased receivable margin, partially offset by increased unbilled revenues, increased receivables, and decreased current liabilities. The decrease in current liabilities includes a fuel credit, approved in August 2015, of $8.3 million that customers received on their bill throughout 2016 and a one-time fuel credit, approved in July 2016, of $15.5 million that customers received on their bill in September 2016.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $5.0 million in cash provided by operating activities for 2015, primarily due to decreased receivables and decreased unbilled revenues, partially offset by increased inventories, decreased accounts payable, and decreased current liabilities. The decrease in current liabilities includes a fuel credit of $2.6 million that customers received on their bill in the period September through December 2015 related to the 2015 fuel savings and $11.4 million of deferred fuel related cost savings to be returned to customers.

39

2015 vs. 2014

Cash provided by operating activities for 2015 was $141.2 million, an increase of $12.4 million when compared to 2014.

MGE Energy's net income decreased $9.0 million for 2015 when compared to 2014.

In 2015, MGE received a $10.0 million refund from the IRS for the 2014 tax year. Excluding the 2015 refund, MGE Energy's federal and state taxes paid increased $4.7 million during 2015 when compared to 2014. In December 2014, bonus depreciation was extended for 2014. Tax payments were made earlier in 2014 before the additional depreciation deduction was known.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $5.0 million in cash provided by operating activities for 2015, primarily due to decreased receivables and decreased unbilled revenues, partially offset by increased inventories, decreased accounts payable, and decreased current liabilities. The decrease in current liabilities includes a fuel credit of $2.6 million that customers received on their bill in the period September through December 2015 related to the 2015 fuel savings and $11.4 million of deferred fuel related cost savings to be returned to customers.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $14.8 million in cash used for operating activities for 2014, primarily due to increased gas inventories, increased other current assets, and decreased current liabilities, partially offset by increased accounts payable. The decrease in current liabilities includes a fuel credit of $6.5 million that customers received on their bill in October 2014 related to the 2013 fuel savings.

An increase in pension contribution resulted in an additional $10.4 million in cash used for operating activities for 2015 when compared to 2014. Pension contributions reflect amounts required by law and discretionary amounts. See Footnote 13 of the Notes to Consolidated Financial Statements for further discussion of MGE Energy's pension and other postretirement benefits.

MGE

2016 vs. 2015

Cash provided by operating activities for 2016 was $146.5 million, a decrease of $2.0 million when compared to the prior year.

Net income increased $3.1 million for 2016, when compared to the prior year.

In both 2016 and 2015, MGE received a $10.0 million refund from the IRS for the 2015 and 2014 tax years, respectively. Excluding the 2016 and 2015 refund, MGE's federal and state taxes paid to MGE Energy increased $4.2 million during 2016, when compared to the prior year.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $7.4 million in cash provided by operating activities for 2016, primarily due to increased accounts payable, decreased inventories, and decreased receivable margin, partially offset by increased receivables, increased unbilled revenues, and decreased current liabilities. The decrease in current liabilities includes a fuel credit, that was approved in August 2015, of $8.3 million that customers received on their bill throughout 2016 and $15.5 million of deferred fuel related cost savings to be returned to customers.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $14.0 million in cash provided by operating activities for 2015, primarily due to decreased receivables and decreased unbilled revenues, partially offset by increased gas inventories, decreased accounts payable, and decreased other current liabilities. The decrease in current liabilities includes a fuel credit of $2.6 million that customers received on their bill in the period September through December 2015 related to the 2015 fuel savings and $11.4 million of deferred fuel related cost savings to be returned to customers.

2015 vs. 2014

Cash provided by operating activities for 2015 was $148.5 million, an increase of $19.9 million when compared to 2014.

40

Net income decreased $10.5 million for 2015 when compared to 2014.

In 2015, MGE received a $10.0 million refund from the IRS for the 2014 tax year. Excluding the 2015 refund, MGE's federal and state taxes paid to MGE Energy decreased $3.3 million during 2015, when compared to the prior year. In December 2014, bonus depreciation was extended for 2014. Tax payments were made earlier in 2014 before the additional depreciation deduction was known.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $14.0 million in cash provided by operating activities for 2015, primarily due to decreased receivables and decreased unbilled revenues, partially offset by increased gas inventories, decreased accounts payable, and decreased other current liabilities. The decrease in current liabilities includes a fuel credit of $2.6 million that customers received on their bill in the period September through December 2015 related to the 2015 fuel savings and $11.4 million of deferred fuel related cost savings to be returned to customers.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $20.9 million in cash used for operating activities for 2014, primarily due to increased gas inventories, increased receivables, and decreased current liabilities, partially offset by increased accounts payable. The decrease in current liabilities includes a fuel credit of $6.5 million that customers received on their bill in October 2014 related to the 2013 fuel savings.

An increase in pension contribution resulted in an additional $10.4 million in cash used for operating activities for 2015 when compared to 2014. These contributions reflect amounts required by law and discretionary amounts. See Footnote 13 of the Notes to Consolidated Financial Statements for further discussion of MGE's pension and other postretirement benefits.

Capital Requirements and Investing Activities

MGE Energy

2016 vs. 2015

MGE Energy's cash used for investing activities increased $13.5 million for 2016 when compared to the prior year.

Capital expenditures for 2016 were $83.7 million. This amount represents an increase of $11.6 million from the expenditures made in the prior year. This increase primarily reflects increased expenditures on electric and gas distribution assets.

There was a $1.9 million increase in the capital contributions to investments for 2016 when compared to the prior year.

2015 vs. 2014

MGE Energy's cash used for investing activities decreased $22.8 million for 2015 when compared to 2014.

Capital expenditures for 2015 were $72.0 million. This amount represents a decrease of $20.6 million from the expenditures made in 2014. The decrease primarily reflects $16.2 million of lower expenditures on the Columbia environmental project in 2015 versus 2014 and decreased expenditures in electric and gas distribution assets.

MGE

2016 vs. 2015

MGE's cash used for investing activities increased $12.7 million for 2016 when compared to the prior year.

Capital expenditures for 2016 were $83.7 million. This amount represents an increase of $11.6 million from the expenditures made in the prior year. This increase primarily reflects increased expenditures on electric and gas distribution assets.

There was a $0.9 million increase in the capital contributions to investments for 2016 when compared to the prior year.

41

2015 vs. 2014

MGE's cash used for investing activities decreased $22.7 million for 2015 when compared to 2014.

Capital expenditures for 2015 were $72.0 million. This amount represents a decrease of $20.6 million from the expenditures made in 2014. The decrease primarily reflects $16.2 million of lower expenditures on the Columbia environmental project in 2015 versus 2014 and decreased expenditures in electric and gas distribution assets.

Capital expenditures

The following table shows MGE Energy's actual capital expenditures for both 2016 and 2015, forecasted capital expenditures for 2017, and annual average forecasted capital expenditures for the years 2018 through 2020:

		Actual				Forecasted
(In thousands)								(Annual Average)
For the years ended December 31,		2015		2016		2017		2018-2020
Electric	$	49,370	$	50,699	$	72,603	$	78,768
Gas		18,787		29,136		34,197		35,475
Utility plant total		68,157		79,835		106,800		114,243
Nonregulated		3,873		3,824		7,362		4,959
MGE Energy total	$	72,030	$	83,659	$	114,162	$	119,202

The forecasted capital expenditures are based upon management's assumptions with respect to future events, including the timing and amount of expenditures associated with compliance with environmental compliance initiatives, load growth, and the timing and adequacy of rate recovery. Actual events may differ materially from those assumptions and result in material changes to those forecasted amounts.

MGE Energy used funds received as dividend payments from MGE Power West Campus and MGE Power Elm Road, internally generated cash, and short-term external financing to meet its 2016 capital requirements and cash obligations, including dividend payments. External financing included short-term financing under existing lines of credit.

Financing Activities

MGE Energy

2016 vs. 2015

Cash used for MGE Energy's financing activities was $46.1 million for 2016, compared to $52.2 million of cash used for 2015.

For 2016, cash dividends paid were $41.8 million compared to $40.0 million in the prior year. This increase was a result of a higher dividend per share ($1.21 vs. $1.16).

For 2015, net short-term debt repayments were $7.0 million. There were no short-term debt repayments for 2016.

2015 vs. 2014

Cash used for MGE Energy's financing activities was $52.2 million for 2015, compared to $35.7 million of cash used for 2014.

For 2015, cash dividends paid were $40.0 million compared to $38.4 million in 2014. This increase was a result of a higher dividend per share ($1.16 vs. $1.11).

For 2015, net short-term debt repayments were $7.0 million. There were no short-term debt repayments for 2014.

42

MGE

2016 vs. 2015

During 2016, cash used for MGE's financing activities was $76.8 million, compared to $53.3 million of cash used for MGE's financing activities in the prior year.

Cash dividends paid from MGE to MGE Energy were $50.0 million for 2016, compared to $30.0 million in the prior year.

Distributions to parent from noncontrolling interest, which represent distributions from MGE Power Elm Road and MGE Power West Campus, were $24.1 million for 2016, compared to $14.7 million in the prior year.

For 2015, net short-term debt repayments were $7.0 million. There were no short-term debt repayments for 2016.

2015 vs. 2014

During 2015, cash used for MGE's financing activities was $53.3 million, compared to $43.2 million of cash used for MGE's financing activities in 2014.

Cash dividends paid from MGE to MGE Energy were $30.0 million for 2015, compared to $26.5 million in 2014.

Distributions to parent from noncontrolling interest, which represent distributions from MGE Power Elm Road and MGE Power West Campus, were $14.7 million for 2015, compared to $21.4 million in 2014.

For 2015, net short-term debt repayments were $7.0 million. There were no short-term debt repayments for 2014.

Dividend Restrictions

Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends, above the PSCW authorized amount of $43 million, that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. MGE's thirteen month rolling average common equity ratio at December 31, 2016, is 60.2%, as determined under the calculation used in the rate proceeding. This restriction did not impact MGE's payment of dividends in 2016. Cash dividends of $50.0 million and $30.0 million were paid by MGE to MGE Energy in 2016 and 2015, respectively. In 2016, MGE also transferred its ownership interest in MGE Transco to MGE Energy in the form of a dividend in kind of $15.8 million. The rate proceeding calculation includes as indebtedness imputed amounts for MGE's outstanding purchase power capacity payments and other PSCW adjustments, but does not include the indebtedness associated with MGE Power Elm Road and MGE Power West Campus, which are consolidated into MGE's financial statements but are not direct obligations of MGE.

MGE has covenanted with the holders of its first mortgage bonds not to declare or pay any dividend or make any other distribution on or purchase any shares of its common stock unless, after giving effect thereto, the aggregate amount of all such dividends and distributions and all amounts applied to such purchases, after December 31, 1945, shall not exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2016, approximately $338.5 million was available for the payment of dividends under this covenant.

Credit Facilities

At December 31, 2016, MGE Energy and MGE had the following aggregate bank commitments and available capacity under their credit agreements:

Borrower		Aggregate Bank Commitments		Outstanding Commercial Paper		Outstanding Borrowings		Available Capacity	Expiration Date
		(Dollars in millions)
MGE Energy	$	50.0	$	-	$	-	$	50.0	June 1, 2020
MGE	$	100.0	$	-	$	-	$	100.0	June 1, 2020

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Borrowings under the Credit Agreements may bear interest at a rate based upon either a "floating rate" or a "Eurodollar Rate" adjusted for statutory reserve requirements, plus an adder based upon the credit ratings assigned to MGE's senior unsecured long-term debt securities. The "floating rate" is calculated on a daily basis as the highest of a prime rate, a Federal Funds effective rate plus 0.5% per annum, or a Eurodollar Rate for a one-month interest period plus 1%. The "floating rate" adder ranges from zero to 0.125%. The "Eurodollar Rate" is calculated as provided in the Credit Agreements. The "Eurodollar Rate" adder ranges from 0.625% to 1.125%.

The agreements require the borrower to maintain a ratio of consolidated debt to consolidated total capitalization not to exceed a maximum of 65%. The ratio calculation excludes assets, liabilities, revenues, and expenses included in MGE's financial statements as a result of the consolidation of VIEs, such as MGE Power Elm Road and MGE Power West Campus. At December 31, 2016, the ratio of consolidated debt to consolidated total capitalization for each of MGE Energy and MGE, as calculated under the credit agreements' covenant, were 34.8% and 36.5%, respectively. See Footnote 10 of the Notes to Consolidated Financial Statements for additional information regarding the credit facilities.

Capitalization Ratios

MGE Energy's capitalization ratios were as follows:

	MGE Energy
	2016	2015
Common shareholders' equity	65.2 %	63.8 %
Long-term debt*	34.8 %	36.2 %
*Includes the current portion of long-term debt.

Credit Ratings

MGE Energy's and MGE's access to the capital markets, including, in the case of MGE, the commercial paper market, and their respective financing costs in those markets, may depend on the credit ratings of the entity that is accessing the capital markets.

None of MGE Energy's or MGE's borrowing is subject to default or prepayment as a result of a downgrading of credit ratings, although a downgrading of MGE's credit ratings could increase fees and interest charges under both MGE Energy's and MGE's credit agreements.

Contractual Obligations and Commercial Commitments for MGE Energy and MGE

MGE Energy's and MGE's contractual obligations as of December 31, 2016, representing cash obligations that are considered to be firm commitments, are as follows:

				Payment Due Within:						Due After
(In thousands)		Total		1 Year		2-3 Years		4-5 Years		5 Years
MGE Energy
Long-term debt(a)	$	391,242	$	4,358	$	29,005	$	24,430	$	333,449
Repurchase-to-maturity transactions - loans(b)		3,895		559		1,215		1,000		1,121
Interest expense(c)		258,164		17,659		33,052		30,803		176,650
Operating leases(d)		11,339		1,331		1,400		588		8,020
Purchase obligations(e)		444,792		122,846		142,872		89,512		89,562
Other obligations(f)		30,445		20,569		2,835		1,395		5,646
Total MGE Energy contractual obligations	$	1,139,877	$	167,322	$	210,379	$	147,728	$	614,448
MGE
Long-term debt(a)	$	391,242	$	4,358	$	29,005	$	24,430	$	333,449
Repurchase-to-maturity transactions - loans(b)		3,895		559		1,215		1,000		1,121
Interest expense(c)		258,164		17,659		33,052		30,803		176,650
Operating leases(d)		11,339		1,331		1,400		588		8,020
Purchase obligations(e)		444,792		122,846		142,872		89,512		89,562
Other obligations(f)		18,613		8,737		2,835		1,395		5,646
Total MGE contractual obligations	$	1,128,045	$	155,490	$	210,379	$	147,728	$	614,448

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(a)

Long-term debt consisting of secured first mortgage bonds, unsecured medium-term notes, and Industrial Development Revenue Bonds issued by MGE, and private placement debt issued by MGE, MGE Power Elm Road, and MGE Power West Campus.

(b)

Chattel paper agreements. See Footnote 1.g. of the Notes to Consolidated Financial Statements.

(c)

Amount represents interest expense on long-term debt. See Footnote 9 of the Notes to Consolidated Financial Statements for further discussion of the long-term debt outstanding at December 31, 2016.

(d)

Operating leases. See Footnote 17.b. of the Notes to Consolidated Financial Statements.

(e)

Purchase obligations for MGE Energy and MGE consist primarily of the purchase of electricity and natural gas, electric transmission, natural gas storage capacity, natural gas pipeline transportation, and the purchase and transport of coal. See Footnote 17.a. of the Notes to Consolidated Financial Statements.

(f)

Other obligations are primarily related to investment commitments, easements, environmental projects, fuel credit, and uncertain tax positions.

The above amounts do not include any contributions for MGE's pension and postretirement plans. Voluntary contributions to the qualified plans for 2017 were $6.0 million, which were paid in January 2017. MGE does not expect to make contributions to the plans for 2018. The contributions for years after 2018 are not yet currently estimated. Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions to the plans.

The above amounts do not include future capital calls by ATC and ATC Holdco. On January 31, 2017, MGE Transco made a $1.4 million capital contribution to ATC, and on January 10, 2017, MGEE Transco made a $0.2 million capital contribution to ATC Holdco. The amount and timing of future capital calls is uncertain and primarily dependent on the operations and expansion of ATC and ATC Holdco.

MGE Energy's and MGE's commercial commitments as of December 31, 2016, representing commitments triggered by future events and including financing arrangements to secure obligations of MGE Energy and MGE, are as follows:

				Expiration Within:						Due After
(In thousands)		Total		1 Year		2-3 Years		4-5 Years		5 Years
MGE Energy
Available lines of credit(a)	$	150,000	$	-	$	-	$	150,000	$	-
MGE
Available lines of credit(b)	$	100,000	$	-	$	-	$	100,000	$	-

(a)

Amount includes the facility discussed in (b) plus an additional line of credit. MGE Energy has available at any time a $50 million committed revolving credit agreement, expiring in June 2020. At December 31, 2016, MGE Energy had no borrowings outstanding under this credit facility.

(b)

Amount includes two committed revolving credit agreements totaling $100 million expiring in June 2020. These credit facilities are used to support commercial paper issuances. At December 31, 2016, MGE had no borrowings outstanding under these facilities, and MGE had no commercial paper outstanding.

Other Matters

ATC

In 2013, several parties filed the first complaint with the FERC seeking to reduce the base return on equity (ROE) used by MISO transmission owners, including ATC, "due to changes in the capital markets." The complaint alleged that the MISO ROE should not exceed 9.15%, the equity components of hypothetical capital structures should be restricted to 50%, and the relevant incentive ROE adders should be discontinued. At the time, MISO's base ROE was 12.38% and ATC's base ROE was 12.2%. In February 2015, a second complaint was filed for the period February 2015 through May 2015 with the FERC requesting a reduction in the base ROE used by MISO

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transmission owners, including ATC, to 8.67%, with a refund effective date retroactive to the filing date of the complaint. In June 2016, an administrative law judge issued an initial decision for the second complaint that would reduce the transmission owner's base ROE to 9.7%. The initial decision will be reviewed by FERC. It is anticipated FERC will issue an order on this issue by mid-2017. On September 28, 2016, FERC issued an order on the first complaint, for the period November 2013 through February 2015, reducing the base ROE to 10.32%. This base ROE also became effective September 28, 2016, and will apply to future periods until FERC rules in the second complaint, at which time the base ROE ordered by FERC in the second complaint will prospectively become the authorized base ROE.

In January 2015, FERC accepted the transmission owner's request for a 50 basis-point incentive ROE adder for participating in MISO. The adder became effective January 6, 2015, subject to refund, and FERC accepted the transmission owner's request to defer collection of the adder pending the outcome of the first ROE complaint proceeding.

Any change to ATC's ROE could result in lower equity earnings and distributions from ATC in the future. Our share of ATC's earnings reflects a pre-tax charge of $1.9 million and $2.3 million for 2016 and 2015, respectively, recorded by ATC for this matter representing its estimate of its refund liability. We derived approximately 6.8% and 6.4% of our net income for 2016 and 2015, respectively, from our investment in ATC.

Critical Accounting Estimates - MGE Energy and MGE

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to unbilled revenues, allowance for doubtful accounts, pension obligations, income taxes, derivatives, and regulatory assets and liabilities. We base our estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Those values may differ from these estimates under different assumptions or conditions. We believe the following critical accounting estimates affect our more significant judgments used in the preparation of our consolidated financial statements.

Unbilled Revenues

Revenues from the sale of electricity and gas to customers are recorded when electricity/gas is delivered to those customers. The quantity of those sales is measured by customers' meters. Due to the large volume of those meters, it is impractical to read all of them at month end. Meters are read on a systematic basis throughout the month based on established meter-reading schedules. Consequently, at the end of any month, there exists a quantity of electricity and gas that has been delivered to customers but has not been captured by the meter readings. As a result, management must estimate revenue related to electricity and gas delivered to customers between their meter-read dates and the end of the period. These estimates include:

·

The amount of electricity expected to be lost in the process of its transmission and distribution to customers (line loss) and the amount of electricity actually delivered to customers.

·

The amount of gas expected to be lost in the process of its distribution to customers and the amount of gas actually delivered to customers.

·

The mix of sales between customer rate classes, which is based upon historical utilization assumptions.

MGE monitors the reasonableness of the unbilled revenue estimate through the review of ratios such as unbilled electric consumption compared to billed electric sales. In the case of unbilled gas, the estimated unbilled consumption is compared to various other statistics, including percent of gas available for sale, change in unbilled month to month and change in unbilled compared to the prior year in order to confirm its reasonableness.

Allowance for Doubtful Accounts

MGE maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. It determines the allowance based on historical write-off experience, regional economic data, and review of the accounts receivable aging. MGE reviews its allowance for doubtful accounts monthly.

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Although management believes that the allowance for doubtful accounts is MGE's best estimate of the amount of probable credit losses, if the financial condition of MGE's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Pension and Other Postretirement Benefit Plans

MGE provides employees with certain retirement (pension) and postretirement (health care and life insurance) benefits. In order to measure the expense and obligations associated with these benefits, management must make a variety of estimates, including discount rates used to value certain liabilities, the expected return on plan assets set aside to fund these costs, the rate of compensation increase, employee turnover rates, retirement rates, health care trends, mortality rates, and other factors. These accounting estimates bear the risk of change due to the uncertainty attached to the estimate as well as the fact that these estimates are difficult to measure. Different estimates used by us could result in recognizing different amounts of expense over different periods of time and recovery in rates is expected.

We use third-party specialists to assist us in evaluating our assumptions as well as appropriately measure the costs and obligations associated with these retirement benefits. The discount rate and expected return on plan assets are based primarily on available investment yields and the historical performance of our plan assets. They are critical accounting estimates because they are subject to management's judgment and can materially affect net income.

·

Assumed return on assets. This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested (or to be invested) to provide for the benefits included in the projected benefit obligation. For 2016, MGE used an assumed return on assets of 7.65% for pension and 6.96% for other postretirement benefits. In 2017, the pension asset assumption will decrease from 7.65% to 7.40%. MGE will decrease the postretirement benefit assumption from 6.96% to 6.78% in 2017. The annual expected rate of return is based on projected long-term equity and bond returns, maturities and asset allocations. Holding other assumptions constant, for every 1% reduction in the expected rate of return on plan assets, annual pension and other postretirement cost would increase by approximately $3.3 million, before taxes.

·

Discount rate. The discount rate represents the rate at which pension obligations could effectively be settled on a present-value basis. MGE uses high-grade bond yields as a benchmark for determining the appropriate discount rate. At December 31, 2015, MGE refined its methodology for using discount rates to measure the components of net periodic benefit cost. The refined methodology uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components. Holding other assumptions constant, a 0.5% reduction in the discount rate on the obligation balance at December 31, 2016, would increase annual pension and other postretirement cost by approximately $2.8 million, before taxes.

·

Medical trend assumptions. The health care cost trend rate is the assumed rate of increase in per-capita health care charges.

·

Mortality rate assumption. Expected mortality rates are used in the valuation to determine the expected duration of future benefit payments to the plan participants. In 2016, the Society of Actuaries released new mortality tables and projection scales. At December 31, 2016, the Company adopted a modified version of these tables that were developed by a third party actuary.

See Footnote 13 of the Notes to Consolidated Financial Statements for additional discussion of these plans.

Income Tax Provision

MGE Energy's and MGE's income tax provisions, including both current and deferred components, are based on estimates, assumptions, calculations, and interpretation of tax statutes for the current and future years. Determination of current-year federal and state income tax will not be settled for years.

Management regularly makes assessments of tax return outcomes relative to financial statement tax provisions and adjusts the tax provisions in the period when facts become final.

Additionally, in determining our current income tax provision, we assess temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in our balance sheets. When we maintain deferred tax assets, we assess the likelihood that these assets will be recovered through adjustments to future taxable income. To the extent we believe recovery

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is not more likely than not, we establish a valuation allowance. We record an allowance reducing the asset to a value we believe will be recoverable based on our expectation of future taxable income. We believe the accounting estimate related to the valuation allowance is a critical accounting estimate because it is highly susceptible to change from period to period as it requires management to make assumptions about our future income over the lives of the deferred tax assets, and the impact of increasing or decreasing the valuation allowance is potentially material to our results of operations.

Accounting for uncertainty in income taxes applies to all tax positions and requires a recognition threshold and measurement standard for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. The threshold is defined for recognizing tax return positions in the financial statements as "more likely than not" that the position is sustainable, based on its merits. Subsequent recognition, derecognition, and measurement is based on management's best judgment given the facts, circumstances and information available at the reporting date.

Accounting for Derivative Instruments

MGE accounts for derivative financial instruments, except those qualifying for the normal purchase normal sale exception, at their fair value on the balance sheet. Fair value is determined using current quoted market prices, except for the PPA, which is valued utilizing an internally-developed pricing model. This model includes observable and unobservable inputs.

MGE received approval from the PSCW to establish a regulatory asset or liability for the deferral of the effects of mark-to-market accounting on contracts related to commodity hedging in MGE's regulated operations.

Regulatory Assets/Liabilities

Regulatory assets represent costs that have been deferred to future periods when it is probable that the regulator will allow future recovery of those costs through rates. MGE bases its assessment of recovery on precedents established by the regulatory body. Regulatory liabilities represent previous collections from customers that are expected to be refunded to customers in future periods. Regulatory assets and regulatory liabilities typically include deferral of energy costs, the normalization of income taxes, the deferral of certain operating expenses, and non-ARO removal costs. The accounting for these regulatory assets and liabilities is in accordance with regulatory accounting standards.

MGE continually assesses whether the regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. This assessment considers factors such as changes in the regulatory environment, recent rate orders to other regulated entities under the same jurisdiction, and the status of any pending or potential deregulation legislation. If future recovery of costs becomes no longer probable, the assets and liabilities would be recognized as current-period revenues or expenses.

Amortization of regulatory assets and liabilities is provided over the recovery or deferral period as allowed in the related regulatory agreement.

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements - MGE Energy and MGE

See Footnote 19 of the Notes to Consolidated Financial Statements for discussion of new accounting pronouncements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

MGE Energy and MGE are potentially exposed to market risk associated with interest rates, commodity prices, and equity returns. MGE currently has no exposure to foreign currency risk. MGE manages some risk exposure through risk management policies and the use of derivative instruments. MGE's risk management policy prohibits speculative trading transactions.

Commodity Price Risk

MGE has commodity price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE's electric operations burn natural gas in several of its peaking power plants and, in many cases, the cost of purchased power is tied to the cost of natural gas. MGE employs established policies and procedures to reduce the market risks associated with changing commodity prices. MGE's commodity risks are somewhat mitigated by the current ratemaking process in place for recovering electric fuel cost, purchased energy costs, and the cost of natural gas.

MGE's electric fuel costs are subject to fuel rules established by the PSCW. The fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. Under the electric fuel rules, MGE is required to defer the benefit of lower costs if the actual electric fuel costs fall outside the lower end of the range and is required to defer costs, less any excess revenues, if the actual electric fuel costs exceed the upper end of the range. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. The range is defined by the PSCW and has been modified throughout the years based on market conditions and other relevant factors. Currently, MGE is subject to a plus or minus 2% range. MGE assumes the risks and benefits of variances that are within the cost tolerance band. For 2017, fuel and purchased power costs included in MGE's base fuel rates are $101.9 million. See Footnote 16 of the Notes to Consolidated Financial Statements for additional information.

MGE recovers the cost of natural gas in its gas utility segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas.

MGE also reduces price risk caused by market fluctuations via physical contracts and financial derivative contracts, including futures, swaps, options, forwards, and other contractual commitments. The maximum length of time over which cash flows related to energy commodities can be hedged under applicable PSCW approvals is four years.

MGE has financial gas and electric commodity contracts to hedge commodity price risk in the gas and electric utility segments. These contracts are primarily comprised of exchange-traded option and future contracts. MGE also holds FTRs, which are used to hedge the risk of increased transmission congestion charges. At December 31, 2016, the fair value of these instruments exceeded their cost basis by $1.3 million. Under the PGA clause and electric fuel rules, MGE may include in the costs of fuel (natural gas or power) the costs and benefits of the aforementioned fuel price risk management tools. Because these costs/benefits are recoverable, the related unrealized loss/gain has been deferred on the consolidated balance sheets as a regulatory asset/liability.

MGE has also entered into a purchased power agreement that provides MGE with firm capacity and energy that began on June 1, 2012, and ends on May 31, 2022 (the "base term"). The agreement also allows MGE an option to extend the contract after the base term. The agreement is considered a derivative contract and is recognized at its fair value on the consolidated balance sheet. However, the derivative qualifies for regulatory deferral and is recognized with a corresponding regulatory asset or liability depending on whether the fair value is in a loss or gain position. The fair value of the contract at December 31, 2016, reflects a loss position of $50.6 million.

Interest Rate Risk

Both MGE Energy and MGE may have short term borrowings at varying interest rates. MGE issues commercial paper for its short-term borrowings, while MGE Energy draws from its current credit facility to meet its short-term borrowing needs. Borrowing levels vary from period to period depending upon capital investments and other factors. Future short-term interest expense and payments will reflect both future short-term interest rates and borrowing levels. MGE Energy and MGE manage interest rate risk by limiting their variable rate exposure and continually monitoring the effects of market changes on interest rates. MGE is not exposed to changes in interest rates on a substantial portion of its long-term debt until that debt matures and is refinanced at market rates.

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Equity Price Risk - Pension-Related Assets

MGE currently funds its liabilities related to employee benefits through trust funds. These funds, which include investments in debt and equity securities, are managed by various investment managers. Changes in market value of these investments can have an impact on the future expenses related to these liabilities. Holding other assumptions constant, for every 1% reduction in the expected rate of return on plan assets, annual pension and other postretirement cost would increase by approximately $3.3 million, before taxes. MGE's risk of expense and annuity payments, as a result of changes in the market value of the trust funds, is mitigated in part through future rate actions by the PSCW. The value of employee benefit plans trusts' assets have increased in value by approximately 8.36% and 1.39% during the years ended December 31, 2016, and 2015, respectively.

Credit Risk - Counterparty

Credit risk is the loss that may result from counterparty nonperformance. MGE is exposed to credit risk primarily through its merchant energy business. MGE uses credit policies to manage its credit risk, which include utilizing an established credit approval process, monitoring counterparty limits, employing credit mitigation measures such as collateral or prepayment arrangements, and using netting agreements.

Due to the possibility of extreme volatility in the prices of energy commodities and derivatives, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If such a counterparty were then to fail to perform its obligations under its contract (for example, fail to deliver the electricity MGE originally contracted for), MGE could sustain a loss that could have a material impact on its financial results.

Additionally, if a counterparty were to default and MGE were to liquidate all contracts with that entity, MGE's credit loss would include the loss in value of mark-to-market contracts; the amount owed for settled transactions; and additional payments, if any, to settle unrealized losses on accrual contracts. As of December 31, 2016, no counterparties have defaulted.

MGE is obligated to provide service to all electric and gas customers within its respective franchised territories. MGE's franchised electric territory includes a 316 square-mile area in Dane County, Wisconsin, and MGE's franchised gas territory includes a service area covering 1,682 square miles in Wisconsin. Based on results for December 31, 2016, no one customer constituted more than 10% of total operating revenues for MGE Energy and MGE. Credit risk for electric and gas is managed by MGE's credit and collection policies, which are consistent with state regulatory requirements.

Cash, cash equivalents, and customer accounts receivable are the financial instruments that potentially subject MGE Energy and MGE to concentrations of credit risk. MGE Energy and MGE place their cash and cash equivalents with high credit-quality financial institutions. MGE has limited concentrations of credit risk from customer accounts receivable because of the large number of customers and relatively strong economy in its service territory.

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Item 8. Financial Statements and Supplementary Data.

MGE Energy

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in the Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2016.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The effectiveness of MGE Energy's internal control over financial reporting as of December 31, 2016, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

February 24, 2017

MGE

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in the Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2016.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

February 24, 2017

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of MGE Energy, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of MGE Energy, Inc. and its subsidiaries at December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 24, 2017

52

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholder of Madison Gas and Electric Company:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Madison Gas and Electric Company and its subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 24, 2017

53

MGE Energy, Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
		For the Years Ended December 31,
		2016		2015		2014
Operating Revenues:
Electric revenues	$	410,202	$	420,291	$	398,132
Gas revenues		134,543		143,737		221,720
Total Operating Revenues		544,745		564,028		619,852
Operating Expenses:
Fuel for electric generation		60,736		53,858		42,828
Purchased power		56,313		81,224		73,232
Cost of gas sold		66,771		76,109		143,644
Other operations and maintenance		167,989		164,478		161,703
Depreciation and amortization		44,646		44,225		40,695
Other general taxes		20,062		19,879		19,652
Total Operating Expenses		416,517		439,773		481,754
Operating Income		128,228		124,255		138,098
Other income, net		9,711		8,613		10,079
Interest expense, net		(19,866)		(20,162)		(19,673)
Income before income taxes		118,073		112,706		128,504
Income tax provision		(42,513)		(41,363)		(48,185)
Net Income	$	75,560	$	71,343	$	80,319
Earnings Per Share of Common Stock
(basic and diluted)	$	2.18	$	2.06	$	2.32
Dividends per share of common stock	$	1.21	$	1.16	$	1.11
Weighted Average Shares Outstanding
(basic and diluted)		34,668		34,668		34,668
The accompanying notes are an integral part of the above consolidated financial statements.

MGE Energy, Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Net Income	$	75,560	$	71,343	$	80,319
Other comprehensive income, net of tax:
Unrealized (loss) gain on available-for-sale securities, net of
tax ($104, $67, and ($54))		(155)		(101)		81
Comprehensive Income	$	75,405	$	71,242	$	80,400
The accompanying notes are an integral part of the above consolidated financial statements.

54

MGE Energy, Inc.
Consolidated Statements of Cash Flows
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Operating Activities:
Net income	$	75,560	$	71,343	$	80,319
Items not affecting cash:
Depreciation and amortization		44,646		44,225		40,695
Deferred income taxes		22,421		21,927		49,884
Provision for doubtful receivables		1,196		596		1,898
Employee benefit plan expenses		295		3,333		(1,080)
Equity earnings in ATC		(8,428)		(7,728)		(9,150)
Other items		1,426		721		729
Changes in working capital items:
Trade and other receivables		(5,666)		4,508		2,115
Inventories		7,273		(2,646)		(10,399)
Unbilled revenues		(4,838)		6,254		720
Prepaid taxes		8,616		3,658		(19,804)
Other current assets		700		978		(5,693)
Accounts payable		9,881		(3,499)		2,756
Other current liabilities		(1,738)		(597)		(4,195)
Dividend income from ATC		7,926		6,645		7,740
Cash contributions to pension and other postretirement plans		(14,452)		(13,676)		(3,321)
Other noncurrent items, net		2,695		5,143		(4,452)
Cash Provided by Operating Activities		147,513		141,185		128,762
Investing Activities:
Capital expenditures		(83,659)		(72,030)		(92,676)
Capital contributions to investments		(2,958)		(1,053)		(2,185)
Other		(209)		(230)		(1,297)
Cash Used for Investing Activities		(86,826)		(73,313)		(96,158)
Financing Activities:
Cash dividends paid on common stock		(41,775)		(40,043)		(38,429)
Repayment of long-term debt		(4,267)		(4,182)		(4,103)
(Decrease) increase in short-term debt		-		(7,000)		7,000
Other		(70)		(1,018)		(130)
Cash Used for Financing Activities		(46,112)		(52,243)		(35,662)
Change in cash and cash equivalents:		14,575		15,629		(3,058)
Cash and cash equivalents at beginning of period		81,384		65,755		68,813
Cash and cash equivalents at end of period	$	95,959	$	81,384	$	65,755
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	19,415	$	19,636	$	20,478
Income taxes paid	$	21,831	$	23,800	$	19,579
Income taxes received	$	(10,000)	$	(10,130)	$	(644)
Significant noncash investing activities:
Accrued capital expenditures	$	16,376	$	3,963	$	1,569
The accompanying notes are an integral part of the above consolidated financial statements.

55

MGE Energy, Inc.
Consolidated Balance Sheets
(In thousands)
		At December 31,
ASSETS		2016		2015
Current Assets:
Cash and cash equivalents	$	95,959	$	81,384
Accounts receivable, less reserves of $3,017 and $3,052, respectively		39,887		37,112
Other accounts receivable, less reserves of $426 and $642, respectively		8,530		7,477
Unbilled revenues		29,846		25,008
Materials and supplies, at average cost		18,561		19,155
Fossil fuel, at average cost		9,757		13,110
Stored natural gas, at average cost		12,819		16,145
Prepaid taxes		26,636		35,252
Regulatory assets - current		6,414		9,538
Assets held for sale		14,813		-
Other current assets		12,293		10,570
Total Current Assets		275,515		254,751
Other long-term receivables		5,603		5,045
Regulatory assets		158,485		148,199
Pension and other postretirement benefit asset		2,020		-
Other deferred assets and other		1,088		1,332
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,245,269		1,217,094
Construction work in progress		36,790		26,351
Total Property, Plant, and Equipment		1,282,059		1,243,445
Investments		76,290		73,631
Total Assets	$	1,801,060	$	1,726,403
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,333	$	4,266
Accounts payable		47,799		40,830
Accrued interest and taxes		5,495		5,067
Accrued payroll related items		11,892		11,215
Regulatory liabilities - current		6,910		9,515
Derivative liabilities		7,620		8,343
Other current liabilities		19,456		4,910
Total Current Liabilities		103,505		84,146
Other Credits:
Deferred income taxes		383,813		360,785
Investment tax credit - deferred		947		1,050
Regulatory liabilities		22,173		20,785
Accrued pension and other postretirement benefits		74,347		75,680
Derivative liabilities		42,970		44,935
Other deferred liabilities and other		66,426		61,820
Total Other Credits		590,676		565,055
Capitalization:
Common shareholders' equity:
Common Stock - $1 par value - 75,000 shares authorized;
34,668 shares issued and outstanding		34,668		34,668
Additional paid-in capital		316,268		316,268
Retained earnings		372,950		339,165
Accumulated other comprehensive income, net of tax		202		357
Total Common Shareholders' Equity		724,088		690,458
Long-term debt		382,791		386,744
Total Capitalization		1,106,879		1,077,202
Commitments and contingencies (see Footnote 17)		-		-
Total Liabilities and Capitalization	$	1,801,060	$	1,726,403
The accompanying notes are an integral part of the above consolidated financial statements.

56

MGE Energy, Inc.
Consolidated Statements of Common Equity
(In thousands, except per share amounts)
									Accumulated
					Additional				Other
	Common Stock				Paid-in		Retained		Comprehensive
	Shares		Value		Capital		Earnings		Income/(Loss)		Total
2014
Beginning balance - December 31, 2013	34,668	$	34,668	$	316,268	$	266,197	$	377	$	617,510
Net income							80,319				80,319
Other comprehensive income									81		81
Common stock dividends declared
($1.11 per share)							(38,429)				(38,429)
Cash in lieu of fractional shares related to stock split							(80)				(80)
Ending balance - December 31, 2014	34,668	$	34,668	$	316,268	$	308,007	$	458	$	659,401
2015
Beginning balance - January 1, 2015	34,668	$	34,668	$	316,268	$	308,007	$	458	$	659,401
Cumulative effect of new accounting principle							(142)				(142)
Beginning balance - Adjusted							307,865				659,259
Net income							71,343				71,343
Other comprehensive loss									(101)		(101)
Common stock dividends declared
($1.16 per share)							(40,043)				(40,043)
Ending balance - December 31, 2015	34,668	$	34,668	$	316,268	$	339,165	$	357	$	690,458
2016
Net income							75,560				75,560
Other comprehensive loss									(155)		(155)
Common stock dividends declared
($1.21 per share)							(41,775)				(41,775)
Ending balance - December 31, 2016	34,668	$	34,668	$	316,268	$	372,950	$	202	$	724,088
The accompanying notes are an integral part of the above consolidated financial statements.

57

Madison Gas and Electric Company
Consolidated Statements of Income
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Operating Revenues:
Electric revenues	$	410,226	$	420,313	$	398,154
Gas revenues		134,572		143,752		221,741
Total Operating Revenues		544,798		564,065		619,895
Operating Expenses:
Fuel for electric generation		60,745		53,866		42,836
Purchased power		56,327		81,237		73,245
Cost of gas sold		66,800		76,124		143,665
Other operations and maintenance		167,077		163,622		160,831
Depreciation and amortization		44,622		44,178		40,648
Other general taxes		20,062		19,879		19,652
Income tax provision		39,616		38,159		45,090
Total Operating Expenses		455,249		477,065		525,967
Operating Income		89,549		87,000		93,928
Other Income and Deductions:
AFUDC - equity funds		1,207		712		3,466
Equity earnings in MGE Transco		6,366		7,728		9,150
Income tax provision		(2,175)		(3,247)		(4,055)
Other deductions, net		(217)		(345)		(704)
Total Other Income and Deductions		5,181		4,848		7,857
Income before interest expense		94,730		91,848		101,785
Interest Expense:
Interest on long-term debt		20,351		20,520		20,927
Other interest, net		182		94		62
AFUDC - borrowed funds		(395)		(231)		(1,142)
Net Interest Expense		20,138		20,383		19,847
Net Income	$	74,592	$	71,465	$	81,938
Less Net Income Attributable to Noncontrolling Interest, net of tax		(23,358)		(26,097)		(26,310)
Net Income Attributable to MGE	$	51,234	$	45,368	$	55,628
The accompanying notes are an integral part of the above consolidated financial statements.

Madison Gas and Electric Company
Consolidated Statements of Comprehensive Income
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Net Income	$	74,592	$	71,465	$	81,938
Other comprehensive income, net of tax:
Unrealized loss on available-for-sale securities, net of
tax ($2, $81, and $33)		(4)		(121)		(48)
Comprehensive Income	$	74,588	$	71,344	$	81,890
Less: Comprehensive Income Attributable to Noncontrolling
Interest, net of tax		(23,358)		(26,097)		(26,310)
Comprehensive Income Attributable to MGE	$	51,230	$	45,247	$	55,580
The accompanying notes are an integral part of the above consolidated financial statements.

58

Madison Gas and Electric Company
Consolidated Statements of Cash Flows
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Operating Activities:
Net income	$	74,592	$	71,465	$	81,938
Items not affecting cash:
Depreciation and amortization		44,622		44,178		40,648
Deferred income taxes		20,876		18,843		49,603
Provision for doubtful receivables		1,196		596		1,898
Employee benefit plan expenses		295		3,333		(1,080)
Equity earnings in MGE Transco		(6,366)		(7,728)		(9,150)
Other items		1,954		1,223		1,280
Changes in working capital items:
Trade and other receivables		(3,583)		11,079		(4,455)
Inventories		7,273		(2,647)		(10,398)
Unbilled revenues		(4,838)		6,254		720
Prepaid taxes		8,481		4,824		(15,169)
Other current assets		699		976		(5,693)
Accounts payable		9,941		(3,587)		2,741
Accrued interest and taxes		419		(18)		(1,001)
Other current liabilities		(2,137)		1,885		(3,144)
Dividend income from MGE Transco		5,032		6,645		7,740
Cash contributions to pension and other postretirement plans		(14,452)		(13,677)		(3,321)
Other noncurrent items, net		2,497		4,816		(4,619)
Cash Provided by Operating Activities		146,501		148,460		128,538
Investing Activities:
Capital expenditures		(83,659)		(72,030)		(92,676)
Capital contributions to MGE Transco		(1,598)		(710)		(1,775)
Other		(391)		(180)		(1,146)
Cash Used for Investing Activities		(85,648)		(72,920)		(95,597)
Financing Activities:
Cash dividends paid to parent by MGE		(50,000)		(30,000)		(26,500)
Distributions to parent from noncontrolling interest		(24,113)		(14,708)		(21,359)
Equity contribution received by noncontrolling interest		1,598		3,230		1,775
Repayment of long-term debt		(4,267)		(4,182)		(4,103)
(Decrease) increase in short-term debt		-		(7,000)		7,000
Other		(63)		(682)		-
Cash Used for Financing Activities		(76,845)		(53,342)		(43,187)
Change in cash and cash equivalents:		(15,992)		22,198		(10,246)
Cash and cash equivalents at beginning of period		26,760		4,562		14,808
Cash and cash equivalents at end of period	$	10,768	$	26,760	$	4,562
Supplemental disclosures of cash flow information:
Interest paid	$	19,415	$	19,636	$	20,478
Income taxes paid	$	29	$	29	$	67
Income taxes received	$	-	$	-	$	(644)
Significant noncash investing activities:
Accrued capital expenditures	$	16,376	$	3,963	$	1,569
Dividend in kind to parent	$	15,822	$	-	$	-
The accompanying notes are an integral part of the above consolidated financial statements.

59

Madison Gas and Electric Company
Consolidated Balance Sheets
(In thousands)
		At December 31,
ASSETS		2016		2015
Current Assets:
Cash and cash equivalents	$	10,768	$	26,760
Accounts receivable, less reserves of $3,017 and $3,052, respectively		39,887		37,112
Affiliate receivables		539		542
Other accounts receivable, less reserves of $426 and $642, respectively		6,363		7,390
Unbilled revenues		29,846		25,008
Materials and supplies, at average cost		18,561		19,155
Fossil fuel, at average cost		9,757		13,110
Stored natural gas, at average cost		12,819		16,145
Prepaid taxes		25,798		34,279
Regulatory assets - current		6,414		9,538
Assets held for sale		14,813		-
Other current assets		12,268		10,544
Total Current Assets		187,833		199,583
Affiliate receivable long-term		4,236		4,766
Regulatory assets		158,485		148,199
Pension and other postretirement benefit asset		2,020		-
Other deferred assets and other		4,353		4,216
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,244,648		1,216,415
Construction work in progress		36,790		26,351
Total Property, Plant, and Equipment		1,281,438		1,242,766
Investments		487		69,984
Total Assets	$	1,638,852	$	1,669,514
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,333	$	4,266
Accounts payable		47,790		40,742
Accrued interest and taxes		5,440		5,021
Accrued payroll related items		11,892		11,215
Regulatory liabilities - current		6,910		9,515
Derivative liabilities		7,620		8,343
Other current liabilities		19,347		4,791
Total Current Liabilities		103,332		83,893
Other Credits:
Deferred income taxes		343,117		352,626
Investment tax credit - deferred		947		1,050
Regulatory liabilities		22,173		20,785
Accrued pension and other postretirement benefits		74,347		75,680
Derivative liabilities		42,970		44,935
Other deferred liabilities and other		66,426		61,817
Total Other Credits		549,980		556,893
Capitalization:
Common shareholder's equity:
Common Stock - $1 par value - 50,000 shares authorized; 17,348 shares outstanding		17,348		17,348
Additional paid-in capital		192,417		192,417
Retained earnings		277,300		291,888
Accumulated other comprehensive income, net of tax		19		23
Total Common Shareholder's Equity		487,084		501,676
Noncontrolling interest		115,665		140,308
Total Equity		602,749		641,984
Long-term debt		382,791		386,744
Total Capitalization		985,540		1,028,728
Commitments and contingencies (see Footnote 17)		-		-
Total Liabilities and Capitalization	$	1,638,852	$	1,669,514
The accompanying notes are an integral part of the above consolidated financial statements.

60

Madison Gas and Electric Company
Consolidated Statements of Common Equity
(In thousands)
								Accumulated
					Additional				Other		Non-
	Common Stock				Paid-in		Retained	Comprehensive			Controlling
	Shares		Value		Capital		Earnings	Income/(Loss)			Interest		Total
2014
Beginning balance - December 31, 2013	17,348	$	17,348	$	192,417	$	247,534	$	192	$	118,963	$	576,454
Net income							55,628				26,310		81,938
Other comprehensive loss									(48)				(48)
Cash dividends paid to parent by MGE							(26,500)						(26,500)
Equity contribution received by
noncontrolling interest											1,775		1,775
Distributions to parent from
noncontrolling interest											(21,359)		(21,359)
Ending balance - December 31, 2014	17,348	$	17,348	$	192,417	$	276,662	$	144	$	125,689	$	612,260
2015
Beginning balance - January 1, 2015	17,348	$	17,348	$	192,417	$	276,662	$	144	$	125,689	$	612,260
Cumulative effect of new accounting principle							(142)						(142)
Beginning balance - Adjusted							276,520						612,118
Net income							45,368				26,097		71,465
Other comprehensive loss									(121)				(121)
Cash dividends paid to parent by MGE							(30,000)						(30,000)
Equity contribution received by
noncontrolling interest											3,230		3,230
Distributions to parent from
noncontrolling interest											(14,708)		(14,708)
Ending balance - December 31, 2015	17,348	$	17,348	$	192,417	$	291,888	$	23	$	140,308	$	641,984
2016
Net income							51,234				23,358		74,592
Other comprehensive loss									(4)				(4)
Cash dividends paid to parent by MGE							(50,000)						(50,000)
Dividend in kind to parent							(15,822)						(15,822)
Equity contribution received by
noncontrolling interest											1,598		1,598
Distributions to parent from
noncontrolling interest											(24,113)		(24,113)
Deconsolidation of noncontrolling interest											(25,486)		(25,486)
Ending balance - December 31, 2016	17,348	$	17,348	$	192,417	$	277,300	$	19	$	115,665	$	602,749
The accompanying notes are an integral part of the above consolidated financial statements.

61

Notes to Consolidated Financial Statements

December 31, 2016, 2015, and 2014

This report is a combined report of MGE Energy and MGE. The notes to the consolidated financial statements that follow include consolidated MGE Energy footnotes and certain footnotes related to MGE as signified below.

1.

Summary of Significant Accounting Policies.

a.

Basis of Presentation - MGE Energy and MGE.

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which give recognition to the rate making accounting policies for regulated operations prescribed by the regulatory authorities having jurisdiction, principally the PSCW and FERC. MGE's accounting records conform to the FERC uniform system of accounts.

b.

Principles of Consolidation - MGE Energy and MGE.

MGE, a wholly owned subsidiary of MGE Energy, is a regulated electric and gas utility headquartered in Madison, Wisconsin. MGE Energy and MGE consolidate all majority owned subsidiaries in which it has controlling influence.

Additional wholly owned subsidiaries of MGE Energy include CWDC, MAGAEL, MGE Power, MGE State Energy Services, MGE Services, MGE Transco, MGEE Transco, and NGV Fueling Services. MGE Power owns 100% of MGE Power Elm Road and MGE Power West Campus. MGE Power and its subsidiaries are part of MGE Energy's nonregulated energy operations, which were formed to own and lease electric generation projects to assist MGE. MGE Transco and MGEE Transco are nonregulated entities formed to manage the investments in ATC and ATC Holdco, respectively. On December 1, 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy. See Footnote 4 for further discussion of the transfer of MGE's investment in MGE Transco.

MGE Energy and MGE consolidate variable interest entities (VIEs) for which it is the primary beneficiary. Variable interest entities are legal entities that possess any of the following characteristics: equity investors who have an insufficient amount of equity at risk to finance their activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity holders who do not receive expected losses or returns significant to the VIE. If MGE Energy or MGE is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, all relevant facts and circumstances are considered, including: the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the expected losses and/or the right to receive the expected returns of the VIE. Ongoing reassessments of all VIEs are performed to determine if the primary beneficiary status has changed. MGE has consolidated MGE Power Elm Road and MGE Power West Campus. Both entities are VIEs. MGE is considered the primary beneficiary of these entities as a result of contractual agreements. See Footnote 2 for more discussion of these entities.

Prior to December 1, 2016, MGE Transco was jointly owned by MGE Energy and MGE. MGE's ownership interest in MGE Transco declined below a majority in July 2016. As a result of the change in majority ownership, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. See Footnote 8 for further discussion regarding the deconsolidation of noncontrolling interest.

The consolidated financial statements reflect the application of certain accounting policies described in this note. All significant intercompany accounts and transactions have been eliminated in consolidation.

c.

Use of Estimates - MGE Energy and MGE.

In order to prepare consolidated financial statements in conformity with GAAP, management must make estimates and assumptions. These estimates could affect reported amounts of assets, liabilities, and disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management's estimates.

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d.

Cash Equivalents and Restricted Cash - MGE Energy and MGE.

Cash Equivalents

MGE Energy and MGE consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

MGE has certain cash accounts that are restricted to uses other than current operations and designated for a specific purpose. MGE's restricted cash accounts include cash held by trustees for certain employee benefits and cash deposits held by third parties. As of December 31, 2016 and 2015, there was $3.7 million and $2.9 million, respectively, of cash deposits held by third parties. These are included in "Other current assets" on the consolidated balance sheets.

Receivable – Margin Account

Cash amounts held by counterparties as margin for certain financial transactions are recorded as receivable – margin account in "Other current assets" on the consolidated balance sheets. As of December 31, 2016 and 2015, the receivable – margin account balance of $1.3 million and $2.3 million, respectively, is shown net of any collateral posted against derivative positions. As of December 31, 2016, no cash collateral was posted against derivative positions. As of December 31, 2015, there was $1.0 million of collateral posted against derivative positions. Changes in this cash account are considered cash flows from operating activities to match with the costs being hedged. The costs being hedged are fuel for electric generation, purchased power, and cost of gas sold.

e.

Trade Receivables, Allowance for Doubtful Accounts, and Concentration Risk - MGE Energy and MGE.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. However, a 1% late payment charge is recorded on all receivables unpaid after the due date. The allowance for doubtful accounts associated with these receivables represents our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine our allowance for doubtful accounts based on historical write-off experience, regional economic data, and review of the accounts receivable aging. MGE manages this concentration and the related credit risk through its credit and collection policies, which are consistent with state regulatory requirements.

f.

Inventories - MGE Energy and MGE.

Inventories consist of natural gas in storage, fossil fuels, materials and supplies, and renewable energy credits (RECs). MGE values natural gas in storage, fossil fuels, and materials and supplies using average cost.

REC allowances are included in "Materials and supplies" on the consolidated balance sheets and are recorded based on specific identification. These allowances are charged to purchase power expense as they are used in operations. MGE's REC allowance balance as of December 31, 2016 and 2015, was $0.3 million.

g.

Chattel Paper Agreements - MGE Energy and MGE.

MGE makes available to qualifying customers a financing program for the purchase and installation of energy-related equipment that will provide more efficient use of utility service at the customer's property. The energy-related equipment installed at the customer sites is used to secure the customer loans. MGE is a party to a chattel paper purchase agreement with a financial institution under which it can sell or finance an undivided interest with recourse, in up to $10.0 million of the financing program receivables, until July 31, 2017. The length of the MGE guarantee to the financial institution varies from one to ten years depending on the term of the underlying customer loan. The loan balances outstanding at December 31, 2016, approximate the fair value of the energy-related equipment acting as collateral. MGE accounts for these agreements as secured borrowings.

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As of December 31, 2016, the remaining contractual maturities of the chattel paper agreements were as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Repurchase-to-Maturity Transactions:
Loans	$	559	$	620	$	595	$	568	$	432	$	1,121

h.

Regulatory Assets and Liabilities - MGE Energy and MGE.

Regulatory assets and regulatory liabilities are recorded consistent with regulatory treatment. Regulatory assets represent costs which are deferred due to the probable future recovery from customers through regulated rates. Regulatory liabilities represent the excess recovery of costs or accrued credits which were deferred because MGE believes it is probable such amounts will be returned to customers through future regulated rates. Regulatory assets and liabilities are amortized in the consolidated statements of income consistent with the recovery or refund included in customer rates. MGE believes that it is probable that its recorded regulatory assets and liabilities will be recovered and refunded, respectively, in future rates. See Footnote 6 for further information.

i.

Debt Issuance Costs - MGE Energy and MGE.

Premiums, discounts, and expenses incurred with the issuance of outstanding long-term debt are amortized over the life of the debt issue. Any call premiums or unamortized expenses associated with refinancing higher-cost debt obligations used to finance utility-regulated assets and operations are amortized consistent with regulatory treatment of those items. These costs are included as a direct deduction to the related debt liability on the consolidated balance sheets.

j.

Property, Plant, and Equipment - MGE Energy and MGE.

Property, plant, and equipment is recorded at original cost. Cost includes indirect costs consisting of payroll taxes, pensions, postretirement benefits, other fringe benefits, and administrative and general costs. Also, included in the cost is AFUDC for utility property and capitalized interest for nonregulated property. Additions for significant replacements of property are charged to property, plant, and equipment at cost; and minor items are charged to maintenance expense. Depreciation rates on utility property are approved by the PSCW, based on the estimated economic lives of property, and include estimates for salvage value and removal costs. Removal costs of utility property, less any salvage value, are adjusted through regulatory liabilities. Depreciation rates on nonregulated property are based on the estimated economic lives of the property. See Footnote 3 for further information.

Provisions at composite straight-line depreciation rates approximate the following percentages for the cost of depreciable property:

	2016	2015	2014
Electric(a)	2.5 %	2.6 %	2.6 %
Gas(a)	2.1 %	1.7 %	1.7 %
Nonregulated	2.3 %	2.4 %	2.4 %

(a)

In December 2015, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2016.

k.

Asset Retirement Obligations - MGE Energy and MGE.

MGE Energy and MGE are required to record a liability for the fair value of an ARO to be recognized in the period in which it is incurred if it can be reasonably estimated. The offsetting associated asset retirement costs are capitalized as a long-lived asset and depreciated over the asset's useful life. The expected present value technique used to calculate the fair value of ARO liabilities includes assumptions about costs, probabilities, settlement dates, interest accretion, and inflation. Revisions to the assumptions, including the timing or amount of expected asset retirement costs, could result in increases or decreases to the AROs. All asset retirement obligations are recorded as "Other long-term liabilities" on the consolidated balance sheets. MGE has regulatory treatment and recognizes regulatory assets or liabilities for the timing differences between when we recover legal AROs in rates and when we would recognize these costs. See Footnote 18 for further information.

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l.

Repairs and Maintenance Expense - MGE Energy and MGE.

MGE utilizes the direct expensing method for planned major maintenance projects. Under this method, MGE expenses all costs associated with major planned maintenance activities as incurred.

m.

Purchased Gas Adjustment Clause - MGE Energy and MGE.

MGE's natural gas rates are subject to a fuel adjustment clause designed to recover or refund the difference between the actual cost of purchased gas and the amount included in rates. Differences between the amounts billed to customers and the actual costs recoverable are deferred and recovered or refunded in future periods by means of prospective monthly adjustments to rates. At December 31, 2016 and 2015, MGE had over collected $0.9 million and $0.8 million, respectively. These amounts are included in "Regulatory liabilities - current" on the consolidated balance sheets.

n.

Revenue Recognition - MGE Energy and MGE.

Operating revenues are recorded as service is rendered or energy is delivered to customers. Meters are read on a systematic basis throughout the month based on established meter-reading schedules. At the end of the month, MGE accrues an estimate for the unbilled amount of energy delivered to customers. The unbilled revenue estimate is based on daily system demand volumes, weather factors, estimated line losses, estimated customer usage by class, and applicable customer rates.

o.

Utility Cost Recovery - MGE Energy and MGE.

MGE's rates include a provision for fuel costs. The PSCW allows Wisconsin utilities to defer electric fuel-related costs, less excess revenues, that fall outside a symmetrical cost tolerance band. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. Such deferred amounts will be recognized in "Purchased power" expense in MGE Energy's and MGE's consolidated income statements each period. The cumulative effects of these deferred amounts will be recorded in "Regulatory assets" or "Regulatory liabilities" on MGE Energy's and MGE's consolidated balance sheets until they are reflected in future billings to customers. See Footnote 16.b. for further information regarding the regulatory rules applicable to the recovery of electric fuel costs.

p.

Regional Transmission Organizations - MGE Energy and MGE.

MGE reports on a net basis transactions on the MISO markets in which it buys and sells power within the same hour to meet electric energy delivery requirements. This treatment resulted in a $77.2 million, a $68.6 million, and a $91.1 million reduction to sales to the market and purchase power expense for MISO markets for the years ended December 31, 2016, 2015, and 2014, respectively.

q.

Allowance for Funds Used During Construction - MGE Energy and MGE.

Allowance for funds used during construction is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a return on shareholder's capital used for construction purposes. In the consolidated income statements, the cost of borrowed funds (AFUDC-debt) is presented as an offset to "Interest expense" and the return on shareholder's capital (AFUDC-equity funds) is shown as an item within "Other income." For both 2016 and 2015, as approved by the PSCW, MGE capitalized AFUDC-debt and equity on 50% of applicable average construction work in progress at 7.93%. For 2014, MGE capitalized AFUDC-debt and equity on 50% of applicable average construction work in progress at 8.21%. For 2016, 2015, and 2014, MGE received specific approval to recover 100% AFUDC on certain environmental costs for Columbia. These amounts are recovered under the ratemaking process over the service lives of the related properties.

r.

Investments - MGE Energy and MGE.

Investments in limited liability companies that have specific ownership accounts in which MGE Energy or MGE's ownership interest is more than minor and are considered to have significant influence are accounted for using the equity method. All other investments are carried at fair value or at cost, as appropriate. See Footnote 4 for further information.

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s.

Capitalized Software Costs - MGE Energy and MGE.

Property, plant, and equipment includes the net book value of capitalized costs of internal use software totaling $12.3 million and $12.0 million at December 31, 2016 and 2015, respectively. During 2016, 2015, and 2014, MGE recorded $3.0 million, $2.2 million, and $1.6 million, respectively, of amortization expense related to these costs. These costs are amortized on a straight-line basis over the estimated useful lives of the assets. For internal use software, the useful lives range from five to ten years.

t.

Impairment of Long-Lived Assets - MGE Energy and MGE.

MGE reviews plant and equipment and other property for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. MGE's policy for determining when long-lived assets are impaired is to recognize an impairment loss if the sum of the expected future cash flows (undiscounted and without interest charges) from an asset are less than the carrying amount of that asset. If an impairment loss is recognized, the amount that will be recorded will be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. There is no impairment of long-lived assets at December 31, 2016, 2015, and 2014.

u.

Income Taxes and Excise Taxes - MGE Energy and MGE.

Income taxes

Under the liability method, income taxes are deferred for all temporary differences between pretax financial and taxable income and between the book and tax basis of assets and liabilities using the tax rates scheduled by law to be in effect when the temporary differences reverse. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. A valuation allowance is recorded for those benefits that do not meet this criterion.

Accounting for uncertainty in income taxes applies to all tax positions and requires a recognition threshold and measurement standard for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. The threshold is defined for recognizing tax return positions in the financial statements as "more likely than not" that the position is sustainable, based on its merits. Subsequent recognition, derecognition, and measurement is based on management's best judgment given the facts, circumstances, and information available at the reporting date.

Regulatory and accounting principles have resulted in a regulatory liability related to income taxes. Excess deferred income taxes result from past taxes provided at rates higher than current rates. The income tax regulatory liability and deferred investment tax credit reflect the revenue requirement associated with the return of these tax benefits to customers.

Investment tax credits from regulated operations are amortized over related property service lives.

Excise taxes

MGE Energy, through its utility operations, pays a state license fee tax in lieu of property taxes on property used in utility operations. License fee tax is calculated as a percentage of adjusted operating revenues of the prior year. The electric tax rate is 3.19% for retail sales and 1.59% for sales of electricity for resale by the purchaser. The tax rate on sales of natural gas is 0.97%. The tax is required to be estimated and prepaid in the year prior to its computation and expensing. License fee tax expense, included in "Other general taxes," was $14.5 million, $14.7 million, and $14.6 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Operating income taxes, including tax credits and license fee tax, are included in rates for utility related items.

v.

Share-Based Compensation - MGE Energy and MGE.

Under two separate incentive plans, eligible participants, including employees and non-employee directors, may receive performance units that entitle the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the set performance period. Under the plans, these awards are subject to

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a prescribed vesting schedule and must be settled in cash. Accordingly, no new shares of common stock are issued in connection with the plans.

MGE Energy and MGE initially measure the cost of the employee or director services received in exchange for a performance unit award based on the current market value of MGE Energy common stock. The fair value of the award is subsequently re-measured at each reporting date through the settlement date. Changes in fair value during the requisite period are recognized as compensation cost over that period.

See Footnote 14 for additional information regarding the plans.

w.

Comprehensive Income - MGE Energy and MGE.

Total comprehensive income includes all changes in equity during a period except those resulting from investments by and distributions to shareholders. Comprehensive income is reflected in the consolidated statements of comprehensive income.

x.

Derivative and Hedging Instruments - MGE Energy and MGE.

As part of regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. MGE recognizes all derivatives in the consolidated balance sheets at fair value, with changes in the fair value of derivative instruments to be recorded in current earnings or deferred in accumulated other comprehensive income (loss), depending on whether a derivative is designated as, and is effective as, a hedge and on the type of hedge transaction. Derivative activities are in accordance with the company's risk management policy.

If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Cash flows from such derivative instruments are classified on a basis consistent with the nature of the underlying hedged item.

2.

Variable Interest Entities - MGE Energy and MGE.

a.

MGE Power Elm Road.

MGE Power Elm Road is not a subsidiary of MGE; however, it has been consolidated in the financial statements of MGE. MGE Power Elm Road was created for the purpose of owning new generating assets. Its sole principal assets are an undivided ownership interest in two coal-fired generating plants located in Oak Creek, Wisconsin, which it leases to MGE pursuant to long-term leases. Based on the nature and terms of the contractual agreements, MGE is expected to absorb a majority of the expected losses, residual value, or both, associated with the ownership of MGE Power Elm Road and therefore holds a variable interest in MGE Power Elm Road, even though it has no equity interest in MGE Power Elm Road. MGE Energy and MGE consolidate VIEs for which they are the primary beneficiary. MGE has the power to direct the activities that most significantly impact the Elm Road Units' economic performance and is also the party most closely associated with MGE Power Elm Road. As a result, MGE is the primary beneficiary. At December 31, MGE has included the following significant accounts on its consolidated balance sheets related to its interest in this VIE:

(In thousands)		2016		2015
Property, plant, and equipment, net	$	175,502	$	177,904
Construction work in progress		3,241		2,400
Deferred income taxes		42,525		40,865
Long-term debt		62,021		64,622
Noncontrolling interest		80,362		79,113

Long-term debt excluding debt issuance costs consists of $62.6 million at December 31, 2016, of senior secured notes that require that MGE Power Elm Road maintain a projected and actual debt service coverage ratio at the end of any calendar quarter of not less than 1.25 to 1.00 for the trailing 12-month period. The debt is secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of the Elm Road Units pursuant to the related long-term leases. As of December 31, 2016, MGE Power Elm Road is in compliance with the covenant requirements.

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MGE has been and will continue to recover in rates the lease payments made to MGE Power Elm Road. MGE received approval from the PSCW to collect in rates the carrying costs incurred by MGE Power Elm Road. The total carrying costs on the Elm Road Units is $62.5 million. MGE collected carrying costs in rates over a six year period that began in 2010. Of these costs, $17.0 million relates to the capitalized interest and the debt portion of the units. These costs will be recognized over the period in which the generating units will be depreciated. The remaining $45.5 million represents the equity portion and was recognized over the period allowed for recovery in rates which ended in 2015.

b.

MGE Power West Campus.

MGE Power West Campus is not a subsidiary of MGE; however, it has been consolidated in the financial statements of MGE. MGE Power West Campus was created for the purpose of owning new generating assets. Its sole principal asset is the WCCF, which it leases to MGE pursuant to a long-term lease. MGE is responsible for operation of the plant during the term of the lease. Based on the nature and terms of these contractual relationships, MGE absorbs a majority of the expected losses, residual value, or both, associated with the ownership and operation of the WCCF and therefore holds a variable interest in MGE Power West Campus, even though it has no equity interest in MGE Power West Campus. MGE has the power to direct the activities that most significantly impact WCCF's economic performance and is also the party most closely associated with MGE Power West Campus. As a result, MGE is the primary beneficiary. At December 31, MGE has included the following significant accounts on its consolidated balance sheets related to its interest in this VIE:

(In thousands)		2016		2015
Property, plant, and equipment, net	$	81,588	$	84,403
Affiliate receivables		4,769		5,295
Deferred income taxes		19,912		19,612
Long-term debt		44,932		46,510
Noncontrolling interest		35,303		37,603

Long-term debt excluding debt issuance costs consists of $45.1 million at December 31, 2016, of senior secured notes that require that MGE Power West Campus maintain a projected debt service coverage ratio of not less than 1.25 to 1.00 and debt to total capitalization ratio of not more than 0.65 to 1.00. The debt is secured by a collateral assignment of lease payments that MGE is making to MGE Power West Campus for use of the cogeneration facility pursuant to the long-term lease. As of December 31, 2016, MGE Power West Campus is in compliance with the covenant requirements.

MGE has been and will continue to recover lease payments made to MGE Power West Campus in rates. Also, MGE received approval from the PSCW to collect approximately $12.1 million in carrying costs incurred by MGE Power West Campus during construction of the facility. The carrying costs were recovered in rates over a 10 year period that started in 2005 and ended in 2015.

c.

Other Variable Interest Entities.

MGE has a variable interest in entities through purchase power agreements relating to purchased energy from the facilities covered by the agreements. As of December 31, 2016 and 2015, MGE had 51 megawatts and 61 megawatts, respectively, of capacity available under these agreements. MGE evaluated the variable interest entities for possible consolidation. The interest holder is considered the primary beneficiary of the entity and is required to consolidate the entity if the interest holder has the power to direct the activities that most significantly impact the economics of the variable interest entity. MGE examined qualitative factors such as the length of the remaining term of the contracts compared with the remaining lives of the plants, who has the power to direct the operations and maintenance of the facilities, and other factors, and determined MGE is not the primary beneficiary of the variable interest entities. There is not a significant potential exposure to loss as a result of involvement with these variable interest entities.

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3.

Property, Plant, and Equipment - MGE Energy and MGE.

Property, plant, and equipment consisted of the following at December 31:

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Utility:
Electric(a)	$	1,171,004	$	1,147,701	$	1,171,021	$	1,147,718
Gas		395,790		384,163		395,801		384,175
Total utility plant		1,566,794		1,531,864		1,566,822		1,531,893
Less: Accumulated depreciation and amortization(a)		579,965		578,410		579,965		578,410
In-service utility plant, net		986,829		953,454		986,857		953,483
Nonregulated:
Nonregulated		317,810		315,589		317,014		314,750
Less: Accumulated depreciation and amortization		59,370		51,949		59,223		51,818
In-service nonregulated plant, net		258,440		263,640		257,791		262,932
Construction work in progress:
Utility construction work in progress(a)		31,356		23,837		31,356		23,837
Nonregulated construction work in progress		5,434		2,514		5,434		2,514
Total property, plant, and equipment	$	1,282,059	$	1,243,445	$	1,281,438	$	1,242,766

(a)

As of December 31, 2016, MGE has classified $14.8 million of Columbia assets as held-for-sale on the consolidated balance sheets related to the partial sale of plant assets to WPL. See Footnote 5.a. for further discussion.

MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust. As of December 31, 2016 and 2015, there was $1.2 million of bonds outstanding under that indenture. See Footnote 9 for further discussion of the mortgage indenture.

4.

Investments - MGE Energy and MGE.

a.

Equity Method Investments, Available for Sale Securities, and Other Investments.

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Available for sale securities:
Cost basis	$	2,216	$	2,225	$	455	$	480
Gross unrealized gains		346		599		40		40
Gross unrealized losses		(8)		(2)		(8)		(2)
Fair value		2,554		2,822		487		518
Equity method investments:
ATC and ATC Holdco(a)		72,458		69,466		-		69,466
Other		1,158		1,184		-		-
Total equity method investments		73,616		70,650		-		69,466
Other investments		120		159		-		-
Total	$	76,290	$	73,631	$	487	$	69,984

(a)

MGE Transco holds an ownership interest in ATC, and MGEE Transco holds an ownership interest in ATC Holdco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. See Footnote 8 for further discussion of noncontrolling interest. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see "ATC and ATC Holdco" below for additional information.

MGE Energy's and MGE's available for sale securities represent publicly traded securities and private equity investments in common stock of companies in various industries.

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During the years ended December 31, 2016, 2015, and 2014, certain investments were liquidated. As a result of these liquidations, MGE Energy and MGE received the following:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Cash proceeds	$	408	$	19	$	38	$	16	$	19	$	-
Gain (loss) on sale		121		10		21		(8)		10		-

b.

ATC and ATC Holdco.

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which, as of December 1, 2016, is owned by MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary of MGE Energy.

MGE Transco and MGEE Transco have accounted for their investment in ATC and ATC Holdco, respectively, under the equity method of accounting. For the years ended December 31, 2016, 2015, and 2014, MGE Transco recorded the following:

(In thousands)		2016		2015		2014
Equity earnings from investment in ATC	$	8,670	$	7,728	$	9,150
Dividends received from ATC(a)		7,926		6,645		7,740
Capital contributions to ATC		2,486		710		1,775

(a)

As of December 31, 2016, MGE Transco recorded a $2.1 million receivable from ATC for a cash dividend received in January 2017.

ATC Holdco's activities commenced in late December 2016 and had an immaterial impact on results of operations, cash flows, and financial condition.

At December 31, 2016 and 2015, MGE Transco held a 3.6% ownership interest in ATC. At December 31, 2016, MGEE Transco held a 4.0% ownership interest in ATC Holdco. On January 31, 2017, MGE Transco made a $1.4 million capital contribution to ATC, and on January 10, 2017, MGEE Transco made a $0.2 million capital contribution to ATC Holdco.

In June 2016, the PSCW required MGE to transfer its interest in ATC to MGE Energy, which was to be completed by December 31, 2022. The requirement arose in the context of requests for regulatory approvals by several owners of ATC in connection with a reorganization of ATC. MGE's ownership interest in ATC, held through MGE Transco, was transferred net of deferred tax liabilities to MGE Energy by way of a dividend in kind of $15.8 million as of December 1, 2016. As a result of the transfer, MGE's ownership interest in MGE Transco was completely eliminated in favor of MGE Energy. See Footnote 12 for further discussion of the transfer of deferred tax liabilities. The change had no effect on MGE Energy's consolidated financial statements.

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ATC's summarized financial data for the years ended December 31, 2016, 2015, and 2014 is as follows:

(In thousands)
Income statement data for the year ended December 31,		2016		2015		2014
Operating revenues	$	650,806	$	615,836	$	635,033
Operating expenses		(322,517)		(319,321)		(307,451)
Other income		3,225		1,176		117
Interest expense, net		(98,758)		(97,250)		(88,970)
Earnings before members' income taxes	$	232,756	$	200,441	$	238,729

Balance sheet data as of December 31,		2016		2015
Current assets	$	75,790	$	80,520
Noncurrent assets		4,312,893		3,948,265
Total assets	$	4,388,683	$	4,028,785
Current liabilities	$	495,126	$	330,248
Long-term debt		1,865,302		1,790,718
Other noncurrent liabilities		271,495		244,991
Members' equity		1,756,760		1,662,828
Total members' equity and liabilities	$	4,388,683	$	4,028,785

5.

Joint Plant Ownership - MGE Energy and MGE.

a.

Columbia.

MGE and two other utilities jointly own Columbia, a coal-fired generating facility located in Portage, Wisconsin, which, at December 31, 2016, accounts for 30% (225 MW) of MGE's net summer rated capacity. Power from this facility is shared in proportion to each company's ownership interest. At December 31, 2016, MGE had a 22.0% ownership interest in Columbia. The other owners are WPL, which operates Columbia, and WPSC. MGE's share of fuel, operating, and maintenance expenses for Columbia was $39.5 million, $38.2 million, and $28.1 million for the years ended December 31, 2016, 2015, and 2014, respectively.

Each owner provides its own financing and reflects its respective portion of facilities and operating costs in its financial statements. MGE's interest in Columbia's gross utility plant in service, and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Utility plant	$	270,898	$	273,762
Accumulated depreciation		(81,935)		(84,864)
Property, plant, and equipment, net		188,963		188,898
Construction work in progress		21,120		17,110
Total property, plant, and equipment	$	210,083	$	206,008

In 2016, MGE and WPL negotiated an amendment to the existing Columbia joint operating agreement, that has been approved by the PSCW, under which MGE will have the option to reduce its obligation to pay certain capital expenditures (other than SCR-related expenditures) at Columbia in exchange for a proportional reduction in MGE's ownership in Columbia. On January 1 of each year, beginning in 2017 and ending June 1, 2020, the ownership percentage will be adjusted, through a partial sale, based on the amount of capital expenditures foregone. In December 2016, MGE jointly filed a request with the co-owners of Columbia for FERC approval of the amendment to the Columbia joint operating agreement, effective January 1, 2017. MGE currently expects to receive FERC's decision on the amendment in 2017.

During 2016, MGE accrued $14.8 million of 2016 capital expenditures that MGE has forgone as part of the ownership transfer agreement with WPL. As of December 31, 2016, MGE classified $14.8 million of Columbia assets as held-for-sale on the consolidated balance sheets. In January 2017, MGE reduced its ownership interest in Columbia from 22.0% to 20.4% through the partial sale of plant assets to WPL.

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b.

Elm Road.

MGE Power Elm Road owns an 8.33% ownership interest in each of two 615 MW coal-fired generating units in Oak Creek, Wisconsin, which, at December 31, 2016, accounts for 14% (106 MW) of MGE's net summer rated capacity. Unit 1 entered commercial operation on February 2, 2010. Unit 2 entered commercial operation on January 12, 2011. MGE Power Elm Road's sole principal asset is that ownership interest in those generating units. MGE Power Elm Road's interest in the Elm Road Units is leased to MGE pursuant to long-term leases.

The remainder of the ownership interest in the Elm Road Units is held by two other entities, one of which is also responsible for the Units' operation. Each owner provides its own financing and reflects its respective portion of the facility and costs in its financial statements. MGE's share of fuel, operating, and maintenance expenses for the Elm Road Units was $21.2 million, $20.9 million, and $20.3 million for the years ended December 31, 2016, 2015, and 2014, respectively. MGE Power Elm Road's interest in the portion of the Elm Road Units in-service and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Nonregulated plant	$	204,292	$	202,326
Accumulated depreciation		(28,790)		(24,422)
Property, plant, and equipment, net		175,502		177,904
Construction work in progress		3,241		2,400
Total property, plant, and equipment	$	178,743	$	180,304

c.

WCCF.

MGE Power West Campus and the UW jointly own the West Campus Cogeneration Facility located on the UW campus in Madison, Wisconsin. MGE Power West Campus owns 55% of the facility and the UW owns 45% of the facility. The UW owns a controlling interest in the chilled-water and steam plants, which are used to meet the growing needs for air-conditioning and steam-heat capacity for the UW campus. MGE Power West Campus owns a controlling interest in the electric generation plant, which is leased and operated by MGE.

Each owner provides its own financing and reflects its respective portion of the facility and operating costs in its financial statements. MGE Power West Campus' interest in WCCF and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Nonregulated plant	$	111,330	$	111,141
Accumulated depreciation		(29,742)		(26,738)
Property, plant, and equipment, net		81,588		84,403
Construction work in progress		1,009		113
Total property, plant, and equipment	$	82,597	$	84,516

Operating charges are allocated to the UW based on formulas contained in the operating agreement. Under the provisions of this arrangement, the UW is required to reimburse MGE for their allocated portion of fuel and operating expenses. For the years ended December 31, 2016, 2015, and 2014, the UW allocated share of fuel and operating costs was $5.5 million, $3.7 million, and $2.8 million, respectively.

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6.

Regulatory Assets and Liabilities - MGE Energy and MGE.

The following regulatory assets and liabilities are reflected in MGE's consolidated balance sheets as of December 31:

(In thousands)		2016		2015
Regulatory Assets
Asset retirement obligation	$	5,563	$	4,849
Conservation costs		444		-
Debt related costs		10,211		10,672
Derivatives		49,281		54,083
Environmental costs		55		368
Tax recovery related to AFUDC equity		9,403		8,950
Unfunded pension and other postretirement liability		86,475		78,181
Other		3,467		634
Total Regulatory Assets	$	164,899	$	157,737
Regulatory Liabilities
Conservation costs	$	-	$	231
Deferred fuel savings		6,016		9,515
Elm Road		3,473		643
Income taxes		1,302		1,559
Non-ARO removal costs		16,415		17,137
Renewable energy credits		339		327
Other		1,538		888
Total Regulatory Liabilities	$	29,083	$	30,300

MGE expects to recover its regulatory assets and return its regulatory liabilities through rates charged to customers based on PSCW decisions made during the ratemaking process or based on PSCW long-standing policies and guidelines. The adjustments to rates for these regulatory assets and liabilities will occur over the periods either specified by the PSCW or over the corresponding period related to the asset or liability. Management believes it is probable that MGE will continue to recover from customers the regulatory assets described above based on prior and current ratemaking treatment for such costs. All regulatory assets for which a cash outflow had been made are earning a return, except for amounts expended for environmental costs.

Asset Retirement Obligation

See Footnote 18 for further discussion.

Conservation Costs

MGE has received regulatory treatment for certain conservation expenditures. The expenditures are used for Focus on Energy programs, Wisconsin's statewide energy efficiency and renewable resource program, to promote energy efficiency on the customer's premises. Costs for Focus on Energy programs are estimated in MGE's rates utilizing escrow accounting. The escrow accounting allows the utility to true-up its actual costs incurred and reflect the amount of the true-up in its next rate case filing.

Debt Related Costs

This balance includes debt issuance costs of extinguished debt and other debt related expenses, including make-whole premiums. The PSCW has allowed rate recovery on unamortized issuance costs for extinguished debt facilities. When the facility replacing the old facility is deemed by the PSCW to be more favorable for the ratepayers, the PSCW will allow rate recovery of any unamortized issuance costs related to the old facility. These amounts are recovered over the term of the new facility.

Derivatives

MGE has physical and financial contracts that are defined as derivatives. The amounts recorded for the net mark-to-market value of the commodity based contracts is offset with a corresponding regulatory asset or liability because these transactions are part of the PGA or fuel rules clause authorized by the PSCW. A significant portion of the recorded amount is related to a purchased power agreement that provides MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. This agreement is accounted for as a derivative contract. See Footnote 15 for further discussion.

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Environmental Costs

MGE has been allowed to defer actual costs on certain environmental matters, including clean up of two landfill sites and legal expenditures pertaining to the response to the EPA Clean Air Act enforcement matter at Columbia. For further discussion of the Columbia Clean Air Act litigation, see Footnote 17.c.

Tax Recovery Related to AFUDC Equity

AFUDC equity represents the after-tax equity cost associated with utility plant construction and results in a temporary difference between the book and tax basis of such plant. It is probable under PSCW regulation that MGE will recover in future rates the future increase in taxes payable represented by the deferred income tax liability. The amounts will be recovered in rates over the depreciable life of the asset for which AFUDC was applied. Tax recovery related to AFUDC equity represents the revenue requirement related to recovery of these future taxes payable, calculated at current statutory tax rates.

Unfunded Pension and Other Postretirement Liability

MGE is required to recognize the unfunded status of defined benefit pension and other postretirement pension plans as a net liability or asset on the balance sheet with an offset to a regulatory asset or liability. The unfunded status represents future expenses that are expected to be recovered in rates. See Footnote 13 for further discussion.

Deferred Fuel Savings

The fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band. Any over/under recovery of the actual costs is determined on an annual basis and is adjusted in future billings to electric retail customers. See Footnote 16.b. for further discussion.

Elm Road

Costs associated with Elm Road are estimated in MGE's rates utilizing escrow accounting and include costs for lease payments, management fees, community impact mitigation, and operating costs. Also, MGE has deferred payments made to MGE Power Elm Road for carrying costs during construction of the facility. MGE has collected the carrying costs in rates over a six year period that ended in 2015. All other costs are collected in rates over a one to two year period.

Income Taxes

Excess deferred income taxes result from past taxes provided at rates higher than current rates. The regulatory liability and deferred investment tax credit reflects the revenue requirement associated with the return of these tax benefits to customers.

Non-ARO Removal Costs

In connection with accounting for asset retirement obligations, companies are required to reclassify cumulative collections for non-ARO removal costs as a regulatory liability, with an offsetting entry to accumulated depreciation. Under the current rate structure, these removal costs are being recovered as a component of depreciation expense.

Renewable Energy Credits

MGE receives renewable energy credits from certain purchase power agreements. The value of the credits are recorded as inventory and expensed when the credit is redeemed or expired. A regulatory liability has been established for the value of the renewable energy credits included in inventory. In Wisconsin, renewable energy credits expire four years after the year of acquisition.

7.

Common Equity.

a.

Common Stock - MGE Energy and MGE.

On December 20, 2013, MGE Energy's Board of Directors declared a three-for-two stock split of MGE Energy's outstanding shares of common stock, effective in the form of a stock dividend. Shareholders of record at the close of business on January 24, 2014, received one additional share of MGE Energy common stock for every two shares of common stock owned on that date. The additional shares were distributed on February 7, 2014. Shareholders received cash in lieu of any fractional shares of common stock they otherwise would have received in connection with the dividend. All share and per share data provided in this report give effect to this stock split.

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MGE Energy sells shares of its common stock through its Stock Plan. Those shares may be newly issued shares or shares that MGE Energy has purchased in the open market for resale to participants in the Stock Plan. All sales under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC. For the years ended December 31, 2016 and 2015, MGE Energy did not issue any new shares of common stock under the Stock Plan.

MGE Energy purchases shares on the open market to provide shares to meet obligations to participants in the Stock Plan. The shares are purchased on the open market through a securities broker-dealer and then are reissued under the Stock Plan as needed to meet share delivery requirements. The volume and timing of share repurchases in the open market depends upon the level of dividend reinvestment and optional share purchases being made from time to time by plan participants. As a result, there is no specific maximum number of shares to be repurchased and no specified termination date for the repurchases.

During the years ended December 31, 2016 and 2015, MGE Energy paid $41.8 million (or $1.21 per share) and $40.0 million (or $1.16 per share), respectively, in cash dividends on its common stock. Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends, above the PSCW authorized amount that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. See Footnote 9 for further discussion of the mortgage indenture covenants. During the years ended December 31, 2016 and 2015, MGE paid $50.0 million and $30.0 million, respectively, in cash dividends to MGE Energy. In 2016, MGE also transferred its ownership interest in MGE Transco to MGE Energy in the form of a dividend in kind of $15.8 million. See Footnote 4 for further information.

b.

Dilutive Shares Calculation - MGE Energy.

MGE Energy does not hold any dilutive securities.

8.

Noncontrolling Interest - MGE.

The noncontrolling interest on MGE's consolidated balance sheets at December 31 was as follows:

(In thousands)		2016		2015
MGE Power Elm Road(a)	$	80,362	$	79,113
MGE Power West Campus(a)		35,303		37,603
MGE Transco(b)		-		23,592
Total Noncontrolling Interest	$	115,665	$	140,308

The net income attributable to noncontrolling interest, net of tax, for the years ended December 31, 2016, 2015, and 2014 was as follows:

(In thousands)		2016		2015		2014
MGE Power Elm Road(a)	$	14,748	$	16,577	$	16,160
MGE Power West Campus(a)		7,200		7,348		7,666
MGE Transco(b)		1,410		2,172		2,484
Net Income Attributable to Noncontrolling Interest, Net of Tax	$	23,358	$	26,097	$	26,310

(a)

MGE Power Elm Road and MGE Power West Campus are not subsidiaries of MGE; however, they have been consolidated in the consolidated financial statements of MGE (see Footnote 2). MGE Power Elm Road and MGE Power West Campus are 100% owned by MGE Power, and MGE Power is 100% owned by MGE Energy. MGE Energy's proportionate share of the equity and net income (through its wholly owned subsidiary MGE Power) of MGE Power Elm Road and MGE Power West Campus is classified within the MGE consolidated financial statements as noncontrolling interest.

(b)

At December 31, 2016, MGE Energy is the owner of MGE Transco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority as a result of continued funding of ATC capital contributions by MGE Energy. As a result of the change in majority ownership in MGE Transco, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. The change in consolidation was applied prospectively by reducing its investment and noncontrolling interest on MGE's consolidated financial statements. The change had no effect on MGE Energy's consolidated financial

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statements; however, MGE Energy's proportionate share of the equity and net income of MGE Transco classified as noncontrolling interest was deconsolidated from MGE's financial statements. No gain or loss was recognized in July 2016 due to MGE ceasing to have a controlling financial interest.

9.

Long-Term Debt - MGE Energy and MGE.

a.

Long-Term Debt.

		2016				2015
(In thousands)		MGE Energy		MGE		MGE Energy		MGE
First Mortgage Bonds:(a)
7.70%, 2028 Series	$	1,200	$	1,200	$	1,200	$	1,200
Tax Exempt Debt:
3.45%, 2027 Series,
Industrial Development Revenue Bonds		19,300		19,300		19,300		19,300
Medium-Term Notes:(b)
5.25%, due 2017(c)		30,000		30,000		30,000		30,000
6.12%, due 2028		20,000		20,000		20,000		20,000
7.12%, due 2032		25,000		25,000		25,000		25,000
6.247%, due 2037		25,000		25,000		25,000		25,000
Total Medium-Term Notes		100,000		100,000		100,000		100,000
Other Long-Term Debt:(d)
5.59%, due 2018(e)		20,000		20,000		20,000		20,000
3.38%, due 2020(e)		15,000		15,000		15,000		15,000
3.09%, due 2023(e)		30,000		30,000		30,000		30,000
3.29%, due 2026(e)		15,000		15,000		15,000		15,000
5.68%, due 2033(f)		27,120		27,120		28,063		28,063
5.19%, due 2033(f)		17,983		17,983		18,640		18,640
5.26%, due 2040(e)		15,000		15,000		15,000		15,000
5.04%, due 2040(g)		38,472		38,472		40,138		40,138
4.74%, due 2041(g)		24,167		24,167		25,167		25,167
4.38%, due 2042(e)		28,000		28,000		28,000		28,000
4.42%, due 2043(e)		20,000		20,000		20,000		20,000
4.47%, due 2048(e)		20,000		20,000		20,000		20,000
Total Other Long-Term Debt		270,742		270,742		275,008		275,008
Long-term debt due within one year		(4,333)		(4,333)		(4,266)		(4,266)
Unamortized discount and debt issuance costs		(4,118)		(4,118)		(4,498)		(4,498)
Total Long-Term Debt	$	382,791	$	382,791	$	386,744	$	386,744

(a)

MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust, under which its first mortgage bonds are issued. The Mortgage Indenture provides that dividends or any other distribution or purchase of shares may not be made if the aggregate amount thereof since December 31, 1945 would exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2016, approximately $338.5 million was available for the payment of dividends under this covenant.

(b)

The indenture under which MGE's Medium-Term notes are issued provides that those notes will be entitled to be equally and ratably secured in the event that MGE issues any additional first mortgage bonds.

(c)

MGE had $30 million of medium-term notes mature in January 2017. MGE issued $40 million of new long-term unsecured debt on January 13, 2017, to refinance the maturing $30 million medium-term notes and assist with the financing of additional capital expenditures. The new debt carries an interest rate of 3.76% per annum over its 35-year term. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt. In accordance with applicable accounting guidance, MGE has classified the $30 million of maturing medium-term notes as long-term debt on the consolidated balance sheets for the year ended December 31, 2016.

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(d)

Unsecured notes issued pursuant to various Note Purchase Agreements with one or more purchasers. The notes are not issued under, or governed by, MGE's Indenture dated as of September 1, 1998, which governs MGE's Medium-Term Notes.

(e)

Issued by MGE. Under that Note Purchase Agreement: (i) note holders have the right to require MGE to repurchase their notes at par in the event of an acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy, (ii) MGE must maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%, and (iii) MGE cannot issue "Priority Debt" in an amount exceeding 20% of its consolidated assets. Priority Debt is defined as any indebtedness of MGE secured by liens other than specified liens permitted by the Note Purchase Agreement and certain unsecured indebtedness of certain subsidiaries. As of December 31, 2016, MGE was in compliance with the covenant requirements.

(f)

Issued by MGE Power West Campus. The Note Purchase Agreements require it to maintain a projected debt service coverage ratio of not less than 1.25 to 1.00, and debt to total capitalization ratio of not more than 0.65 to 1.00. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power West Campus for use of its ownership interest in the WCCF pursuant to a long-term lease. As of December 31, 2016, MGE Power West Campus was in compliance with the covenant requirements.

(g)

Issued by MGE Power Elm Road. The Note Purchase Agreement requires MGE Power Elm Road to maintain a projected and actual debt service coverage ratio at the end of any calendar quarter of not less than 1.25 to 1.00 for the trailing 12-month period. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of its ownership interest in the Elm Road Units pursuant to long-term leases. As of December 31, 2016, MGE Power Elm Road was in compliance with the covenant requirements.

b.

Long-Term Debt Maturities.

Below is MGE Energy's and MGE's aggregate maturities for all long-term debt for years following December 31, 2016.

		MGE
(In thousands)		Energy		MGE *
2017	$	4,358		4,358
2018		24,452		24,452
2019		4,553		4,553
2020		19,659		19,659
2021		4,771		4,771
Future years		333,449		333,449
Total	$	391,242	$	391,242

*Includes $45.1 million for MGE Power West Campus and $62.6 million for MGE Power Elm Road, all of which are consolidated with MGE's debt (see Footnote 2 for further information).

10.

Notes Payable to Banks, Commercial Paper, and Lines of Credit.

a.

MGE Energy.

At December 31, 2016, MGE Energy had an unsecured, committed revolving line of credit of $50 million expiring June 1, 2020. At December 31, 2016, no borrowings were outstanding under this facility.

The agreement requires MGE Energy to maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%. A change in control constitutes a default under the agreement. Change in control events are defined as (i) a failure by MGE Energy to hold 100% of the outstanding voting equity interest in MGE or (ii) the acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy by one person or two or more persons acting in concert. As of December 31, 2016, MGE Energy was in compliance with the covenant requirements.

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b.

MGE.

For short-term borrowings, MGE generally issues commercial paper (issued at the prevailing discount rate at the time of issuance), which is supported by unused committed bank lines of credit. At December 31, 2016, MGE had two unsecured, committed revolving lines of credit for a total of $100 million expiring June 1, 2020. At December 31, 2016, no borrowings were outstanding under these facilities, and MGE had no commercial paper outstanding.

The agreements require MGE to maintain a ratio of consolidated debt to consolidated total capitalization not to exceed a maximum of 65%. The ratio calculation excludes assets, liabilities, revenues, and expenses included in MGE's financial statements as the result of the consolidation of VIEs, such as MGE Power West Campus and MGE Power Elm Road. A change in control constitutes a default under the agreements. Change in control events are defined as (i) a failure by MGE Energy to hold 100% of the outstanding voting equity interest in MGE or (ii) the acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy by one person or two or more persons acting in concert. As of December 31, 2016, MGE was in compliance with the covenant requirements.

c.

MGE Energy and MGE.

Information concerning short-term borrowings for the past two years is shown below:

		As of December 31,
(In thousands)		2016		2015
MGE Energy(a)
Available lines of credit	$	150,000	$	150,000
Short-term debt outstanding	$	-	$	-
Weighted-average interest rate		-%		-%
During the year:
Maximum short-term borrowings	$	-	$	17,500
Average short-term borrowings	$	-	$	1,511
Weighted-average interest rate		-%		0.17%
MGE
Available lines of credit	$	100,000	$	100,000
Commercial paper outstanding	$	-	$	-
Weighted-average interest rate		-%		-%
During the year:
Maximum short-term borrowings	$	-	$	17,500
Average short-term borrowings	$	-	$	1,511
Weighted-average interest rate		-%		0.17%

(a)

MGE Energy short-term borrowings include MGE Energy and MGE lines of credit and MGE commercial paper.

11.

Fair Value of Financial Instruments - MGE Energy and MGE.

Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The accounting standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability including assumptions about risk. The standard also establishes a three level fair value hierarchy based upon the observability of the assumptions used and requires the use of observable market data when available. The levels are:

Level 1 - Pricing inputs are quoted prices within active markets for identical assets or liabilities.

Level 2 - Pricing inputs are quoted prices within active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations that are correlated with or otherwise verifiable by observable market data.

Level 3 - Pricing inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability.

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a.

Fair Value of Financial Assets and Liabilities Recorded at the Carrying Amount.

At December 31, 2016 and 2015, the carrying amount of cash, cash equivalents, and outstanding commercial paper approximates fair market value due to the short maturity of those investments and obligations. The estimated fair market value of MGE Energy's and MGE's long-term debt is based on quoted market prices for similar financial instruments at December 31. Since long-term debt is not traded in an active market, it is classified as Level 2. The estimated fair market value of financial instruments are as follows:

		2016				2015
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	95,959	$	95,959	$	81,384	$	81,384
Liabilities:
Long-term debt(a)		391,242		430,122		395,508		435,767
MGE
Assets:
Cash and cash equivalents	$	10,768	$	10,768	$	26,760	$	26,760
Liabilities:
Long-term debt(a)		391,242		430,122		395,508		435,767
(a)   Includes long-term debt due within one year. Excludes debt issuance costs and unamortized
discount of $4.1 million and $4.5 million at December 31, 2016 and 2015, respectively.

b.

Recurring Fair Value Measurements.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.

	Fair Value as of December 31, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		500		500		-		-
Total Assets	$	2,027	$	1,541	$	-	$	486
Liabilities:
Derivatives, net	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
MGE
Assets:
Derivatives, net	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		143		143		-		-
Total Assets	$	1,670	$	1,184	$	-	$	486
Liabilities:
Derivatives, net	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792

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	Fair Value as of December 31, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		759		759		-		-
Total Assets	$	993	$	759	$	-	$	234
Liabilities:
Derivatives, net(b)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
MGE
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		148		148		-		-
Total Assets	$	382	$	148	$	-	$	234
Liabilities:
Derivatives, net(b)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
(b)     These amounts are shown gross and exclude $1.0 million of collateral that was posted against
derivative positions with counterparties as of December 31, 2015.

No transfers were made in or out of Level 1 or Level 2 for the year ended December 31, 2016.

Investments include exchange-traded investment securities valued using quoted prices on active exchanges and are therefore classified as Level 1.

Derivatives include exchange-traded derivative contracts, over-the-counter transactions, a purchased power agreement, and FTRs. Most exchange-traded derivative contracts are valued based on unadjusted quoted prices in active markets and are therefore classified as Level 1. A small number of exchange-traded derivative contracts are valued using quoted market pricing in markets with insufficient volumes and are therefore considered unobservable and classified as Level 3. Transactions done with an over-the-counter party are on inactive markets and are therefore classified as Level 3. These transactions are valued based on quoted prices from markets with similar exchange-traded transactions. FTRs are priced based upon monthly auction results for identical or similar instruments in a closed market with limited data available and are therefore classified as Level 3.

The purchased power agreement (see Footnote 15) was valued using an internally-developed pricing model and therefore is classified as Level 3. The model projects future market energy prices and compares those prices to the projected power costs to be incurred under the contract. Inputs to the model require significant management judgment and estimation. Future energy prices are based on a forward power pricing curve using exchange-traded contracts in the electric futures market, where such exchange-traded contracts exist, and upon calculations based on forward gas prices, where such exchange-traded contracts do not exist. A basis adjustment is applied to the market energy price to reflect the price differential between the market price delivery point and the counterparty delivery point. The historical relationship between the delivery points is reviewed and a discount (below 100%) or premium (above 100%) is derived. This comparison is done for both peak times when demand is high and off peak times when demand is low. If the basis adjustment is lowered, the fair value measurement will decrease, and if the basis adjustment is increased, the fair value measurement will increase.

The projected power costs anticipated to be incurred under the purchased power agreement are determined using many factors, including historical generating costs, future prices, and expected fuel mix of the counterparty. An increase in the projected fuel costs would result in a decrease in the fair value measurement of the purchased power agreement. A significant input that MGE estimates is the counterparty's fuel mix in determining the projected power cost. MGE also considers the assumptions that market participants would use in valuing the asset or liability. This consideration includes assumptions about market risk such as liquidity, volatility, and contract duration. The fair value model uses a discount rate that incorporates discounting, credit, and model risks.

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The following table presents the significant unobservable inputs used in the pricing model as of December 31:

	Model Input
Significant Unobservable Inputs	2016	2015
Basis adjustment:
On peak	91.9%	96.9%
Off peak	93.4%	95.1%
Counterparty fuel mix:
Internal generation	55%-75%	60%-75%
Purchased power	45%-25%	40%-25%

The deferred compensation plan allows participants to defer certain cash compensation into a notional investment account. These amounts are included within other deferred liabilities in the consolidated balance sheets of MGE Energy and MGE. The notional investments earn interest based upon the semiannual rate of U.S. Treasury Bills having a 26 week maturity increased by 1% compounded monthly with a minimum annual rate of 7%, compounded monthly. The notional investments are based upon observable market data, however since the deferred compensation obligations themselves are not exchanged in an active market they are classified as Level 2.

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis.

(In thousands)		2016		2015		2014
Balance as of January 1,	$	(53,501)	$	(53,986)	$	(64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities		3,195		484		10,642
Included in other comprehensive income		-		-		-
Included in earnings		(5,347)		(6,635)		5,129
Included in current assets		(142)		-		-
Purchases		23,346		23,052		26,382
Sales		-		-		-
Issuances		-		-		-
Settlements		(17,857)		(16,416)		(31,511)
Transfers in and/or out of Level 3		-		-		-
Balance as of December 31,	$	(50,306)	$	(53,501)	$	(53,986)
Total gains (losses) included in earnings attributed to the
change in unrealized gains (losses) related to assets and
liabilities held at December 31,(c)	$	-	$	-	$	-

The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis (c).

(In thousands)
Year Ended December 31,		2016		2015		2014
Purchased power expense	$	(5,262)	$	(6,663)	$	5,137
Cost of gas sold expense		(85)		28		(8)
Total	$	(5,347)	$	(6,635)	$	5,129

(c)

MGE's exchange-traded derivative contracts, over-the-counter party transactions, purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.

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12.

Income Taxes.

a.

MGE Energy and MGE Income Taxes.

MGE Energy files a consolidated federal income tax return that includes the operations of all subsidiary companies. The subsidiaries calculate their respective federal income tax provisions as if they were separate taxable entities.

On a consolidated and separate company basis, the income tax provision consists of the following provision (benefit) components for the years ended December 31:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Current payable:
Federal	$	16,908	$	16,837	$	(891)	$	17,521	$	19,295	$	637
State		3,287		2,774		(589)		3,497		3,443		(451)
Net-deferred:
Federal		17,571		15,951		39,284		16,391		13,538		38,553
State		4,850		5,976		10,600		4,485		5,305		10,625
Amortized investment tax credits		(103)		(175)		(219)		(103)		(175)		(219)
Total income tax provision	$	42,513	$	41,363	$	48,185	$	41,791	$	41,406	$	49,145

The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:

	MGE Energy			MGE
	2016	2015	2014	2016	2015	2014
Statutory federal income tax rate	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %
State income taxes, net of federal benefit	5.1 %	5.2 %	5.1 %	5.1 %	5.2 %	5.1 %
Amortized investment tax credits	(0.1)%	(0.2)%	(0.2)%	(0.1)%	(0.2)%	(0.2)%
Credit for electricity from wind energy	(1.6)%	(1.8)%	(1.7)%	(1.7)%	(1.8)%	(1.7)%
Domestic manufacturing deduction	(1.3)%	(1.4)%	-%	(1.3)%	(1.4)%	-%
AFUDC equity, net	(0.2)%	(0.1)%	(0.8)%	(0.2)%	(0.1)%	(0.8)%
Other, net, individually insignificant	(0.9)%	-%	0.1 %	(0.9)%	-%	0.1 %
Effective income tax rate	36.0 %	36.7 %	37.5 %	35.9 %	36.7 %	37.5 %

The significant components of deferred tax liabilities (assets) that appear on the consolidated balance sheets as of December 31 are as follows:

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Property-related	$	344,721	$	327,918	$	344,630	$	327,822
Investment in ATC(a)		71,898		38,213		-		30,382
Bond transactions		1,324		1,422		1,324		1,422
Pension and other postretirement benefits		63,516		57,697		63,516		57,697
Derivatives		20,304		21,660		20,304		21,660
Tax deductible prepayments		8,404		8,011		8,404		8,011
Other		16,606		14,997		16,571		14,831
Gross deferred income tax liabilities		526,773		469,918		454,749		461,825
Investment in ATC(a)		(31,212)		-		-		-
Accrued expenses		(22,410)		(21,391)		(22,410)		(21,391)
Pension and other postretirement benefits		(48,860)		(46,582)		(48,860)		(46,582)
Deferred tax regulatory account		(903)		(1,047)		(903)		(1,047)
Derivatives		(20,304)		(21,660)		(20,304)		(21,660)
Other		(19,340)		(18,523)		(19,224)		(18,589)
Gross deferred income tax assets		(143,029)		(109,203)		(111,701)		(109,269)
Less valuation allowance		69		70		69		70
Net deferred income tax assets		(142,960)		(109,133)		(111,632)		(109,199)
Deferred income taxes	$	383,813	$	360,785	$	343,117	$	352,626

(a)

As of December 1, 2016, MGE transferred its ownership interest in ATC to MGE Energy, resulting in a deferred intercompany gain and a corresponding step-up in tax basis.

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Our state valuation allowance reduces MGE Energy's and MGE's deferred tax assets for state carryforward losses to estimated realizable value due to the uncertainty of future income estimates in various state tax jurisdictions. For tax purposes, as of December 31, 2016, both MGE Energy and MGE had approximately $1.4 million of state tax net operating loss deductions subject to a valuation allowance that expire between 2020 and 2023 if unused.

b.

Accounting for Uncertainty in Income Taxes - MGE Energy and MGE.

MGE Energy and MGE account for the difference between the tax benefit amount taken on prior year tax returns, or expected to be taken on a current year tax return, and the tax benefit amount recognized in the financial statements as an unrecognized tax benefit.

A tabular reconciliation of unrecognized tax benefits and interest from January 1, 2014, to December 31, 2016, is as follows:

(In thousands)
Unrecognized Tax Benefits:		2016		2015		2014
Unrecognized tax benefits, January 1,	$	2,528	$	2,365	$	2,363
Additions based on tax positions related to the current year		452		488		610
Additions based on tax positions related to the prior years		39		520		618
Reductions based on tax positions related to the prior years		(532)		(845)		(1,226)
Unrecognized tax benefits, December 31,	$	2,487	$	2,528	$	2,365
(In thousands)
Interest on Unrecognized Tax Benefits:		2016		2015		2014
Accrued interest on unrecognized tax benefits, January 1,	$	311	$	92	$	101
Reduction in interest expense on uncertain tax positions		(27)		(102)		(97)
Interest expense on uncertain tax positions		104		321		88
Accrued interest on unrecognized tax benefits, December 31,	$	388	$	311	$	92

Unrecognized tax benefits are liabilities shown with "Other deferred liabilities" on the consolidated balance sheets. The interest component is offset by a regulatory asset.

At December 31, 2016, 2015, and 2014, MGE Energy and MGE had unrecognized tax benefits primarily related to temporary tax differences associated with the change in income tax method of accounting for electric generation and electric and gas distribution repairs. In addition, at December 31, 2016, MGE Energy and MGE had unrecognized tax benefits relating to permanent differences and tax credits of less than $0.1 million. There were no unrecognized tax benefits at December 31, 2015 or 2014, related to federal permanent differences and tax credits.

The unrecognized tax benefits at December 31, 2016, are not expected to significantly increase or decrease within the next twelve months. In addition, statutes of limitations will expire for MGE Energy and MGE tax returns. The impact of the statutes of limitations expiring is not anticipated to be material. The following table shows tax years that remain subject to examination by major jurisdiction:

Taxpayer	Open Years
MGE Energy and consolidated subsidiaries in federal return	2013 through 2016
MGE Energy Wisconsin combined reporting corporation return	2012 through 2016

13.

Pension Plans and Other Postretirement Benefits - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits, and defined contribution 401(k) benefit plans for its employees and retirees. MGE's costs for the 401(k) plans were $3.1 million, $2.8 million, and $2.5 million in 2016, 2015, and 2014, respectively. A measurement date of December 31 is utilized for all pension and postretirement benefit plans.

All employees hired after December 31, 2006, have been enrolled in the defined contribution pension plan, rather than the defined benefit pension plan previously in place.

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a.

Benefit Obligations and Plan Assets.

(In thousands)		Pension Benefits				Other Postretirement Benefits
Change in Benefit Obligations:		2016		2015		2016		2015
Net benefit obligation at beginning of year	$	332,565	$	340,233	$	74,935	$	78,478
Service cost		5,365		7,263		1,271		1,559
Interest cost		12,393		13,766		2,681		3,075
Plan participants' contributions		-		-		767		741
Actuarial loss (gain)(a)		11,412		(17,576)		2,638		(5,828)
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Less: federal subsidy on benefits paid(b)		-		-		187		190
Benefit obligation at end of year	$	349,556	$	332,565	$	78,842	$	74,935
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	290,716	$	288,548	$	40,170	$	38,952
Actual return on plan assets		24,181		4,153		3,236		603
Employer contributions		9,215		9,136		2,641		3,154
Plan participants' contributions		-		-		767		741
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Fair value of plan assets at end of year	$	311,933	$	290,716	$	43,177	$	40,170
Funded Status at December 31	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

(a)

In 2016, lower discount rates were the main driver of the actuarial loss.

(b)

In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For the years ended December 31, 2016 and 2015, the subsidy due to MGE was $0.2 million.

The accumulated benefit obligation for the defined benefit pension plans at the end of 2016 and 2015 was $319.9 million and $302.5 million, respectively.

The amounts recognized in the consolidated balance sheets to reflect the funded status of the plans at December 31 are as follows:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Long-term asset	$	2,020	$	-	$	-	$	-
Current liability		(972)		(966)		-		(52)
Long-term liability		(38,671)		(40,883)		(35,665)		(34,713)
Net liability	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31 and are recorded as regulatory assets in our consolidated balance sheets:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Net actuarial loss	$	84,656	$	80,660	$	14,728	$	13,086
Prior service benefit		(446)		(436)		(12,489)		(15,158)
Transition obligation		-		-		26		29
Total	$	84,210	$	80,224	$	2,265	$	(2,043)

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The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Projected Benefit Obligation in Excess of Plan Assets		2016		2015
Projected benefit obligation, end of year	$	227,739	$	332,565
Fair value of plan assets, end of year		188,096		290,716

The accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Accumulated Benefit Obligation in Excess of Plan Assets		2016		2015
Accumulated benefit obligation, end of year	$	26,927	$	24,606
Fair value of plan assets, end of year		-		-

b.

Net Periodic Cost.

(In thousands)		Pension Benefits						Other Postretirement Benefits
Components of Net Periodic Cost (Benefit):		2016		2015		2014		2016		2015		2014
Service cost	$	5,365	$	7,263	$	6,179	$	1,271	$	1,559	$	1,339
Interest cost		12,393		13,766		13,574		2,681		3,075		3,166
Expected return on assets		(22,365)		(22,682)		(22,051)		(2,829)		(2,812)		(2,615)
Amortization of:
Transition obligation		-		-		-		3		3		3
Prior service cost (benefit)		10		23		204		(2,669)		(2,669)		(2,669)
Actuarial loss		5,600		5,395		703		589		953		252
Net periodic cost (benefit)	$	1,003	$	3,765	$	(1,391)	$	(954)	$	109	$	(524)

c.

Plan Assumptions.

The weighted-average assumptions used to determine the benefit obligations were as follows for the years ended December 31:

	Pension Benefits		Other Postretirement Benefits
	2016	2015	2016	2015
Discount rate(a)	4.29%	4.51%	4.11%	4.32%
Rate of compensation increase	3.71%	3.78%	N/A	N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year	N/A	N/A	6.25%	6.5%
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate)	N/A	N/A	5.0%	5.0%
Year that the rate reaches the ultimate trend rate	N/A	N/A	2022	2022

(a)

In 2015, MGE refined its methodology for using discount rates to measure the components of net periodic benefit cost. The refined methodology uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components.

The weighted-average assumptions used to determine the net periodic cost were as follows for the years ended December 31:

	Pension Benefits			Other Postretirement Benefits
	2016	2015	2014	2016	2015	2014
Discount rate	4.51%	4.11%	4.88%	4.32%	3.96%	4.69%
Expected rate of return on plan assets	7.65%	7.80%	8.10%	6.96%	7.06%	7.07%
Rate of compensation increase	3.76%	3.84%	3.93%	N/A	N/A	N/A

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The assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. The following table shows how an assumed 1% increase or 1% decrease in health care cost trends could impact postretirement benefits in 2016 dollars:

(In thousands)		1% Increase		1% Decrease
Effect on other postretirement benefit obligation	$	1,175	$	(1,479)
Effect on total service and interest cost components		54		(67)

MGE employs a building-block approach in determining the expected long-term rate of return for asset classes. Historical markets are studied and long-term historical relationships among asset classes are analyzed, consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as interest rates and dividend yields, are evaluated before long-term capital market assumptions are determined.

The expected long-term nominal rate of return for plan assets is primarily a function of expected long-term real rates of return for component asset classes and the plan's target asset allocation in conjunction with an inflation assumption. Peer data and historical returns are reviewed to check for appropriateness.

d.

Investment Strategy.

MGE employs a total return investment approach whereby a mix of equities, fixed income, and real estate investments are used to maximize the expected long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan-funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity, fixed income, and real estate investments. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews and liability measurements.

The asset allocation for MGE's pension plans at the end of 2016 and 2015, and the target allocation for 2017, by asset category, follows:

	Target Allocation	Percentage of Plan Assets at Year End
		2016	2015
Equity securities(a)	63.0 %	65.0 %	63.0 %
Fixed income securities	30.0 %	27.0 %	29.0 %
Real estate	7.0 %	8.0 %	8.0 %
Total	100.0 %	100.0 %	100.0 %

(a) Target allocations for equity securities are broken out as follows: 45.5% United States equity, 17.5% non-United States equity.

The fair value of plan assets for the postretirement benefit plans is $43.2 million and $40.2 million at the end of 2016 and 2015, respectively. Of this amount, $37.0 million and $34.1 million at the end of 2016 and 2015, respectively, were held in the master pension trust and are allocable to postretirement health expenses. The target asset allocation and investment strategy for the portion of assets held in the master pension trust are the same as that explained for MGE's pension plans. The remainder of postretirement benefit assets are held either in an insurance continuance fund for the payment of retiree life benefits or health benefit trusts for payment of retiree health premiums. The asset allocation for the insurance continuance fund is determined by the life insurer. The target asset allocation for the health benefit trusts are established based on a similar investment strategy as assets held in the master pension trust, with consideration for liquidity needs in the health benefit trusts.

e.

Concentrations of Credit Risk.

MGE evaluated its pension and other postretirement benefit plans' asset portfolios for the existence of significant concentrations of credit risk as of December 31, 2016. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, and foreign country. As of December 31, 2016, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in MGE pension and postretirement benefit plan assets.

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f.

Fair Value Measurements of Plan Assets.

Pension and other postretirement benefit plan investments are recorded at fair value. See Footnote 11 for more information regarding the fair value hierarchy.

The following descriptions are the categories of underlying plan assets held within the pension and other postretirement benefit plans as of December 31, 2016:

Cash and Cash Equivalents – This category includes highly liquid investments with maturities of less than three months which are traded in active markets.

Equity Securities – These securities consist of U.S. and international stock funds. The U.S. stock funds are primarily invested in domestic equities. Securities in these funds are typically priced using the closing price from the applicable exchange, NYSE, Nasdaq, etc. The international funds are composed of international equities. Securities are priced using the closing price from the appropriate local stock exchange.

Fixed Income Securities – These securities consist of U.S. bond funds and short-term funds. U.S. bond funds are priced by a pricing agent using inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. The short-term funds are valued initially at cost and adjusted for amortization of any discount or premium.

Real Estate – The fair value of real estate properties is determined through an external appraisal process.

Insurance Continuance Fund (ICF) – The ICF is a supplemental retirement plan that includes assets that have been segregated and restricted to pay retiree term life insurance premiums.

Fixed Rate Fund – The Fixed Rate fund is supported by an underlying portfolio of fixed income securities, including public bonds, commercial mortgages, and private placement bonds. Public market data and GAAP reported market values are used when available to determine fair value.

All of the fair values of MGE's plan assets are measured using net asset value, except for cash and cash equivalents which are considered level 1 investments. The fair values of MGE's plan assets by asset category are as follows:

(In thousands)		2016		2015
Cash and Cash Equivalents	$	284	$	300
Equity Securities:
U.S. Large Cap		107,406		98,949
U.S. Mid Cap		25,966		22,446
U.S. Small Cap		33,836		27,561
International Blend		59,054		55,948
Fixed Income Securities:
Short-Term Fund		4,318		3,388
High Yield Bond		17,978		16,225
Long Duration Bond		71,512		73,112
Real Estate		29,441		27,231
Insurance Continuance Fund		1,514		1,518
Fixed Rate Fund		3,801		4,208
Total	$	355,110	$	330,886

g.

Expected Cash Flows.

Contributions to the qualified plans for 2017 were $6.0 million, which was paid in January 2017. MGE does not expect to make contributions to the plans for 2018. The contributions for years after 2018 are not yet currently estimated. MGE has adopted the asset smoothing as permitted in accordance with the Pension Protection Act of 2006, including modifications made by WRERA.

Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions.

In 2016, MGE made $14.5 million in employer contributions to its pension and postretirement plans.

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h.

Benefit Payments.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

		Pension		Other Postretirement Benefits
(In thousands)		Pension Benefits		Gross Postretirement Benefits		Expected Medicare Part D Subsidy		Net Postretirement Benefits
2017	$	13,468	$	3,623	$	(232)	$	3,391
2018		14,618		3,998		(252)		3,746
2019		15,632		4,442		(274)		4,168
2020		16,429		4,932		(302)		4,630
2021		17,263		5,442		(326)		5,116
2022 - 2026		99,725		31,065		(2,122)		28,943

14.

Share-Based Compensation - MGE Energy and MGE.

Under MGE Energy's Director Incentive Plan and Performance Unit Plan, non-employee directors and eligible employees may receive performance units that entitle the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the set performance period. In accordance with the plans' provisions, these awards are subject to prescribed vesting schedules and must be settled in cash. Accordingly, no shares of common stock will be issued in connection with the plans.

On the grant date, MGE Energy and MGE measure the cost of the director or employee services received in exchange for a performance unit award based on the current market value of MGE Energy common stock. The fair value of the awards is re-measured quarterly, including at December 31, 2016, as required by applicable accounting standards. Changes in fair value as well as the original grant are recognized as compensation cost. Since this amount is re-measured throughout the vesting period, the compensation cost is subject to variability.

Units granted under the Director Incentive Plan are subject to a three-year vesting schedule. The most recent three years of units granted under this plan are as follows:

Grant Date	MGE Energy Units Granted
January 20, 2017	4,032
January 15, 2016	3,773
January 16, 2015	3,794

Units granted under the Performance Unit Plan are subject to a five-year vesting schedule. The most recent units granted under this plan are as follows:

Grant Date	MGE Energy Units Granted
February 19, 2016	19,055
February 20, 2015	18,948
February 21, 2014	21,991
February 15, 2013	22,884

For nonretirement eligible employees, stock-based compensation costs are accrued and recognized using the graded vesting method. Compensation cost for retirement eligible employees or employees that will become retirement eligible during the vesting schedule are recognized on an abridged horizon.

During the years ended December 31, 2016, 2015, and 2014, MGE recorded $3.1 million, $1.0 million, and $2.0 million, respectively, in compensation expense as a result of awards under the plans. In January 2016, cash payments of $1.2 million were distributed relating to awards that were granted in 2011. During the year ended December 31, 2015, MGE recorded a $0.2 million gain on 4,676 units forfeited. No forfeitures occurred during the years ended December 31, 2016 and 2014. At December 31, 2016, $6.9 million of outstanding awards are vested, and of this amount, no cash settlements have occurred.

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15.

Derivative and Hedging Instruments - MGE Energy and MGE.

a.

Purpose.

As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, MGE Energy and MGE recognize such derivatives in the consolidated balance sheets at fair value. MGE's financial commodity derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism.

b.

Notional Amounts.

The gross notional volume of open derivatives is as follows:

	December 31, 2016	December 31, 2015
Commodity derivative contracts	393,395 MWh	355,580 MWh
Commodity derivative contracts	4,195,000 Dth	5,037,500 Dth
FTRs	2,251 MW	2,000 MW
PPA	3,250 MW	3,850 MW

c.

Financial Statement Presentation.

MGE purchases and sells exchange-traded and over-the-counter options, swaps, and future contracts. These arrangements are primarily entered into to help stabilize the price risk associated with gas or power purchases. These transactions are employed by both MGE's gas and electric segments. Additionally, as a result of the firm transmission agreements that MGE holds on electricity transmission paths in the MISO market, MGE holds FTRs. An FTR is a financial instrument that entitles the holder to a stream of revenues or charges based on the differences in hourly day-ahead energy prices between two points on the transmission grid. The fair values of these instruments are offset with a corresponding regulatory asset/liability depending on whether they are in a net loss/gain position. Depending on the nature of the instrument, the gain or loss associated with these transactions will be reflected as cost of gas sold, fuel for electric generation, or purchased power expense in the delivery month applicable to the instrument. At December 31, 2016, the fair value of exchange traded derivatives and FTRs exceeded their cost basis by $1.3 million. At December 31, 2015, the cost basis of exchange traded derivatives and FTRs exceeded their fair value by $0.8 million.

MGE is a party to a purchased power agreement that provides MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. The agreement also allows MGE an option to extend the contract after the base term. The agreement is accounted for as a derivative contract and is recognized at its fair value on the consolidated balance sheets. However, the derivative qualifies for regulatory deferral and is recognized with a corresponding regulatory asset or liability depending on whether the fair value is in a loss or gain position. The fair value of the contract at December 31, 2016 and 2015, reflects a loss position of $50.6 million and $53.3 million, respectively. The actual cost will be recognized in purchased power expense in the month of purchase.

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The following table summarizes the fair value of the derivative instruments on the consolidated balance sheets. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, MGE Energy and MGE have netted instruments with the same counterparty under a master netting agreement as well as the netting of collateral.

		Derivative Assets		Derivative Liabilities
(In thousands)					Balance Sheet Location
December 31, 2016
Commodity derivative contracts(a)	$	1,227	$	164	Other current assets
Commodity derivative contracts(a)		157		54	Other deferred charges
FTRs		143		-	Other current assets
PPA		N/A		7,620	Derivative liability (current)
PPA		N/A		42,970	Derivative liability (long-term)
December 31, 2015
Commodity derivative contracts(a)	$	146	$	1,266	Derivative liability (current)
Commodity derivative contracts(a)		144		70	Derivative liability (long-term)
FTRs		234		-	Other current assets
PPA		N/A		8,340	Derivative liability (current)
PPA		N/A		44,930	Derivative liability (long-term)

(a)

As of December 31, 2015, collateral of $1.0 million was posted against and netted with derivative liability positions on the consolidated balance sheets. No collateral was posted against derivative positions as of December 31, 2016.

The following tables show the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the consolidated balance sheets.

Offsetting of Derivative Assets
		Gross Amounts		Gross Amounts Offset in  Balance Sheets		Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
(In thousands)
December 31, 2016
Commodity derivative contracts	$	1,384	$	(218)	$	-	$	1,166
FTRs		143		-		-		143
December 31, 2015
Commodity derivative contracts	$	290	$	(290)	$	-	$	-
FTRs		234		-		-		234

Offsetting of Derivative Liabilities
		Gross Amounts		Gross Amounts Offset in Balance Sheets		Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
(In thousands)
December 31, 2016
Commodity derivative contracts	$	218	$	(218)	$	-	$	-
PPA		50,590		-		-		50,590
December 31, 2015
Commodity derivative contracts	$	1,336	$	(290)	$	(1,038)	$	8
PPA		53,270		-		-		53,270

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The following tables summarize the unrealized and realized gains (losses) related to the derivative instruments on the consolidated balance sheets at December 31, 2016 and 2015, and the consolidated income statements for the years ended December 31, 2016 and 2015.

		2016				2015
		Current and Long-Term Regulatory Asset		Other Current Assets		Current and Long-Term Regulatory Asset		Other Current Assets
(In thousands)
Balance at January 1,	$	54,082	$	1,208	$	54,998	$	1,001
Unrealized loss		1,575		-		8,586		-
Realized (loss) gain reclassified to a deferred account		(1,060)		1,060		(2,953)		2,953
Realized loss reclassified to income statement		(5,316)		(2,038)		(6,549)		(2,746)
Balance at December 31,	$	49,281	$	230	$	54,082	$	1,208

		Realized Losses (Gains)
		2016				2015
		Fuel for Electric Generation/ Purchased Power		Cost of Gas Sold		Fuel for Electric Generation/ Purchased Power		Cost of Gas Sold
(In thousands)
Year Ended December 31:
Commodity derivative contracts	$	1,154	$	2,064	$	2,236	$	2,548
FTRs		(445)		-		(309)		-
PPA		4,581		-		4,820		-

MGE's commodity derivative contracts, FTRs, and PPA are subject to regulatory deferral. These derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Realized gains and losses are deferred on the consolidated balance sheets and are recognized in earnings in the delivery month applicable to the instrument. As a result of the above described treatment, there are no unrealized gains or losses that flow through earnings.

The PPA has a provision that may require MGE to post collateral if MGE's debt rating falls below investment grade (i.e., below BBB-). The amount of collateral that it may be required to post varies from $20.0 million to $40.0 million, depending on MGE's nominated capacity amount. As of December 31, 2016, no collateral is required to be, or has been, posted. Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of December 31, 2016, no counterparties were in a net liability position. As of December 31, 2015, certain counterparties were in a net liability of less than $0.1 million.

Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss. However, MGE enters into transactions only with companies that meet or exceed strict credit guidelines, and it monitors these counterparties on an ongoing basis to mitigate nonperformance risk in its portfolio. As of December 31, 2016, no counterparties have defaulted.

16.

Rate Matters - MGE Energy and MGE.

a.

Rate Proceedings.

On December 15, 2016, the PSCW authorized MGE to decrease 2017 rates for retail electric customers by 0.8% or $3.3 million and to increase rates for retail gas customers by 1.9% or $3.1 million. The decrease in retail electric rates is attributable to declining fuel and purchased power costs. The increase in retail gas rates covers costs associated with MGE's natural gas system infrastructure improvements. The authorized return on common stock equity for 2017 is 9.8% on 57.2% common equity. The PSCW also approved MGE's request to extend the current accounting treatment for transmission related costs through 2018.

In July 2015, the PSCW approved MGE's request to extend the current accounting treatment for transmission related costs through 2016, conditioned upon MGE not filing a base rate case for 2016. This accounting treatment allows MGE to reflect any differential between transmission costs reflected in rates and actual costs incurred in its next rate case filing.

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On December 23, 2014, the PSCW authorized MGE to increase 2015 rates for retail electric customers by 3.8% or $15.4 million and to decrease gas rates by 2.0% or $3.8 million. The increase in retail electric rates cover costs associated with the construction of emission-reduction equipment at Columbia, improvements and reliability of the state's electric transmission system, fuel and purchased power related to coal delivery costs, partially offset by lower cost as a result of market conditions for pension and postretirement benefit costs. The authorized return on common stock equity was 10.2%.

The PSCW also approved changes to customer rates and rate design for gas service that became effective January 1, 2015. Gas rate design consists of a fixed monthly customer charge and a variable charge tied to actual usage, in addition to the separate charge through the PGA for natural gas commodity costs. The change shifted more of the rate recovery to the monthly charge, reflecting the related fixed costs of providing gas services, and reduced the variable usage-based charge. Thus, gas net income is expected to be more evenly distributed during the year and less sensitive to weather.

On July 26, 2013, the PSCW authorized MGE to freeze electric and natural gas rates at 2013 levels for 2014. The order authorized 100% AFUDC on the Columbia scrubber construction project and deferral of increased costs related to ATC and MISO network upgrade fees. As part of the rate freeze plan authorized by the PSCW, effective January 1, 2014, approximately $6.3 million associated with a 2012 fuel rule surplus credit was amortized in 2014. The fuel credit accrued interest at MGE's weighted cost of capital. The authorized return on common stock equity was unchanged at 10.3%.

b.

Fuel Rules.

Fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is currently set at plus or minus 2%. Under fuel rules, MGE would defer costs, less any excess revenues, if its actual electric fuel costs exceeded 102% of the electric fuel costs allowed in its latest rate order. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. Conversely, MGE is required to defer the benefit of lower costs if actual electric fuel costs were less than 98% of the electric fuel costs allowed in that order.

In August 2015, the PSCW approved a $0.00256/kWh fuel credit that began on September 1, 2015, and continued throughout 2016. The fuel credit established a mechanism to return $10.9 million of fuel savings to electric customers as a bill credit. MGE returned $2.6 million of electric fuel-related savings to customers through bill credits during the period from September 1, 2015, through December 31, 2015. MGE returned $8.3 million of electric fuel-related savings during the year ended December 31, 2016.

In January 2016, the PSCW lowered MGE's 2016 fuel rules monitored costs by $14.8 million as a result of continued lower projected fuel costs in 2016. Also, in March 2016, MGE filed its 2015 fuel plan reconciliation application showing an overcollection of 2015 fuel rules monitored costs. In July 2016, the PSCW issued a final order stating that MGE shall refund the additional fuel savings incurred during 2015 and 2016 for a total of $15.7 million to its retail electric customers over a one-month period. In September 2016, MGE returned $15.5 million to customers through bill credits.

As of December 31, 2016, MGE has deferred $5.6 million of 2016 fuel savings that were in excess of the fuel savings included within the fuel credits referenced above. These costs will be subject to the PSCW's annual review of 2016 fuel costs, expected to be completed in 2017.

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17.

Commitments and Contingencies.

a.

Purchase Contracts - MGE Energy and MGE.

MGE Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet their obligations to deliver electricity and natural gas to customers. As of December 31, 2016, the future minimum commitments related to these purchase contracts were as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Coal(a)	$	21,246	$	14,763	$	7,281	$	-	$	-	$	-
Natural gas
Transportation and storage(b)		20,859		20,645		19,483		15,226		8,443		23,331
Supply(c)		17,783		-		-		-		-		-
Purchase power(d)		48,056		46,563		33,670		32,577		33,266		66,231
Other		14,902		324		143		-		-		-
	$	122,846	$	82,295	$	60,577	$	47,803	$	41,709	$	89,562

(a)

Total coal commitments for the Columbia and Elm Road Units, including transportation. Fuel procurement for MGE's jointly owned Columbia and Elm Road Units is handled by WPL and WEPCO, respectively, who are the operators of those facilities. If any minimum purchase obligations must be paid under these contracts, management believes these obligations would be considered costs of service and recoverable in rates.

(b)

MGE's natural gas transportation and storage contracts require fixed monthly payments for firm supply pipeline transportation and storage capacity. The pricing components of the fixed monthly payments for the transportation and storage contracts are established by FERC but may be subject to change. Management expects to recover these costs in future customer rates.

(c)

These commitments include market-based pricing. Management expects to recover these costs in future customer rates.

(d)

MGE has several purchase power agreements to help meet future electric supply requirements. Management expects to recover these costs in future customer rates. In October 2008, MGE entered into a purchase power agreement to help meet future electric supply requirements. Under this agreement, MGE has agreed to purchase 50 MW of wind power from Osceola Windpower II, LLC, which is located in Iowa. This facility became operational in October 2008. MGE does not have any capacity payment commitments under this agreement. However, MGE is obligated to purchase its ratable share of the energy produced by the project. MGE's commitment related to its ratable share of energy produced by the project has been estimated and is included in the above numbers. Management expects to recover these costs in future customer rates.

b.

Leases - MGE Energy and MGE.

MGE has noncancelable operating leases, primarily for combustion turbines, railcars, and computer equipment. The operating leases generally do not contain renewal options, with the exception of certain railcar operating leases. These leases have a renewal option of one year or less. MGE is required to pay all executory costs, such as maintenance and insurance, for its leases.

Future minimum rental payments at December 31, 2016, under agreements classified as operating leases with noncancelable terms in excess of one year are as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Minimum lease payments	$	1,331	$	959	$	441	$	310	$	278	$	8,020

Rental expense under operating leases totaled $2.0 million, $2.1 million, and $2.5 million for 2016, 2015, and 2014, respectively.

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c.

Environmental - MGE Energy and MGE.

Water Quality

Water quality regulations promulgated by the EPA and WDNR in accordance with the Federal Water Pollution Control Act, or more commonly known as the Clean Water Act (CWA), impose restrictions on discharges of various pollutants into surface waters. The CWA also regulates surface water quality issues that affect aquatic life, such as water temperatures, intake structures, and wetlands filling. The CWA also includes discharge standards, which require the use of effluent-treatment processes equivalent to categorical "best practicable" or "best available" technologies. The CWA regulates discharges from "point sources," such as power plants, through establishing discharge limits in water discharge permits. MGE's power plants operate under Wisconsin Pollution Discharge Elimination System (WPDES) permits issued by the WDNR to ensure compliance with these discharge limits. Permits are subject to periodic renewal.

EPA's Effluent Limitations Guidelines (ELG) and Standards for Steam Electric Power Generating Point Source Category

In November 2015, the EPA published its final rule setting Effluent Limitations Guidelines (ELG) for the steam electric power generating industry. The ELG rule establishes federal limits on the amount of metals and other pollutants that can be discharged in wastewater from new and existing steam electric generation plants. The ELG rule mostly covers pollutants that are captured by certain air pollution control systems and via wet ash handling systems at coal-burning power plants with units greater than 50 MW generation capacity. The operators of our Columbia and Elm Road Units have indicated that equipment upgrades may be necessary to comply with the new discharge standards. The rule will be applied to Wisconsin-based power plants as they renew their WPDES permits, beginning in 2018 but no later than 2023. Management believes that any compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

EPA Cooling Water Intake Rules (Section 316(b))

Section 316(b) of the Clean Water Act requires that the cooling water intake structures at electric power plants meet best available technology standards so that mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens) are reduced. The EPA finalized its 316(b) rule for existing facilities in 2014. Section 316(b) requirements are implemented in Wisconsin through modifications to plants' WPDES permits, which govern plant wastewater discharges. The WDNR is currently developing guidance and rules to implement the EPA 316(b) rule.

Our WCCF, Blount, and Columbia plants are considered existing plants under this rule. Our WCCF facility already employs a system that meets the 316(b) rule. Our Blount plant has conducted historical studies that will show that it will likely be in compliance with this rule when its WPDES permit is renewed in 2017. The operator of our Columbia plant is conducting an intake study to demonstrate compliance with the 316(b) rule and/or identify design criteria needed to meet the new rule requirements prior to Columbia's 2017 WPDES permit renewal. The exact requirements at Blount and Columbia, however, will not be known until the WDNR finalizes its rule, approves the plant operators' approach, and those sites' WPDES permits are modified to account for this rule. Nonetheless, MGE expects that the 316(b) rule will not have material effects on its existing plants.

Energy Efficiency and Renewables

The Wisconsin Energy Efficiency and Renewables Act requires that 10% of the state's electricity be generated from renewable sources. MGE is in compliance with the requirement. The costs to comply with the Act and its accompanying regulations are being recovered in rates.

Air Quality

Federal and state air quality regulations impose restrictions on various emissions including emissions of particulate matter (PM), sulfur dioxide (SO₂), nitrogen oxides (NO_x), and other pollutants, and require permits for operation of emission sources. These permits have been obtained by MGE and must be renewed periodically. Current EPA initiatives under the Clean Air Act, including a recent update to the Cross-State Air Pollution Rule (CSAPR), and recently revised National Ambient Air Quality Standards (NAAQS) for ozone have the potential to result in additional operating and capital expenditure costs for MGE.

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EPA's Greenhouse Gas (GHG) Reduction Guidelines under the Clean Air Act 111(d) Rule

In October 2015, the EPA finalized its Clean Power Plan (CPP) rule with an effective date of December 2015, setting guidelines and approval criteria for states to use in developing plans to control GHG emissions from existing fossil fuel-fired electric generating units (EGUs) and systems. Implementation of the rule is expected to have a direct impact on existing coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs.

In October 2015, many states (including Wisconsin) and other litigants filed petitions with the U.S. Court of Appeals for the District of Columbia Circuit asking for a stay of the CPP rule, and seeking expedited review of the petitioners' challenges to the CPP's legality. The parties' request to stay the rule was denied by the D.C. Circuit on January 20, 2016, but the D.C. Circuit issued an expedited schedule for resolving the merits of the litigation. On January 26, 2016, several parties filed a request for a stay of the CPP with the U.S. Supreme Court.

On February 9, 2016, the U.S. Supreme Court issued a stay blocking implementation of the CPP pending the Court's own review. The CPP may not be implemented until the Supreme Court lifts the stay, presumably after the courts ultimately resolve the underlying legality of the rule. Oral arguments were held before the D.C. Circuit in September 2016 and a decision by the D.C. Circuit is expected in 2017.

Given the pending legal proceedings, the nature and timing of any final requirements is subject to uncertainty. If the rule remains substantially in its present form, it is expected to have a material impact on MGE.

National Ambient Air Quality Standards (NAAQS) and Related Rules

The EPA's NAAQS regulations have been developed to set ambient levels of six pollutants to protect sensitive human populations (primary NAAQS) and the environment (secondary NAAQS) from the negative effects of exposure to these pollutants at higher levels. The Clean Air Act requires that the EPA periodically review, and adjust as necessary, the NAAQS for these six air pollutants. The EPA's NAAQS review can result in a lowering of the allowed ambient levels of a pollutant, a change in how the pollutant is monitored, and/or a change in which sources of that pollutant are regulated. States implement any necessary monitoring and measurement changes and recommend areas for attainment (meets the ambient requirements) or nonattainment (does not meet these standards). The EPA makes the final attainment and nonattainment determinations. States must come up with a state implementation plan (SIP) to get nonattainment areas into attainment and maintain air quality in attainment areas. A company with facilities located in a nonattainment area will be most affected. Their facilities may be subject to additional data submissions and measurement during permitting renewals, their facilities may need to meet new emission limitations set by the SIP (which could result in significant capital expenditures), and the company may have additional expenses and/or difficulties expanding existing facilities or building new facilities. The process from determining acceptable primary and/or secondary NAAQS to executing SIPs can take years. Nonetheless, because the NAAQS regulations have the potential to affect both existing and new facilities in areas, MGE continuously monitors changes to these rules to evaluate whether changes could impact our operations. In addition, the EPA has adopted interstate transport rules such as the CSAPR to address contributions to NAAQS nonattainment from upwind sources in neighboring states. In the following paragraphs we discuss specific NAAQS and transport rule developments that may affect MGE.

Ozone NAAQS

In October 2015, the EPA revised the primary and secondary ozone NAAQS, lowering each to 70 ppb. The rule became effective in December 2015. In November 2016, the EPA introduced a proposed implementation rule for the revised standard. Based on current ozone monitoring data, it appears that Milwaukee County (where our Elm Road Units are located) will likely not attain the lowered standards, and Dane and Columbia Counties (where our WCCF/Blount and Columbia Units are located, respectively) may attain them. Final attainment designations for these three counties will be based upon air monitoring data for years 2014-2016. The EPA will finalize the designations by October 1, 2017 based on that data. Once these EPA designations are complete, the State of Wisconsin will need to develop implementation plans for each county designated as nonattainment, which could affect operations and emission control obligations for plants located within the nonattainment counties.

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The State of Wisconsin has joined a lawsuit filed by several states challenging the EPA's new ozone standard, alleging that the new standard is not attainable and the EPA is not properly considering background levels in setting its ozone attainment levels. Oral arguments in this case are scheduled to begin in April 2017. MGE will continue to monitor the EPA's progress on attainment designations and related litigation to assess potential impacts at our facilities, particularly our Elm Road Units.

Sulfur Dioxide (SO₂) NAAQS

In March 2015, the EPA identified MGE's Columbia Plant in Columbia County as a large stationary source of SO₂ that may exceed the one hour SO₂ NAAQS standard and was subject to a State of Wisconsin proposed county attainment/nonattainment determination. In September 2015, Wisconsin sent a letter to the EPA proposing that Columbia County be designated as being in attainment for the SO₂ NAAQS based on recent modeling demonstrating that SO₂ pollution controls on the Columbia Plant had brought the county into attainment. In June 2016, the EPA issued a final rule classifying Columbia County as an unclassified/attainment area. MGE does not anticipate any material costs from this rule.

Nitrogen Dioxide (NO₂) NAAQS

The WDNR has revised its state rules to incorporate the EPA's one hour NO₂ NAAQS rule that was finalized in 2010. The effective date of the state rule was August 1, 2016. The WDNR is currently seeking input from the public on ideas for implementing this one-hour standard. Wisconsin's NO₂ NAAQS rule will affect our stationary fossil-fuel generation sources by requiring that we demonstrate consistency with the NAAQS when applying for certain air permits. Sources that cannot demonstrate compliance with the NAAQS may be required to install emission controls or restrict operations. MGE will continue to monitor developments while the WDNR implements guidance for compliance with the one-hour NAAQS.

EPA's Cross-State Air Pollution Rule: Proposed Ozone Season Update based on 2008 Ozone NAAQS

The EPA's Cross-State Air Pollution Rule (CSAPR) is an interstate air pollution transport rule designed to reduce ozone and fine particulate (PM2.5) air levels in areas that the EPA has determined are being affected by pollution from neighboring and upwind states. This is accomplished in the CSAPR through a reduction in SO₂ and NO_x from qualifying fossil-fuel fired power plants in upwind or "contributing" states. NO_x and SO₂ contribute to fine particulate pollution, and NO_x contributes to ozone formation. Reductions are achieved through a cap and trade system. Individual plants can meet their caps through modifications and/or buying allowances on the market.

In October 2016, the EPA finalized rulemaking for an update to CSAPR that incorporated 2008 Ozone NAAQS levels into the rule (the original CSAPR is based on 1997 Ozone NAAQS levels). The update affects 22 states, including Wisconsin, by further limiting statewide NO_x allowances in each of those states. The rule also includes revisions to CSAPR that are designed to address issues remaining from the D.C. Circuit remand of CSAPR, including Wisconsin's inclusion in the NO_x ozone season portion of the rule. The State of Wisconsin filed a legal challenge to the CSAPR update rule asserting, among other things, that the rule over-controls NO_x emissions in Wisconsin.

The CSAPR Update rule will further reduce summertime (or Ozone Season) NO_x emissions allocations from power plants starting in 2017. MGE intends to meet the rule requirements through a combination of owned, received, and purchased. Depending on the number of allocations MGE receives for ozone season, the number of allocations that MGE must purchase, and the cost of allocations, this requirement could be material for MGE.

Clean Air Visibility Rule (CAVR)

Columbia is subject to the best available retrofit technology (BART) regulations, a subsection of the EPA's Clean Air Visibility Rule (CAVR), which may require pollution control retrofits. Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR equals compliance with BART, should mean that Columbia will not need to do additional work to meet BART requirements. At this time, however, the BART regulatory obligations, compliance strategies, and costs remain uncertain due to the continued legal challenges surrounding CSAPR and CAVR.

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In December 2016, the EPA introduced a final rule (posted online but not yet scheduled for publication in the Federal Register) extending state implementation plan deadlines by three years from 2018 to 2021 for the next implementation phase of the CAVR, which goes beyond BART and may affect utilities. This extension would allow for states to coordinate their CAVR compliance with other compliance efforts, which should lessen the burden to comply. It is too early to determine if the rule will affect MGE. MGE will continue to monitor developments.

Solid Waste

EPA's Coal Combustion Residuals Rule

In December 2014, the EPA finalized its Disposal of Coal Combustion Residuals from Electric Utilities (CCR) rule. The rule became effective in October 2015. It provides that coal ash will be regulated as a solid waste, and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash. The rule also regulates landfills, ash ponds, and other surface impoundments for coal combustion residuals by regulating their design, location, monitoring, and operation. This portion of the rule is accomplished in phases to allow for sites with onsite storage and/or disposal to evaluate their compliance with the rule's design criteria. Landfills and impoundments that cannot meet design criteria will need to close formally within defined timeframes.

The Columbia and Elm Road Units co-owners and plant operators are working through the phased requirements to plan and implement changes necessary at those facilities to meet design criteria. Review of our Elm Road Units has indicated that the costs to comply with this rule are not expected to be significant. Columbia's operator has developed a preliminary implementation schedule for meeting the various deadlines spelled out in the rule. Costs at Columbia will be dependent on what is determined during the evaluation stage. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

Columbia

Based upon current available information, compliance with various environmental requirements and initiatives is expected to result in significant additional operating and capital expenditures at Columbia as noted below.

Columbia Clean Air Act Litigation

Columbia is a coal-fired generating station operated by WPL in which WPL, WPSC, and MGE have ownership interests. In December 2009, the EPA sent a Notice of Violation (NOV) to the co-owners, including MGE. The NOV alleged that WPL, which is the plant operator, and the Columbia co-owners failed to comply with appropriate pre-construction review and permitting requirements and, as a result, violated the Prevention of Significant Deterioration program requirements, Title V Operating Permit requirements of the CAA, and the Wisconsin SIP. In June 2013, the court approved and entered a consent decree entered by the EPA, Sierra Club, and the co-owners of Columbia. One of the requirements of the consent decree requires installation of an SCR system at Columbia Unit 2 by December 31, 2018. Installation of the SCR has been approved by the PSCW and is currently under construction. MGE's share of the projected cost for the SCR system is estimated to be $22-$24 million, with expected completion in 2018.

d.

Legal Matters - MGE Energy and MGE.

MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE maintains accruals for such costs that are probable of being incurred and subject to reasonable estimation. The accrued amount for these matters is not material to the financial statements. MGE does not expect the resolution of these matters to have a material adverse effect on its consolidated results of operations, financial condition, or cash flows.

e.

Other Commitments.

MGE Energy holds investments in nonpublic entities. From time to time, these entities require additional capital infusions from their investors. MGE Energy has committed to contribute $11.4 million in capital for such infusions. The timing of these infusions is dependent on the needs of the investee and is therefore uncertain at this time.

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In addition, MGE Energy has a three year agreement with a venture debt fund expiring in December 2019. MGE Energy has committed to invest up to a total of $1.5 million into this fund. As of December 31, 2016, MGE Energy has $0.4 million remaining in commitments. The timing of infusions is dependent on the needs of the fund and is therefore uncertain at this time.

MGE has several other commitments related to various projects. Payments for these commitments are expected to be as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Other commitments	$	1,317	$	1,175	$	511	$	497	$	440	$	5,646

18.

Asset Retirement Obligations - MGE Energy and MGE.

MGE recorded an obligation for the fair value of its legal liability for asset retirement obligations (AROs) associated with removal of the West Campus Cogeneration Facility and the Elm Road Units, electric substations, combustion turbine generating units, wind generating facilities, and photovoltaic generating facilities, all of which are located on property not owned by MGE Energy and MGE and would need to be removed upon the ultimate end of the associated leases. The significant conditional AROs identified by MGE included the costs of abandoning in place gas services and mains, the abatement and disposal of equipment and buildings contaminated with asbestos and PCBs, and the proper disposal and removal of tanks, batteries, and underground cable. Changes in management's assumptions regarding settlement dates, settlement methods, or assigned probabilities could have a material effect on the liabilities recorded by MGE at December 31, 2016, as well as the regulatory asset recorded.

MGE also may have AROs relating to the removal of various assets, such as certain electric and gas distribution facilities. These facilities are generally located on property owned by third parties, on which MGE is permitted to operate by lease, permit, easement, license, or service agreement. The asset retirement obligations associated with these facilities cannot be reasonably determined due to the indeterminate life of the related agreements.

The following table summarizes the change in AROs. Amounts include conditional AROs.

(In thousands)		2016		2015
Balance at January 1,	$	24,360	$	19,744
Liabilities incurred(a)		1,303		2,380
Accretion expense		1,269		1,131
Liabilities settled		(110)		(124)
Revisions in estimated cash flows(a)		64		1,229
Balance at December 31,	$	26,886	$	24,360

(a)

In the second quarter of 2015, MGE recorded an obligation of $2.3 million for the fair value of its legal liability for AROs associated with the effect of the final Coal Combustion Residual Rule at Columbia. An additional $1.3 million was recorded in the fourth quarter, associated with this ARO, based on revised estimates.

19.

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements - MGE Energy and MGE.

a.

Revenue from Contracts with Customers.

In May 2014, the FASB issued authoritative guidance within the Codification's Revenue Recognition topic that provides guidance on the recognition, measurement, and disclosure of revenue from contracts with customers. The new standard establishes a five step model for recognizing and measuring revenue from contracts with customers and replaces existing guidance on revenue recognition. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

98

MGE Energy and MGE have been assessing the impact of this guidance on revenue streams within the scope of the new standard. All retail electric and gas revenues are tariff rates approved by the PSCW. Based on our evaluation of the new standard, retail revenues will be recognized within the period in which utility service is provided to the customer and the performance obligation is fulfilled, consistent with our current revenue recognition model. Electric revenues for sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may also include bilateral sales to other utilities or power marketers. Revenues for sales to the market will be recognized when the sale is completed within the market operated by MISO, similar to the recognition under our current revenue recognition model. In addition, revenues from the transportation of gas will continue to be recognized upon the performance of services for the respective customer. Based on our assessment of the new standard, revenue recognition for retail revenues, sales to the market, and transportation of gas will be consistent with our current revenue recognition model. However, additional disclosures regarding the nature, amount, timing, and uncertainty of these revenue streams and related cash flows arising from contracts with customers will be required as a result of the new standard.

The Power and Utilities Task Force of the AICPA is formulating a utility industry-specific interpretation of the guidance regarding the collectability threshold of probable within the new standard. The collectability criterion could impact the timing of revenue recognition for uncollectible accounts. The Power and Utilities Task Force of the AICPA is also requesting the FASB issue an industry-specific clarification regarding the accounting treatment of upfront contributions in the aid of construction, also known as CIAC. The final clarification on this topic could result in a material impact on the consolidated financial statements. Management continues to analyze newly-released interpretative guidance and assess the related impacts to the current revenue recognition model.

This authoritative guidance will become effective January 1, 2018, and MGE Energy and MGE anticipate adopting the standard upon the effective date. Adoption of this standard is permitted under one of two methods: the full retrospective method or the modified retrospective method. MGE Energy and MGE are continuing to assess the permitted implementation methods and the impact on our financial statements.

b.

Consolidation.

In February 2015, the FASB issued authoritative guidance within the Codification's Consolidation topic that provides guidance on the evaluation of certain legal entities for consolidation purposes. This authoritative guidance became effective January 1, 2016. This guidance had no impact on our financial statements.

c.

Debt Issuance Costs.

In April 2015, the FASB issued authoritative guidance within the Codification's Interest topic that provides guidance on the presentation of debt issuance costs in financial statements. This authoritative guidance became effective January 1, 2016, and changed the presentation of debt issuance costs on the balance sheet. Prior to the authoritative guidance, debt issuance costs were treated as a deferred asset, and beginning January 1, 2016, these costs are included as a direct deduction to the related debt liability on the consolidated balance sheets. As of December 31, 2016, assets (other deferred assets and other) and liabilities (long-term debt) decreased approximately $3.9 million as a cumulative result of the guidance. In addition, this guidance was applied retrospectively to all prior periods presented, resulting in a decrease to assets and liabilities of $4.3 million for the year ended December 31, 2015.

d.

Financial Instruments.

In January 2016, the FASB issued authoritative guidance within the Codification's Financial Instruments topic that provides guidance on the recognition and measurement of financial instruments. This authoritative guidance will become effective January 1, 2018, and will require equity investments to be measured at fair value with changes in fair value recognized in net income rather than in other comprehensive income. As a result of this guidance, MGE Energy and MGE will no longer have any other comprehensive income. This standard will be applied using a modified retrospective approach, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of all prior periods presented.

99

e.

Leases.

In February 2016, the FASB issued authoritative guidance within the Codification's Leases topic that provides guidance on the classification, recognition, measurement, and disclosure of leases. The new leasing standard establishes that a lease conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Under the new guidance, lessees will be required to recognize all leases with terms greater than one year, including operating leases, on the consolidated balance sheet by recording a right-of-use asset and lease liability. Prior to the authoritative guidance, only capital leases were recognized on the balance sheet by lessees. The new accounting guidance as applied by lessors is materially consistent from that applied under current GAAP.

Management has begun utilizing a bottoms-up approach to analyze the impact of the standard on our lease portfolio. MGE Energy and MGE have been reviewing current accounting policies and procedures to identify potential differences in accounting treatment that would result from applying the requirements of the new standard to our existing lease portfolio. In addition, we are identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure requirements under the new standard. This authoritative guidance will become effective January 1, 2019, with early adoption permitted. The new leasing standard requires entities to recognize and measure leases at the beginning of the earliest comparative period presented using a modified retrospective approach. MGE Energy and MGE are currently assessing the impact this pronouncement will have on our financial statements.

f.

Restricted Cash.

In November 2016, the FASB issued authoritative guidance within the Codification's Statement of Cash Flows topic that provides guidance on the classification and presentation of changes in restricted cash within the statement of cash flows. The new standard was issued to eliminate a current diversity in practice for the accounting treatment of restricted cash. Under the new guidance, reporting entities will be required to explain the changes in the total of restricted and unrestricted cash and cash equivalents when reconciling the beginning and ending balances on the statement of cash flows. Prior to the authoritative guidance, changes in restricted cash were presented as either cash flows from operating, investing, or financing activities within the statement of cash flows, as appropriate based on the nature of the restriction. Also under the new standard, reporting entities will be required to provide a reconciliation from the balance sheet to the statement of cash flows and disclose the nature of the restrictions of cash. This authoritative guidance will become effective January 1, 2018. Upon the effective date, MGE Energy and MGE will change the presentation of restricted cash to reflect this change in accounting guidance. MGE Energy and MGE will also retrospectively apply the guidance to all prior periods presented. As of December 31, 2016, MGE Energy and MGE had $5.1 million of restricted cash classified within other current assets on the consolidated balance sheets.

20.

Segment Information - MGE Energy and MGE.

The electric utility business purchases, generates and distributes electricity, and contracts for transmission service. The gas utility business purchases and distributes natural gas and contracts for the transportation of natural gas. Both the electric and gas segments operate through MGE Energy's principal subsidiary, MGE.

The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power, MGE Power Elm Road, and MGE Power West Campus. These subsidiaries own and lease electric generating capacity to assist MGE. MGE Power Elm Road has an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin, which are leased to MGE, and MGE Power West Campus owns a controlling interest in the electric generation plant of a natural gas-fired cogeneration facility on the UW campus. MGE Power West Campus's portion is also leased to MGE.

The transmission investment segment invests, through MGE Transco, in ATC, a company that provides electric transmission services primarily in Wisconsin and MGEE Transco, in ATC Holdco, a company formed to pursue electric transmission development and investments outside of Wisconsin. See Footnote 4 for further discussion.

The "All Others" segment includes: corporate, CWDC, MAGAEL, MGE State Energy Services, MGE Services, and NGV Fueling Services. These entities' operations consist of investing in companies and property which relate to the regulated operations, financing the regulated operations, or owning and operating natural gas compression equipment.

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General corporate expenses include the cost of executive management, corporate accounting and finance, information technology, risk management, human resources and legal functions, and employee benefits that are allocated to electric and gas segments based on formulas prescribed by the PSCW. Identifiable assets are those used in MGE's operations in each segment. Assets not allocated consist primarily of cash and cash equivalents, restricted cash, investments, other accounts receivable, and prepaid assets.

Sales between our electric and gas segments are based on PSCW approved tariffed rates. Additionally, intersegment operations related to the leasing arrangement between our electric segment and MGE Power Elm Road/MGE Power West Campus are based on terms previously approved by the PSCW. Consistent with internal reporting, management has presented the direct financing capital leases between MGE and MGE Power Elm Road/MGE Power West Campus based on actual lease payments included in rates. Lease payments made by MGE to MGE Power Elm Road and MGE Power West Campus are shown as operating expenses. The lease payments received by MGE Power Elm Road and MGE Power West Campus from MGE are shown as lease income in interdepartmental revenues. The depreciation expense associated with the Elm Road Units and WCCF is reflected in the nonregulated energy segment.

The following table shows segment information for MGE Energy's and MGE's operations:

(In thousands) MGE Energy		Electric		Gas		Non-Regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2016
Operating revenues	$	409,006	$	134,543	$	1,196	$	-	$	-	$	-	$	544,745
Interdepartmental revenues		1,912		21,378		43,930		-		-		(67,220)		-
Total operating revenues		410,918		155,921		45,126		-		-		(67,220)		544,745
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		(24)		-		(44,646)
Other operating expenses		(310,941)		(127,083)		(155)		(17)		(895)		67,220		(371,871)
Operating income (loss)		70,855		20,710		37,599		(17)		(919)		-		128,228
Other income, net		960		30		-		8,429		292		-		9,711
Interest (expense) income, net		(11,147)		(3,223)		(5,768)		-		272		-		(19,866)
Income (loss) before taxes		60,668		17,517		31,831		8,412		(355)		-		118,073
Income tax (provision) benefit		(20,115)		(6,894)		(12,775)		(2,836)		107		-		(42,513)
Net income (loss)	$	40,553	$	10,623	$	19,056	$	5,576	$	(248)	$	-	$	75,560
Year Ended December 31, 2015
Operating revenues	$	412,528	$	143,737	$	7,763	$	-	$	-	$	-	$	564,028
Interdepartmental revenues		513		11,780		39,435		-		-		(51,728)		-
Total operating revenues		413,041		155,517		47,198		-		-		(51,728)		564,028
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		(47)		-		(44,225)
Other operating expenses		(318,001)		(128,241)		(158)		(19)		(857)		51,728		(395,548)
Operating income (loss)		65,095		20,518		39,565		(19)		(904)		-		124,255
Other (deductions) income, net		400		(33)		-		7,728		518		-		8,613
Interest (expense) income, net		(11,187)		(3,203)		(5,993)		-		221		-		(20,162)
Income (loss) before taxes		54,308		17,282		33,572		7,709		(165)		-		112,706
Income tax (provision) benefit		(17,915)		(6,915)		(13,474)		(3,102)		43		-		(41,363)
Net income (loss)	$	36,393	$	10,367	$	20,098	$	4,607	$	(122)	$	-	$	71,343
Year Ended December 31, 2014
Operating revenues	$	394,849	$	221,720	$	3,283	$	-	$	-	$	-	$	619,852
Interdepartmental revenues		509		8,366		42,692		-		-		(51,567)		-
Total operating revenues		395,358		230,086		45,975		-		-		(51,567)		619,852
Depreciation and amortization		(26,933)		(6,308)		(7,407)		-		(47)		-		(40,695)
Other operating expenses		(297,409)		(194,203)		(139)		-		(875)		51,567		(441,059)
Operating income (loss)		71,016		29,575		38,429		-		(922)		-		138,098
Other (deductions) income, net		2,847		(86)		-		9,150		(1,832)		-		10,079
Interest (expense) income, net		(10,410)		(3,229)		(6,208)		-		174		-		(19,673)
Income (loss) before taxes		63,453		26,260		32,221		9,150		(2,580)		-		128,504
Income tax (provision) benefit		(22,070)		(10,480)		(12,932)		(3,664)		961		-		(48,185)
Net income (loss)	$	41,383	$	15,780	$	19,289	$	5,486	$	(1,619)	$	-	$	80,319

101

(In thousands) MGE		Electric		Gas		Non- Regulated Energy		Transmission Investment(b)		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2016
Operating revenues	$	409,030	$	134,572	$	1,196	$	-	$	-	$	544,798
Interdepartmental revenues		1,888		21,349		43,930		-		(67,167)		-
Total operating revenues		410,918		155,921		45,126		-		(67,167)		544,798
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		-		(44,622)
Other operating expenses(a)		(330,924)		(133,940)		(12,930)		-		67,167		(410,627)
Operating income(a)		50,872		13,853		24,824		-		-		89,549
Other (deductions) income, net(a)		828		(7)		-		4,360		-		5,181
Interest expense, net		(11,147)		(3,223)		(5,768)		-		-		(20,138)
Net income		40,553		10,623		19,056		4,360		-		74,592
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(23,358)		(23,358)
Net income attributable to MGE	$	40,553	$	10,623	$	19,056	$	4,360	$	(23,358)	$	51,234
Year Ended December 31, 2015
Operating revenues	$	412,550	$	143,752	$	7,763	$	-	$	-	$	564,065
Interdepartmental revenues		491		11,765		39,435		-		(51,691)		-
Total operating revenues		413,041		155,517		47,198		-		(51,691)		564,065
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		-		(44,178)
Other operating expenses(a)		(335,803)		(135,124)		(13,632)		(19)		51,691		(432,887)
Operating income (loss)(a)		47,293		13,635		26,091		(19)		-		87,000
Other (deductions) income, net(a)		287		(65)		-		4,626		-		4,848
Interest expense, net		(11,187)		(3,203)		(5,993)		-		-		(20,383)
Net income		36,393		10,367		20,098		4,607		-		71,465
Less: net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,097)		(26,097)
Net income attributable to MGE	$	36,393	$	10,367	$	20,098	$	4,607	$	(26,097)	$	45,368
Year Ended December 31, 2014
Operating revenues	$	394,871	$	221,741	$	3,283	$	-	$	-	$	619,895
Interdepartmental revenues		487		8,345		42,692		-		(51,524)		-
Total operating revenues		395,358		230,086		45,975		-		(51,524)		619,895
Depreciation and amortization		(26,933)		(6,308)		(7,407)		-		-		(40,648)
Other operating expenses(a)		(319,175)		(204,597)		(13,071)		-		51,524		(485,319)
Operating income(a)		49,250		19,181		25,497		-		-		93,928
Other (deductions) income, net(a)		2,543		(172)		-		5,486		-		7,857
Interest expense, net		(10,410)		(3,229)		(6,208)		-		-		(19,847)
Net income		41,383		15,780		19,289		5,486		-		81,938
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,310)		(26,310)
Net income attributable to MGE	$	41,383	$	15,780	$	19,289	$	5,486	$	(26,310)	$	55,628
(a) Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statements of Income.
(b) As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco.
See Footnote 4 for additional information.

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The following table shows segment information for MGE Energy's and MGE's assets and capital expenditures:
		Utility						Consolidated
(In thousands) MGE Energy		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2016	$	1,021,905	$	318,603	$	27,338	$	271,277	$	74,535	$	465,202	$	(377,800)	$	1,801,060
December 31, 2015(c)		974,235		298,435		49,753		277,858		69,470		434,868		(378,216)		1,726,403
December 31, 2014(c)		945,790		306,106		41,124		280,542		67,697		438,898		(390,636)		1,689,521
Capital Expenditures:
Year ended Dec. 31, 2016	$	50,699	$	29,136	$	-	$	3,824	$	-	$	-	$	-	$	83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		-		72,030
Year ended Dec. 31, 2014		68,067		22,104		-		2,505		-		-		-		92,676

		Utility						Consolidated
(In thousands) MGE		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment(d)		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2016	$	1,021,905	$	318,603	$	27,338	$	271,227	$	-	$	(221)	$	1,638,852
December 31, 2015(c)		974,235		298,435		49,753		277,808		69,470		(187)		1,669,514
December 31, 2014(c)		945,790		306,106		41,124		280,492		67,697		(6,521)		1,634,688
Capital Expenditures:
Year ended Dec. 31, 2016	$	50,699	$	29,136	$	-	$	3,824	$	-	$	-	$	83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		72,030
Year ended Dec. 31, 2014		68,067		22,104		-		2,505		-		-		92,676
(c) Reflects retrospective application of new accounting pronouncement related to debt issuance costs, see Footnote 19 for additional information.
(d) In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see Footnote 4 for additional information.

21.

Quarterly Summary of Operations - MGE Energy (unaudited).

(In thousands, except per share amounts)		Quarters Ended
2016		March 31		June 30		September 30		December 31
Operating revenues:
Electric revenues	$	93,690	$	100,615	$	119,147	$	96,750
Gas revenues		53,837		20,961		17,570		42,175
Total Operating Revenues		147,527		121,576		136,717		138,925
Operating expenses		117,996		93,364		90,190		114,967
Operating income		29,531		28,212		46,527		23,958
Interest and other income, net		(2,558)		(2,778)		(2,933)		(1,886)
Income tax provision		(9,945)		(9,284)		(15,714)		(7,570)
Earnings on common stock	$	17,028	$	16,150	$	27,880	$	14,502
Earnings per common share	$	0.49	$	0.47	$	0.80	$	0.42
Dividends per share	$	0.295	$	0.295	$	0.308	$	0.308
2015
Operating revenues:
Electric revenues	$	100,206	$	101,457	$	123,364	$	95,264
Gas revenues		69,928		20,669		17,431		35,709
Total Operating Revenues		170,134		122,126		140,795		130,973
Operating expenses		138,283		98,077		94,618		108,795
Operating income		31,851		24,049		46,177		22,178
Interest and other income, net		(2,986)		(2,562)		(2,472)		(3,529)
Income tax provision		(10,587)		(8,008)		(15,351)		(7,417)
Earnings on common stock	$	18,278	$	13,479	$	28,354	$	11,232
Earnings per common share	$	0.53	$	0.39	$	0.82	$	0.32
Dividends per share	$	0.283	$	0.283	$	0.295	$	0.295

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Notes:

·

The quarterly results of operations within a year may not be comparable because of seasonal and other factors.

·

The sum of earnings per share of common stock for any four quarters may vary slightly from the earnings per share of common stock for the equivalent twelve-month period due to rounding.

·

MGE Energy's operations are based primarily on its utility subsidiary MGE.

22.

Related Party Transactions - MGE Energy and MGE.

ATC

During 2016, 2015, and 2014, MGE recorded $29.1 million, $28.2 million, and $26.8 million, respectively, for transmission services received from ATC. MGE also provides a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. For the years ended December 31, 2016 and 2014, MGE had a receivable due from ATC of $0.1 million. For the year ended December 31, 2015, MGE had a receivable due from ATC of $0.2 million.

For additional discussion on MGE's relationship with ATC, see Footnote 4.

104

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

MGE Energy and MGE

None.

Item 9A. Controls and Procedures.

MGE Energy and MGE

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

During the fourth quarter of 2016, each registrant's management, including the principal executive officer and principal financial officer, evaluated its disclosure controls and procedures related to the recording, processing, summarization, and reporting of information in its periodic reports that it files with the SEC. These disclosure controls and procedures have been designed to ensure that material information relating to that registrant, including its subsidiaries, is accumulated and made known to that registrant's management, including its principal executive officer and its principal financial officer, by other employees of that registrant and its subsidiaries as appropriate to allow timely decisions regarding required disclosure, and that this information is recorded, processed, summarized, evaluated, and reported, as applicable, within the time periods specified in the SEC's rules and forms. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision making can be faulty and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Also, the registrants do not control or manage certain of their unconsolidated entities, and thus, their access and ability to apply their procedures to those entities is more limited than is the case for their consolidated subsidiaries.

As of December 31, 2016, the principal executive officer and principal financial officer of each registrant concluded that such registrant's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective to accomplish their objectives. Each registrant intends to strive continually to improve its disclosure controls and procedures to enhance the quality of its financial reporting.

During the quarter ended December 31, 2016, there were no changes in MGE Energy or MGE's internal controls over financial reporting that materially affected, or are reasonably likely to affect materially, MGE Energy or MGE's internal control over financial reporting.

MGE Energy and MGE

Management of MGE Energy and MGE are required to assess and report on the effectiveness of its internal control over financial reporting as of December 31, 2016. As a result of that assessment, management determined that there were no material weaknesses as of December 31, 2016 and, therefore, concluded that MGE Energy and MGE's internal control over financial reporting was effective. Management's Report on Internal Control Over Financial Reporting is included in Item 8. Financial Statements and Supplementary Data.

Item 9B. Other Information.

MGE Energy

None.

105

PART III.

Item 10. Directors, Executive Officers, and Corporate Governance.

MGE Energy

The information required by Item 10 relating to directors and nominees for election as directors at MGE Energy's annual meeting of shareholders is incorporated herein by reference to the information under the heading "ELECTION OF DIRECTORS" in MGE Energy's definitive proxy statement (2017 Proxy Statement) to be filed with the SEC on or before March 27, 2017. Information relating to compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the information under the heading "BENEFICIAL OWNERSHIP - Section 16(a) Beneficial Ownership Reporting Compliance" in the 2017 Proxy Statement.

The information required by Item 10 relating to executive officers is set forth above in Item 1. Business - Executive Officers of the Registrants.

Code of Ethics

MGE Energy has adopted a Code of Ethics applicable to its directors and all of its employees, including its chief executive officer, chief financial officer, and principal accounting officer. The Code of Ethics is available on MGE Energy's website at www.mgeenergy.com.

Item 11. Executive Compensation.

See Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

MGE Energy

The required information is included in the 2017 Proxy Statement, which will be filed with the SEC on or before March 27, 2017, for Item 11 under the section "EXECUTIVE COMPENSATION," not including "Compensation Committee Report," and "Cumulative Five-Year Total Return Comparison Graph," and for Item 12 under the section "BENEFICIAL OWNERSHIP," which is incorporated herein by reference.

MGE Energy does not have or maintain any compensation plans pursuant to which equity is issued.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

MGE Energy

The information required by Item 13 is incorporated by reference herein from the "BOARD OF DIRECTORS INFORMATION" section in the 2017 Proxy Statement, which will be filed with the SEC on or before March 27, 2017.

Item 14. Principal Accounting Fees and Services.

MGE Energy

The information required by Item 14 is incorporated herein by reference to the information under the heading "RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" in the 2017 Proxy Statement, which will be filed with the SEC on or before March 27, 2017.

106

MGE

Independent Registered Public Accounting Firm Fees Disclosure

		2016		2015
Audit fees(a)	$	823,495	$	822,605
Audit-related fees(b)		75,000		75,000
Tax fees(c)		83,027		137,965
All other fees(d)		236,509		7,900

(a)

Professional services rendered for the audits of the financial statements, review of the interim financial statements, opinion on the effectiveness of our internal control over financial reporting for MGE Energy, and services that generally only the independent auditor can reasonably provide, such as comfort letters, statutory audits, consents and assistance with and review of documents filed with the SEC.

(b)

Professional services rendered in connection with utility commission-mandated obligations.

(c)

Review of federal and state income tax returns and tax planning.

(d)

Other fees for 2016 include customer information system advisory services and a cyber-security risk assessment.

MGE is a wholly owned subsidiary of MGE Energy and does not have a separate audit committee. Instead, that function is fulfilled for MGE by the MGE Energy Audit Committee. The Audit Committee approves each engagement of the independent registered public accounting firm to render any audit or nonaudit services before the firm is engaged to render those services. The Chair of the Audit Committee or other designated Audit Committee member may represent the entire Audit Committee for purposes of this approval. Any services approved by the Chair or other designated Audit Committee members are reported to the full Audit Committee at the next scheduled Audit Committee meeting. No de minimis exceptions to this approval process are allowed under the Audit Committee Charter; and thus, none of the services described in the preceding table were approved pursuant to Rule 2-01(c)(7)(i)(C) of Regulation S-X.

107

PART IV.

Item 15. Exhibits and Financial Statement Schedules.

(a) 1. Financial Statements.

MGE Energy
Consolidated Statements of Income for the years ended December 31, 2016, 2015, and 2014	54
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014	54
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014	55
Consolidated Balance Sheets as of December 31, 2016 and 2015	56
Consolidated Statements of Common Equity as of December 31, 2016, 2015, and 2014	57
Notes to Consolidated Financial Statements	62
MGE
Consolidated Statements of Income for the years ended December 31, 2016, 2015, and 2014	58
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015, and 2014	58
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014	59
Consolidated Balance Sheets as of December 31, 2016 and 2015	60
Consolidated Statements of Common Equity as of December 31, 2016, 2015, and 2014	61
Notes to Consolidated Financial Statements	62

2.

Financial Statement Schedule.

Schedule I – Condensed Parent Company Financial Statements.

Schedule II – Valuation and Qualifying Accounts for MGE Energy, Inc. and Madison Gas and Electric Company.

All other schedules have been omitted because they are not applicable or not required, or because the required information is shown in the consolidated financial statements or notes thereto.

3.

All Exhibits Including Those Incorporated by Reference.

Exhibits. Several of the following exhibits are incorporated herein by reference under Rule 12b-32 of the Securities Exchange Act of 1934, as amended, as indicated by the parenthetical reference. Several other instruments, which would otherwise be required to be listed below, have not been so listed because those instruments do not authorize securities in an amount that exceeds 10% of the total assets of the applicable registrant and its subsidiaries on a consolidated basis. The relevant registrant agrees to furnish a copy of any instrument that was so omitted on that basis to the Commission upon request.

3.1

Amended and Restated Articles of Incorporation of MGE Energy, Inc. (Exhibit 4.1 to MGE Energy's Registration Statement on Form S-3, Registration No. 333-197423.)

3.2

Amended and Restated Bylaws of MGE Energy, Inc. (Exhibit 3.2 to MGE Energy's Registration Statement on Form S-4, Registration No. 333-72694.)

3.3

Restated Articles of Incorporation of Madison Gas and Electric Company as in effect at October 25, 2012. (Exhibit 3.1 to Form 8-K dated October 25, 2012, File No. 0-1125.)

3.4

Amended Bylaws of Madison Gas and Electric Company as in effect at August 16, 2002. (Exhibit 3.4 to Form 10-K for year ended December 31, 2002, File No. 0-1125.)

4.1

Indenture of Mortgage and Deed of Trust between Madison Gas and Electric Company and U.S. Bank, N.A. (successor to First Wisconsin Trust Company), as Trustee, dated as of January 1, 1946. (Exhibit 7-D to Registration Statement, Registration No. 2-6059.)

108

4.2

Supplemental Indenture dated as of February 1, 1993 to aforementioned Indenture of Mortgage and Deed of Trust. (Exhibit 4F to Form 10-K for year ended December 31, 1992, File No. 0-1125.)

4.3

Indenture between Madison Gas and Electric Company and The Bank of New York Mellon Trust Company, N.A. (as successor to Bank One, N.A.), as Trustee, dated as of September 1, 1998. (Exhibit 4B to Form 10-K for year ended December 31, 1999, File No. 0-1125.)

10.1

Credit Agreement dated as of June 1, 2015, among MGE Energy, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. (Exhibit 10.1 to Form 8-K dated June 3, 2015, File No. 0-49965)

10.2

Credit Agreement dated as of June 1, 2015, among Madison Gas and Electric Company, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. (Exhibit 10.2 to Form 8-K dated June 3, 2015, File No. 0-1125.)

10.3

Credit Agreement dated as of June 1, 2015, among Madison Gas and Electric Company, the Lenders party thereto and U.S. Bank National Association, as Administrative Agent. (Exhibit 10.3 to Form 8-K dated June 3, 2015, File No. 0-1125.)

10.4

Copy of Joint Power Supply Agreement with Wisconsin Power and Light Company and Wisconsin Public Service Corporation dated February 2, 1967. (Exhibit 4.09 to Registration Statement, Registration No. 2-27308.)

10.5

Copy of Joint Power Supply Agreement (Exclusive of Exhibits) with Wisconsin Power and Light Company and Wisconsin Public Service Corporation dated July 26, 1973. (Exhibit 5.04A to Registration Statement, Registration No. 2-48781.)

10.6

Copy of Amended and Restated Agreement for Construction and Operation of Columbia Generating Plant dated January 17, 2007. (Exhibit 10.9 to Form 10-K for the year ended December 31, 2006, File No. 0-1125.)

10.7

West Campus Cogeneration Facility Joint Ownership Agreement, dated as of October 13, 2003, among MGE Power West Campus, LLC, The Board of Regents of the University of Wisconsin System, and the State of Wisconsin, as Joint Owners. (Exhibit 10.19 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.8

West Campus Cogeneration Facility Operation and Maintenance Agreement, dated as of October 13, 2003, among Madison Gas and Electric Company, as Operator, and the Board of Regents of the University of Wisconsin System, as Joint Owner. (Exhibit 10.20 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.9

West Campus Cogeneration Facility Lease Agreement, dated as of March 18, 2004, among MGE Power West Campus, LLC, as Lessor, and Madison Gas and Electric Company, as Lessee. (Exhibit 10.21 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.10

West Campus Cogeneration Facility Ground Lease, dated as of July 15, 2002, among MGE Power LLC, as Lessee, and the Board of Regents of the University of Wisconsin System, as Lessor. (Exhibit 10.22 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.11

West Campus Cogeneration Facility Amendment of Ground Lease, dated as of March 18, 2004, among MGE Power West Campus, LLC, as Lessee, and the Board of Regents of the University of Wisconsin System, as Lessor. (Exhibit 10.23 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.12

West Campus Cogeneration Facility MGE Ground Sublease, dated as of March 18, 2004, among MGE Power West Campus, LLC, as Lessee, and Madison Gas and Electric Company, as Lessor. (Exhibit 10.24 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

109

10.13

Elm Road Generating Station Common Facilities Operating and Maintenance Agreement, dated as of December 17, 2004, among Madison Gas and Electric Company, Wisconsin Electric Power Company, and Wisconsin Public Power Inc., as Lessee/Owner Parties, and Wisconsin Electric Power Company, as Operating Agent. (Exhibit 10.7 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.14

Elm Road Generating Station New Common Facilities Ownership Agreement, dated as of December 17, 2004, among MGE Power Elm Road, LLC, Elm Road Generating Station Supercritical, LLC, and Wisconsin Public Power Inc., as Joint Owners. (Exhibit 10.8 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.15

Elm Road Generating Station I Ownership Agreement, dated as of December 17, 2004, among MGE Power Elm Road, LLC, Elm Road Generating Station Supercritical, LLC, and Wisconsin Public Power Inc., as Joint Owners, Elm Road Services, LLC, as Project Manager, and W.E. Power LLC. (Exhibit 10.9 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.16

Elm Road Generating Station I Facility Lease Agreement, dated as of November 4, 2005, among MGE Power Elm Road, LLC, as Lessor, and Madison Gas and Electric Company, as Lessee. (Exhibit 10.10 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.17

Elm Road Generating Station I Operating and Maintenance Agreement, dated as of December 17, 2004, among Madison Gas and Electric Company, Wisconsin Electric Power Company, and Wisconsin Public Power Inc., as Lessee/ Owners, and Wisconsin Electric Power Company, as Operating Agent. (Exhibit 10.11 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.18

Elm Road Generating Station I Easement and Indemnification Agreement, dated as of December 17, 2004, among MGE Power Elm Road, LLC and Wisconsin Public Power Inc., as Grantees, and Wisconsin Electric Power Company, as Grantor. (Exhibit 10.12 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.19

Assignment and Assumption Agreement, dated as of November 4, 2005 between MGE Power Elm Road, LLC and Madison Gas and Electric Company relating to Elm Road Generating Station I Easement and Indemnification Agreement, dated as of December 17, 2004, among MGE Power Elm Road, LLC and Wisconsin Public Power Inc., as Grantees, and Wisconsin Electric Power Company, as Grantor. (Exhibit 10.16 to Form 10-K for the year ended December 31, 2005, File No. 0-1125.)

10.20

Elm Road Generating Station II Ownership Agreement, dated as of December 17, 2004, among MGE Power Elm Road, LLC, Elm Road Generating Station Supercritical, LLC, and Wisconsin Public Power Inc., as Joint Owners, Elm Road Services, LLC, as Project Manager, and W.E. Power LLC. (Exhibit 10.13 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.21

Elm Road Generating Station II Facility Lease Agreement, dated as of November 4, 2005, among MGE Power Elm Road, LLC, as Lessor, and Madison Gas and Electric Company, as Lessee. (Exhibit 10.14 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.22

Elm Road Generating Station II Operating and Maintenance Agreement, dated as of December 17, 2004, among Madison Gas and Electric Company, Wisconsin Electric Power Company, and Wisconsin Public Power Inc., as Lessee/ Owners, and Wisconsin Electric Power Company, as Operating Agent. (Exhibit 10.15 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

10.23

Elm Road Generating Station II Easement and Indemnification Agreement, dated as of December 17, 2004, among MGE Power Elm Road, LLC and Wisconsin Public Power Inc., as Grantees, and Wisconsin Electric Power Company, as Grantor. (Exhibit 10.16 to Form 10-Q for the quarter ended September 30, 2005, File No. 0-1125.)

110

10.24

Substation and Transformer Shared Use Agreement and Easement Agreement, dated as of September 29, 2006, among Madison Gas and Electric Company and Northern Iowa Windpower II LLC as Joint Owners. (Exhibit 10.6 to Form 10-Q for the quarter ended September 30, 2006, File No. 0-1125.)

10.25

Management and Administration Agreement, dated as of October 13, 2006, among Madison Gas and Electric Company as Owner and Midwest Renewable Energy Resources, LLC as Manager. (Exhibit 10.7 to Form 10-Q for the quarter ended September 30, 2006, File No. 0-1125.)

10.26*

Form of Severance Agreement. (Exhibit 10.37 to Form 10-K for the year ended December 31, 2008, File No. 0-49965.)

10.27*

Form of Amendment to Severance Agreement. (Exhibit 10.01 to Form 10-Q for the quarter ended March 31, 2016, File No. 0-49965.)

10.28*

Form of Severance Agreement for Officers hired on or after January 1, 2012. (Exhibit 10.2 to Form 10-Q for the quarter ended March 31, 2016, File No. 0-49965.)

10.29*

Form of Deferred Compensation Agreement. (Exhibit 10.38 to Form 10-K for the year ended December 31, 2008, File No. 0-49965.)

10.30*

Form of Amended and Restated Deferred Compensation Agreement. (Exhibit 10.39 to Form 10-K for the year ended December 31, 2008, File No. 0-49965.)

10.31*

Form of Income Continuation Agreement as revised January 1, 2016. (Exhibit 10.3 to Form 10-Q for the quarter ended March 31, 2016, File No. 0-49965.)

10.32*

Defined Contribution Supplemental Executive Retirement Plan

10.33*

Form of Participation Agreement for the Defined Contribution Supplemental Executive Retirement Plan

10.34*

MGE Energy, Inc., 2006 Performance Unit Plan. (Exhibit 10.41 to Form 10-K for the year ended December 31, 2008, File No. 0-49965.)

10.35*

Amendment Number One to MGE Energy, Inc., 2006 Performance Unit Plan, dated March 18, 2011. (Exhibit 10.2 to Form 8-K dated March 24, 2011, File No. 0-49965.)

10.36*

Amendment Number Two to MGE Energy, Inc., 2006 Performance Unit Plan, dated February 25, 2015. (Exhibit 10.1 to Form 8-K dated December 15, 2015, File No. 0-49965.)

10.37*

Form of Performance Unit Award Agreement. (Exhibit 10.42 to Form 10-K for the year ended December 31, 2008, File No. 0-49965.)

10.38*

Form of Amendment to Performance Unit Award Agreement. (Exhibit 10.1 to Form 8-K dated April 15, 2011, File No. 0-49965.)

10.39*

MGE Energy, Inc., 2013 Director Incentive Plan. (Exhibit 10.37 to Form 10-K for the year ended December 31, 2013, File No. 0-49965.)

10.40*

Form of 2013 Director Incentive Plan Award Agreement. (Exhibit 10.38 to Form 10-K for the year ended December 31, 2013, File No. 0-49965.)

12

Statements regarding computation of ratio of earnings to fixed charges:

12.1

MGE Energy, Inc.

12.2

Madison Gas and Electric Company

21

Subsidiaries of MGE Energy, Inc.

111

23

Consent of Independent Registered Public Accounting Firm

23.1

MGE Energy, Inc.

23.2

Madison Gas and Electric Company

31

Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 as to the Annual Report on Form 10-K for the year ended December 31, 2016, filed by the following officers for the following companies:

31.1

Filed by Gary J. Wolter for MGE Energy, Inc.

31.2

Filed by Jeffrey C. Newman for MGE Energy, Inc.

31.3

Filed by Gary J. Wolter for Madison Gas and Electric Company

31.4

Filed by Jeffrey C. Newman for Madison Gas and Electric Company

32

Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) as to the Annual Report on Form 10-K for the year ended December 31, 2016, filed by the following officers for the following companies:

32.1

Filed by Gary J. Wolter for MGE Energy, Inc.

32.2

Filed by Jeffrey C. Newman for MGE Energy, Inc.

32.3

Filed by Gary J. Wolter for Madison Gas and Electric Company

32.4

Filed by Jeffrey C. Newman for Madison Gas and Electric Company

101

Interactive Data Files:

101.INS

XBRL Instance

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation

101.DEF

XBRL Taxonomy Extension Definition

101.LAB

XBRL Taxonomy Extension Labels

101.PRE

XBRL Taxonomy Extension Presentation

*

Indicates a management contract or compensatory plan or arrangement.

Item 16. Form 10-K Summary.

MGE Energy and MGE

None.

112

Schedule I
Condensed Parent Company Financial Statements
MGE Energy, Inc.
Statements of Comprehensive Income
(Parent Company Only)
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Operating Expenses:
Other operations and maintenance	$	720	$	690	$	689
Total Operating Expenses		720		690		689
Operating Loss		(720)		(690)		(689)
Equity in earnings of investments		75,581		71,306		81,811
Other income (loss), net		435		526		(1,879)
Other interest		176		136		93
Income before income taxes		75,472		71,278		79,336
Income tax provision		88		65		983
Net Income		75,560		71,343		80,319
Other Comprehensive Income, Net of Tax:
Unrealized (loss) gain on available-for-sale securities, net of
tax ($104, $67, and ($54))		(155)		(101)		81
Comprehensive Income	$	75,405	$	71,242	$	80,400
The accompanying notes are an integral part of the above consolidated financial statements.

MGE Energy, Inc.
Statements of Cash Flows
(Parent Company Only)
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Net Cash Flows Provided by Operating Activities	$	74,994	$	37,085	$	48,165
Investing Activities:
Other investing		(2,764)		(3,690)		(2,422)
Cash Used for Investing Activities		(2,764)		(3,690)		(2,422)
Financing Activities:
Cash dividends paid on common stock		(41,775)		(40,043)		(38,429)
Other financing		(11)		-		(89)
Cash Used for Financing Activities		(41,786)		(40,043)		(38,518)
Change in cash and cash equivalents:		30,444		(6,648)		7,225
Cash and cash equivalents at beginning of period		51,781		58,429		51,204
Cash and cash equivalents at end of period	$	82,225	$	51,781	$	58,429
The accompanying notes are an integral part of the above consolidated financial statements.

113

Schedule I
Condensed Parent Company Financial Statements (continued)
MGE Energy, Inc.
Balance Sheets
(Parent Company Only)
(In thousands)
		At December 31,
ASSETS		2016		2015
Current Assets:
Cash and cash equivalents	$	82,225	$	51,781
Accounts receivable, net:
Accounts receivable from affiliates		83		20
Other current assets		1,221		1,386
Total Current Assets		83,529		53,187
Other deferred assets and other		201		249
Investments:
Investments in affiliates		684,968		649,276
Other investments		1,161		1,447
Total Investments		686,129		650,723
Total Assets	$	769,859	$	704,159
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable to affiliates	$	530	$	530
Accrued taxes		218		263
Other current liabilities		115		144
Total Current Liabilities		863		937
Other Credits:
Deferred income taxes		40,672		7,998
Accounts payable to affiliates		4,236		4,766
Total Other Credits		44,908		12,764
Shareholders' Equity:
Common shareholders' equity		350,936		350,936
Retained income		372,950		339,165
Other comprehensive income		202		357
Total Shareholders' Equity		724,088		690,458
Commitments and contingencies (see Footnote 3)		-		-
Total Liabilities and Shareholders' Equity	$	769,859	$	704,159
The accompanying notes are an integral part of the above consolidated financial statements.

114

Schedule I

Condensed Parent Company Financial Statements (continued)

Notes to Condensed Financial Statements

(Parent Company Only)

1.

Basis of Presentation.

MGE Energy is a holding company and conducts substantially all of its business operations through its subsidiaries. For Parent Company only presentation, investment in subsidiaries are accounted for using the equity method. These condensed Parent Company financial statements and related notes have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X. These statements should be read in conjunction with the financial statements and the notes in Item 8. Financial Statements and Supplementary Data of the Annual Report on Form 10-K for the year ended December 31, 2016.

2.

Credit Agreements.

As of December 31, 2016, MGE Energy had access to an unsecured, committed credit facility with aggregate bank commitments of $50.0 million. At December 31, 2016, no borrowings were outstanding under this facility.

See Footnote 10 of the Notes to Consolidated Financial Statements for further information regarding MGE Energy's credit agreements.

3.

Commitments and Contingencies.

See Footnote 17 of the Notes to Consolidated Financial Statements for commitments and contingencies.

4.

Dividends from Affiliates.

		Dividends from Affiliates
(In thousands)		2016		2015		2014
MGE(a)	$	50,000	$	30,000	$	26,500
MGE Power Elm Road		13,500		10,000		13,500
MGE Power West Campus		9,500		3,000		6,000
MGE Transco		1,107		1,708		1,859
Total	$	74,107	$	44,708	$	47,859

(a)

Excludes $15.8 million dividend in kind to MGE Energy from MGE.

Dividend Restrictions

Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends, above the PSCW authorized amount of $43 million, that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. MGE's thirteen month rolling average common equity ratio at December 31, 2016, is 60.2% as determined under the calculation used in the rate proceeding. MGE was not restricted from paying cash dividends in 2016. Cash dividends of $50.0 million and $30.0 million were paid by MGE to MGE Energy in 2016 and 2015, respectively. In 2016, MGE also transferred its ownership interest in MGE Transco to MGE Energy in the form of a dividend in kind of $15.8 million. The rate proceeding calculation includes as indebtedness imputed amounts for MGE's outstanding purchase power capacity payments and other PSCW adjustments, but does not include the indebtedness associated with MGE Power Elm Road or MGE Power West Campus, which are consolidated into MGE's financial statements but are not direct obligations of MGE.

MGE has covenanted with the holders of its first mortgage bonds not to declare or pay any dividend or make any other distribution on or purchase any shares of its common stock unless, after giving effect thereto, the aggregate amount of all such dividends and distributions and all amounts applied to such purchases, after December 31, 1945, shall not exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2016, approximately $338.5 million was available for the payment of dividends under this covenant.

See Footnotes 9 and 10 of the Notes to Consolidated Financial Statements for long-term debt and lines of credit dividend restrictions.

115

Schedule II
MGE Energy, Inc. and Madison Gas and Electric Company
Valuation and Qualifying Accounts
			Additions
		Balance at Beginning of Period	Charged to Costs and Expenses	Charged to Other Accounts	Net Accounts Written Off(a)		Balance at End of Period
Fiscal Year 2014:
Accumulated provision for uncollectibles	$	4,969,711	1,898,300	15,092	(2,134,446)	$	4,748,657
Fiscal Year 2015:
Accumulated provision for uncollectibles	$	4,748,657	595,500	25,500	(1,675,577)	$	3,694,080
Fiscal Year 2016:
Accumulated provision for uncollectibles	$	3,694,080	1,195,500	19,500	(1,465,784)	$	3,443,296
(a) Net of recovery of amounts previously written off.

116

Signatures - MGE Energy, Inc.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	MGE Energy, Inc.
	(Registrant)
Date: February 24, 2017	/s/ Gary J. Wolter
	Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 24, 2017.

/s/ Gary J. Wolter	Gary J. Wolter Chairman, President and Chief Executive Officer and Director (Principal Executive Officer)
/s/ Jeffrey C. Newman	Jeffrey C. Newman Senior Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Mark D. Bugher	Mark D. Bugher, Director
/s/ Londa J. Dewey	Londa J. Dewey, Director
/s/ F. Curtis Hastings	F. Curtis Hastings, Director
/s/ Regina M. Millner	Regina M. Millner, Director
/s/ John R. Nevin	John R. Nevin, Director
/s/ James L. Possin	James L. Possin, Director
/s/ Thomas R. Stolper	Thomas R. Stolper, Director

117

Signatures - Madison Gas and Electric Company

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

	Madison Gas and Electric Company
	(Registrant)
Date: February 24, 2017	/s/ Gary J. Wolter
	Chairman, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 24, 2017.

/s/ Gary J. Wolter	Gary J. Wolter Chairman, President and Chief Executive Officer and Director (Principal Executive Officer)
/s/ Jeffrey C. Newman	Jeffrey C. Newman Senior Vice President, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Mark D. Bugher	Mark D. Bugher, Director
/s/ Londa J. Dewey	Londa J. Dewey, Director
/s/ F. Curtis Hastings	F. Curtis Hastings, Director
/s/ Regina M. Millner	Regina M. Millner, Director
/s/ John R. Nevin	John R. Nevin, Director
/s/ James L. Possin	James L. Possin, Director
/s/ Thomas R. Stolper	Thomas R. Stolper, Director

118

EX-10

Exhibit 10.32

EX-10

EXHIBIT 10.33

MADISON GAS AND ELECTRIC COMPANY

DEFINED CONTRIBUTION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

PARTICIPATION AGREEMENT

Name of Participant: ____________________________________________________

Effective Date of Participation: _____________, 20___

The Company has designated the undersigned employee as a Participant in the above Plan. In consideration of his or her designation as a Participant, the undersigned employee hereby agrees and acknowledges as follows:

1.

That he or she has received a copy of the Plan, as currently in effect;

2.

That he or she agrees to be bound by all of the terms and conditions of the Plan, and to perform any and all acts required from him or her thereunder;

3.

That he or she has the right to designate the Beneficiary or Beneficiaries, and thereafter to change the Beneficiary or Beneficiaries, of any death benefit payable under the Plan, by completing and delivering to the Company a Beneficiary Designation in the form specified by the Plan Administrator.

4.

That the attached Appendix A includes all variable provisions applicable under the Plan.  

IN WITNESS WHEREOF, this Participation Agreement has been duly executed as of the Participation Date.

MADISON GAS AND ELECTRIC COMPANY

_____________________________

By:

Its:

I hereby accept becoming a Participant in the Plan as described in this Participation Agreement, and I agree to be bound by the terms of the Plan and this Participation Agreement.   I hereby agree that all of the decisions and determinations of the Company with respect to the Plan shall be final and binding.

PARTICIPANT:

_____________________________

[NAME]

APPENDIX A - ______________________________

[NAME]

Compensation

$[ ]

Compensation Scale

[ ]%

Normal Retirement Age

[ ]

Form of Payment

[ ]

Payment Annuity Factor

[ ]

Interest (Credited Annually on Determination

Date):

[ ]%

Contribution Percentage:

Years of Participation	Contribution Percentage
Years [] through []	[]%
Years [] through []	[]%
Years [] and Beyond	[]%

EX-12

EXHIBIT 12.1

MGE Energy, Inc.

Ratio of Earnings to Fixed Charges

Twelve Months Ended December 31, 2016

(In thousands)

Earnings
Net income	$75,560
Equity earnings	(8,394)
Income distribution from equity investees	7,926
Federal and state income taxes	42,513
Amortization of capitalized interest	527
Fixed charges	20,920
Total Earnings as Defined	$139,052
Fixed Charges
Interest expense on long-term debt and other	$18,963
Interest on rentals*	667
AFUDC - borrowed funds	387
Amortization of debt issuance costs	903
Total Fixed Charges	$20,920
Ratio of Earnings to Fixed Charges	6.65X

*Management believes that using one-third of the total rental expense

gives a reasonable approximation for actual interest on rentals.

EX-12

EXHIBIT 12.2

Madison Gas and Electric Company

Ratio of Earnings to Fixed Charges

Twelve Months Ended December 31, 2016

(In thousands)

Earnings
Net income before minority interest	$74,592
Equity earnings	(6,366)
Income distribution from equity investees	5,032
Minority interest in pretax income	(2,355)
Amortization of capitalized interest	527
Federal and state income taxes	41,791
Fixed charges	21,200
Total Earnings as Defined	$134,421
Fixed Charges
Interest expense on long-term debt and other	$19,235
Interest on rentals*	667
Amortization of debt issuance costs	903
AFUDC - borrowed funds	395
Total Fixed Charges	$21,200
Ratio of Earnings to Fixed Charges	6.34X

*Management believes that using one-third of the total rental expense

gives a reasonable approximation for actual interest on rentals.

EX-21

EXHIBIT 21

Subsidiaries of MGE Energy, Inc.

As of December 31, 2016, the company held the following subsidiaries (all of which are formed or organized as Wisconsin entities):

•

Madison Gas and Electric Company – a regulated utility that generates and distributes electricity to approximately 149,000 customers in Dane County, Wisconsin, and purchases and distributes natural gas to approximately 154,000 customers in seven Wisconsin counties.

•

MGE Power LLC – owns MGE Power West Campus, LLC and MGE Power Elm Road, LLC.

•

MGE Power West Campus, LLC – owns a controlling interest in the electric generating assets related to the West Campus Cogeneration Facility. MGE Power West Campus has leased its share of these assets to Madison Gas and Electric Company through a long-term lease agreement.

•

MGE Power Elm Road, LLC – owns an 8.33% undivided ownership interest in two coal-fired generating units in Oak Creek, Wisconsin. MGE Power Elm Road has leased its share of the generating units to Madison Gas and Electric Company through separate long-term lease agreements.

•

MGE Transco Investment LLC – owns a minority equity interest in American Transmission Company LLC, which owns and operates electric transmission facilities in Wisconsin.

•

MGEE Transco LLC – owns a minority equity interest in ATC Holdco LLC, which will facilitate electric transmission development and investments outside of Wisconsin.

•

Central Wisconsin Development Corporation – assists new and expanding businesses throughout central Wisconsin by participating in planning, financing, property acquisition, joint ventures and associated activities.

•

MAGAEL, LLC – holds title to property for future utility plant expansion and nonutility property.

•

MGE Services, LLC – owns NGV Fueling Services, LLC, and provides construction and other services.

•

NGV Fueling Services, LLC – owns and maintains natural gas compression equipment to facilitate the use of compressed natural gas in natural gas vehicles.

•

North Mendota Energy & Technology Park, LLC – owns and serves as the development entity for property.

•

MGE State Energy Services, LLC – holds a 50% interest in State Energy Services, LLC, in which a subsidiary of Wisconsin Energy Corporation holds the remaining 50% interest. State Energy Services, LLC was formed for the purpose of bidding on certain energy production assets and facilities currently owned by the State of Wisconsin, should the State decide to sell those facilities.

EX-23

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-197423) of MGE Energy, Inc. of our report dated February 24, 2017 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 24, 2017

EX-23

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-197423-01) of Madison Gas and Electric Company of our report dated February 24, 2017 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois

February 24, 2017

EX-31

EXHIBIT 31.1

Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

I, Gary J. Wolter, certify that:

1.

I have reviewed this annual report on Form 10-K of MGE Energy, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Gary J. Wolter

Gary J. Wolter

Chairman, President and Chief Executive Officer

Date: February 24, 2017

EX-31

EXHIBIT 31.2

Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

I, Jeffrey C. Newman, certify that:

1.

I have reviewed this annual report on Form 10-K of MGE Energy, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Jeffrey C. Newman

Jeffrey C. Newman

Senior Vice President, Chief Financial Officer,

Secretary and Treasurer

Date: February 24, 2017

EX-31

EXHIBIT 31.3

Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

I, Gary J. Wolter, certify that:

1.

I have reviewed this annual report on Form 10-K of Madison Gas and Electric Company;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Gary J. Wolter

Gary J. Wolter

Chairman, President and Chief Executive Officer

Date: February 24, 2017

EX-31

EXHIBIT 31.4

Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934

I, Jeffrey C. Newman, certify that:

1.

I have reviewed this annual report on Form 10-K of Madison Gas and Electric Company;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Jeffrey C. Newman

Jeffrey C. Newman

Senior Vice President, Chief Financial Officer,

Secretary and Treasurer

Date: February 24, 2017

EX-32

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report on Form 10-K of MGE Energy, Inc. (the "Company"), for the period ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), I, Gary J. Wolter, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gary J. Wolter

Gary J. Wolter

Chairman, President and Chief Executive Officer

Date: February 24, 2017

EX-32

EXHIBIT 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report on Form 10-K of MGE Energy, Inc. (the "Company"), for the period ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), I, Jeffrey C. Newman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey C. Newman

Jeffrey C. Newman

Senior Vice President, Chief Financial Officer,

Secretary and Treasurer

Date: February 24, 2017

EX-32

EXHIBIT 32.3

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report on Form 10-K of Madison Gas and Electric Company (the "Company"), for the period ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), I, Gary J. Wolter, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gary J. Wolter

Gary J. Wolter

Chairman, President and Chief Executive Officer

Date: February 24, 2017

EX-32

EXHIBIT 32.4

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report on Form 10-K of Madison Gas and Electric Company (the "Company"), for the period ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), I, Jeffrey C. Newman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey C. Newman

Jeffrey C. Newman

Senior Vice President, Chief Financial Officer,

Secretary and Treasurer

Date: February 24, 2017

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Feb. 01, 2017	Jun. 30, 2016
Document and Entity Information [Line Items]
Entity Registrant Name	MGE Energy Inc
Entity Central Index Key	0001161728
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Trading Symbol	MGEE
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1,954,670,687
Entity Common Stock Shares Outstanding		34,668,370
MGE [Member]
Document and Entity Information [Line Items]
Entity Registrant Name	Madison Gas and Electric Company
Entity Central Index Key	0000061339
Entity Well known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock Shares Outstanding		17,347,894

XML

MGE Energy Inc Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Revenues:
Electric revenues	$ 410,202	$ 420,291	$ 398,132
Gas revenues	134,543	143,737	221,720
Total Operating Revenues	544,745	564,028	619,852
Operating Expenses:
Fuel for electric generation	60,736	53,858	42,828
Purchased power	56,313	81,224	73,232
Cost of gas sold	66,771	76,109	143,644
Other operations and maintenance	167,989	164,478	161,703
Depreciation and amortization	44,646	44,225	40,695
Other general taxes	20,062	19,879	19,652
Total Operating Expenses	416,517	439,773	481,754
Operating Income (Loss)	128,228	124,255	138,098
Other income, net	9,711	8,613	10,079
Interest expense, net	(19,866)	(20,162)	(19,673)
Income before income taxes	118,073	112,706	128,504
Income tax provision	(42,513)	(41,363)	(48,185)
Net Income	$ 75,560	$ 71,343	$ 80,319
Earnings Per Share of Common Stock (basic and diluted)	$ 2.18	$ 2.06	$ 2.32
Dividends per share of common stock	$ 1.21	$ 1.16	$ 1.11
Weighted Average Shares Outstanding (basic and diluted)	34,668	34,668	34,668

XML

Madison Gas and Electric Company Consolidated Statements of Income - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Revenues:
Electric revenues		$ 410,202	$ 420,291	$ 398,132
Gas revenues		134,543	143,737	221,720
Total Operating Revenues		544,745	564,028	619,852
Operating Expenses:
Fuel for electric generation		60,736	53,858	42,828
Purchased power		56,313	81,224	73,232
Cost of gas sold		66,771	76,109	143,644
Other operations and maintenance		167,989	164,478	161,703
Depreciation and amortization		44,646	44,225	40,695
Other general taxes		20,062	19,879	19,652
Total Operating Expenses		416,517	439,773	481,754
Operating Income (Loss)		128,228	124,255	138,098
Other Income and Deductions:
Equity earnings in MGE Transco		8,428	7,728	9,150
Total Other Income and Deductions		9,711	8,613	10,079
Interest Expense:
Net Interest Expense		19,866	20,162	19,673
Net Income		75,560	71,343	80,319
MGE [Member]
Operating Revenues:
Electric revenues		410,226	420,313	398,154
Gas revenues		134,572	143,752	221,741
Total Operating Revenues		544,798	564,065	619,895
Operating Expenses:
Fuel for electric generation		60,745	53,866	42,836
Purchased power		56,327	81,237	73,245
Cost of gas sold		66,800	76,124	143,665
Other operations and maintenance		167,077	163,622	160,831
Depreciation and amortization		44,622	44,178	40,648
Other general taxes		20,062	19,879	19,652
Income tax provision		39,616	38,159	45,090
Total Operating Expenses		455,249	477,065	525,967
Operating Income (Loss)	[1]	89,549	87,000	93,928
Other Income and Deductions:
AFUDC - equity funds		1,207	712	3,466
Equity earnings in MGE Transco		6,366	7,728	9,150
Income tax provision		(2,175)	(3,247)	(4,055)
Other deductions, net		(217)	(345)	(704)
Total Other Income and Deductions	[1]	5,181	4,848	7,857
Income before interest expense		94,730	91,848	101,785
Interest Expense:
Interest on long-term debt		20,351	20,520	20,927
Other interest, net		182	94	62
AFUDC - borrowed funds		(395)	(231)	(1,142)
Net Interest Expense		20,138	20,383	19,847
Net Income Including Noncontrolling Interest		74,592	71,465	81,938
Less Net Income Attributable to Noncontrolling Interest, net of tax		(23,358)	(26,097)	(26,310)
Net Income		$ 51,234	$ 45,368	$ 55,628

[1] Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statements of Income.

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MGE Energy Inc Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement of Other Comprehensive Income [Abstract]
Net Income	$ 14,502	$ 27,880	$ 16,150	$ 17,028	$ 11,232	$ 28,354	$ 13,479	$ 18,278	$ 75,560	$ 71,343	$ 80,319
Other comprehensive income, net of tax:
Unrealized (loss) gain on available for sale securities, net of tax									(155)	(101)	81
Comprehensive Income									$ 75,405	$ 71,242	$ 80,400

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Madison Gas and Electric Company Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other comprehensive income, net of tax:
Unrealized (loss) gain on available for sale securities, net of tax	$ (155)	$ (101)	$ 81
Comprehensive Income	75,405	71,242	80,400
MGE [Member]
Net Income	74,592	71,465	81,938
Other comprehensive income, net of tax:
Unrealized (loss) gain on available for sale securities, net of tax	(4)	(121)	(48)
Comprehensive Income Including Noncontrolling Interest	74,588	71,344	81,890
Less: Comprehensive Income Attributable to Noncontrolling Interest, net of tax	(23,358)	(26,097)	(26,310)
Comprehensive Income	$ 51,230	$ 45,247	$ 55,580

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Consolidated Statements of Comprehensive Income (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unrealized (loss) gain on available-for-sale securities, taxes	$ (104)	$ (67)	$ 54
MGE [Member]
Unrealized (loss) gain on available-for-sale securities, taxes	$ (2)	$ (81)	$ (33)

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MGE Energy Inc Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Activities:
Net Income	$ 75,560	$ 71,343	$ 80,319
Items not affecting cash:
Depreciation and amortization	44,646	44,225	40,695
Deferred income taxes	22,421	21,927	49,884
Provision for doubtful receivables	1,196	596	1,898
Employee benefit plan expenses	295	3,333	(1,080)
Equity earnings in ATC	(8,428)	(7,728)	(9,150)
Other items	1,426	721	729
Changes in working capital items:
Trade and other receivables (change)	(5,666)	4,508	2,115
Inventories (change)	7,273	(2,646)	(10,399)
Unbilled revenues (change)	(4,838)	6,254	720
Prepaid taxes (change)	8,616	3,658	(19,804)
Other current assets (change)	700	978	(5,693)
Accounts payable (change)	9,881	(3,499)	2,756
Other current liabilities (change)	(1,738)	(597)	(4,195)
Dividend income from ATC	7,926	6,645	7,740
Cash contributions to pension and other postretirement plans	(14,452)	(13,676)	(3,321)
Other noncurrent items, net	2,695	5,143	(4,452)
Cash Provided by Operating Activities	147,513	141,185	128,762
Investing Activities:
Capital expenditures	(83,659)	(72,030)	(92,676)
Capital contributions to investments	(2,958)	(1,053)	(2,185)
Other investing	(209)	(230)	(1,297)
Cash Used for Investing Activities	(86,826)	(73,313)	(96,158)
Financing Activities:
Cash dividends paid on common stock	(41,775)	(40,043)	(38,429)
Repayment of long-term debt	(4,267)	(4,182)	(4,103)
(Decrease) increase in short-term debt	0	(7,000)	7,000
Other financing	(70)	(1,018)	(130)
Cash Used for Financing Activities	(46,112)	(52,243)	(35,662)
Change in cash and cash equivalents:	14,575	15,629	(3,058)
Cash and cash equivalents at beginning of period	81,384	65,755	68,813
Cash and cash equivalents at end of period	95,959	81,384	65,755
Supplemental disclosures of cash flow information:
Interest paid	19,415	19,636	20,478
Income taxes paid	21,831	23,800	19,579
Income taxes received	(10,000)	(10,130)	(644)
Significant noncash investing activities:
Accrued capital expenditures	$ 16,376	$ 3,963	$ 1,569

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Madison Gas and Electric Company Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Items not affecting cash:
Depreciation and amortization	$ 44,646	$ 44,225	$ 40,695
Deferred income taxes	22,421	21,927	49,884
Provision for doubtful receivables	1,196	596	1,898
Employee benefit plan expenses	295	3,333	(1,080)
Equity earnings in MGE Transco	(8,428)	(7,728)	(9,150)
Other items	1,426	721	729
Changes in working capital items:
Trade and other receivables (change)	(5,666)	4,508	2,115
Inventories (change)	7,273	(2,646)	(10,399)
Unbilled revenues (change)	(4,838)	6,254	720
Prepaid taxes (change)	8,616	3,658	(19,804)
Other current assets (change)	700	978	(5,693)
Accounts payable (change)	9,881	(3,499)	2,756
Other current liabilities (change)	(1,738)	(597)	(4,195)
Dividend income from MGE Transco	7,926	6,645	7,740
Cash contributions to pension and other postretirement plans	(14,452)	(13,676)	(3,321)
Other noncurrent items, net	2,695	5,143	(4,452)
Cash Provided by Operating Activities	147,513	141,185	128,762
Investing Activities:
Capital expenditures	(83,659)	(72,030)	(92,676)
Capital contributions to MGE Transco	(2,958)	(1,053)	(2,185)
Other investing	(209)	(230)	(1,297)
Cash Used for Investing Activities	(86,826)	(73,313)	(96,158)
Financing Activities:
Repayment of long-term debt	(4,267)	(4,182)	(4,103)
(Decrease) increase in short-term debt	0	(7,000)	7,000
Other financing	(70)	(1,018)	(130)
Cash Used for Financing Activities	(46,112)	(52,243)	(35,662)
Change in cash and cash equivalents:	14,575	15,629	(3,058)
Cash and cash equivalents at beginning of period	81,384	65,755	68,813
Cash and cash equivalents at end of period	95,959	81,384	65,755
Supplemental disclosures of cash flow information:
Interest paid	19,415	19,636	20,478
Income taxes paid	21,831	23,800	19,579
Income taxes received	(10,000)	(10,130)	(644)
Significant noncash investing activities:
Accrued capital expenditures	16,376	3,963	1,569
MGE [Member]
Operating Activities:
Net Income	74,592	71,465	81,938
Items not affecting cash:
Depreciation and amortization	44,622	44,178	40,648
Deferred income taxes	20,876	18,843	49,603
Provision for doubtful receivables	1,196	596	1,898
Employee benefit plan expenses	295	3,333	(1,080)
Equity earnings in MGE Transco	(6,366)	(7,728)	(9,150)
Other items	1,954	1,223	1,280
Changes in working capital items:
Trade and other receivables (change)	(3,583)	11,079	(4,455)
Inventories (change)	7,273	(2,647)	(10,398)
Unbilled revenues (change)	(4,838)	6,254	720
Prepaid taxes (change)	8,481	4,824	(15,169)
Other current assets (change)	699	976	(5,693)
Accounts payable (change)	9,941	(3,587)	2,741
Accrued interest and taxes (change)	419	(18)	(1,001)
Other current liabilities (change)	(2,137)	1,885	(3,144)
Dividend income from MGE Transco	5,032	6,645	7,740
Cash contributions to pension and other postretirement plans	(14,452)	(13,677)	(3,321)
Other noncurrent items, net	2,497	4,816	(4,619)
Cash Provided by Operating Activities	146,501	148,460	128,538
Investing Activities:
Capital expenditures	(83,659)	(72,030)	(92,676)
Capital contributions to MGE Transco	(1,598)	(710)	(1,775)
Other investing	(391)	(180)	(1,146)
Cash Used for Investing Activities	(85,648)	(72,920)	(95,597)
Financing Activities:
Cash dividends paid to parent by MGE	(50,000)	(30,000)	(26,500)
Distributions to parent from noncontrolling interest	(24,113)	(14,708)	(21,359)
Equity contribution received by noncontrolling interest	1,598	3,230	1,775
Repayment of long-term debt	(4,267)	(4,182)	(4,103)
(Decrease) increase in short-term debt	0	(7,000)	7,000
Other financing	(63)	(682)	0
Cash Used for Financing Activities	(76,845)	(53,342)	(43,187)
Change in cash and cash equivalents:	(15,992)	22,198	(10,246)
Cash and cash equivalents at beginning of period	26,760	4,562	14,808
Cash and cash equivalents at end of period	10,768	26,760	4,562
Supplemental disclosures of cash flow information:
Interest paid	19,415	19,636	20,478
Income taxes paid	29	29	67
Income taxes received	0	0	(644)
Significant noncash investing activities:
Accrued capital expenditures	16,376	3,963	1,569
Dividend in kind to parent	$ 15,822	$ 0	$ 0

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Current Assets:
Cash and cash equivalents	$ 95,959	$ 81,384
Accounts receivable, less reserves	39,887	37,112
Other accounts receivables, less reserves	8,530	7,477
Unbilled revenues	29,846	25,008
Materials and supplies, at average cost	18,561	19,155
Fossil fuel, at average cost	9,757	13,110
Stored natural gas, at average cost	12,819	16,145
Prepaid taxes	26,636	35,252
Regulatory assets - current	6,414	9,538
Assets held for sale	14,813	0
Other current assets	12,293	10,570
Total Current Assets	275,515	254,751
Other long-term receivables	5,603	5,045
Regulatory assets	158,485	148,199
Pension and other postretirement benefit asset	2,020	0
Other deferred assets and other	1,088	1,332	[1]
Property, Plant, and Equipment:
Property, plant, and equipment, net	1,245,269	1,217,094
Construction work in progress	36,790	26,351
Total Property, Plant, and Equipment	1,282,059	1,243,445
Investments	76,290	73,631
Total Assets	1,801,060	1,726,403	[1]
Current Liabilities:
Long-term debt due within one year	4,333	4,266
Accounts payable	47,799	40,830
Accrued interest and taxes	5,495	5,067
Accrued payroll related items	11,892	11,215
Regulatory liabilities - current	6,910	9,515
Derivative liabilities	7,620	8,343
Other current liabilities	19,456	4,910
Total Current Liabilities	103,505	84,146
Other Credits:
Deferred income taxes	383,813	360,785
Investment tax credit - deferred	947	1,050
Regulatory liabilities	22,173	20,785
Accrued pension and other postretirement benefits	74,347	75,680
Derivative liabilities	42,970	44,935
Other deferred liabilities and other	66,426	61,820
Total Other Credits	590,676	565,055
Common shareholders' equity:
Common stock	34,668	34,668
Additional paid-in capital	316,268	316,268
Retained earnings	372,950	339,165
Accumulated other comprehensive income, net of tax	202	357
Total Common Shareholders' Equity	724,088	690,458
Long-term debt	382,791	386,744	[1]
Total Capitalization	1,106,879	1,077,202
Commitments and contingencies (see Footnote 17)
Total Liabilities and Capitalization	1,801,060	1,726,403	[1]
MGE [Member]
Current Assets:
Cash and cash equivalents	10,768	26,760
Accounts receivable, less reserves	39,887	37,112
Affiliate receivables	539	542
Other accounts receivables, less reserves	6,363	7,390
Unbilled revenues	29,846	25,008
Materials and supplies, at average cost	18,561	19,155
Fossil fuel, at average cost	9,757	13,110
Stored natural gas, at average cost	12,819	16,145
Prepaid taxes	25,798	34,279
Regulatory assets - current	6,414	9,538
Assets held for sale	14,813	0
Other current assets	12,268	10,544
Total Current Assets	187,833	199,583
Affiliate receivable long-term	4,236	4,766
Regulatory assets	158,485	148,199
Pension and other postretirement benefit asset	2,020	0
Other deferred assets and other	4,353	4,216	[1]
Property, Plant, and Equipment:
Property, plant, and equipment, net	1,244,648	1,216,415
Construction work in progress	36,790	26,351
Total Property, Plant, and Equipment	1,281,438	1,242,766
Investments	487	69,984
Total Assets	1,638,852	1,669,514	[1]
Current Liabilities:
Long-term debt due within one year	4,333	4,266
Accounts payable	47,790	40,742
Accrued interest and taxes	5,440	5,021
Accrued payroll related items	11,892	11,215
Regulatory liabilities - current	6,910	9,515
Derivative liabilities	7,620	8,343
Other current liabilities	19,347	4,791
Total Current Liabilities	103,332	83,893
Other Credits:
Deferred income taxes	343,117	352,626
Investment tax credit - deferred	947	1,050
Regulatory liabilities	22,173	20,785
Accrued pension and other postretirement benefits	74,347	75,680
Derivative liabilities	42,970	44,935
Other deferred liabilities and other	66,426	61,817
Total Other Credits	549,980	556,893
Common shareholders' equity:
Common stock	17,348	17,348
Additional paid-in capital	192,417	192,417
Retained earnings	277,300	291,888
Accumulated other comprehensive income, net of tax	19	23
Total Common Shareholders' Equity	487,084	501,676
Noncontrolling interest	115,665	140,308
Total Equity	602,749	641,984
Long-term debt	382,791	386,744	[1]
Total Capitalization	985,540	1,028,728
Commitments and contingencies (see Footnote 17)
Total Liabilities and Capitalization	$ 1,638,852	$ 1,669,514	[1]

[1] Reflects retrospective application of new accounting pronouncement. See Footnote 19 for additional information.

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Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Receivables, Net
Reserve for uncollectible accounts receivable	$ 3,017	$ 3,052
Reserve for uncollectible other accounts receivable	$ 426	$ 642
Common shareholders' equity
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	75,000	75,000
Common stock, shares issued	34,668	34,668
Common stock, shares outstanding	34,668	34,668
MGE [Member]
Receivables, Net
Reserve for uncollectible accounts receivable	$ 3,017	$ 3,052
Reserve for uncollectible other accounts receivable	$ 426	$ 642
Common shareholders' equity
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	50,000	50,000
Common stock, shares outstanding	17,348	17,348

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MGE Energy Inc Consolidated Statements of Common Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive (Loss)/ Income [Member]
Beginning balance, shares at Dec. 31, 2013		34,668
Beginning balance, value at Dec. 31, 2013	$ 617,510	$ 34,668	$ 316,268	$ 266,197	$ 377
Increase (Decrease) in Common Equity [Roll Forward]
Net Income	80,319			80,319
Other comprehensive income (loss)	81				81
Common stock dividends declared	(38,429)			(38,429)
Cash in lieu of fractional shares related to stock split	(80)			(80)
Ending balance, shares at Dec. 31, 2014		34,668
Ending balance, value at Dec. 31, 2014	659,401	$ 34,668	316,268	308,007	458
Increase (Decrease) in Common Equity [Roll Forward]
Cumulative effect of new accounting principle	(142)			(142)
Beginning balance, value - Adjusted at Dec. 31, 2014	659,259			307,865
Increase (Decrease) in Common Equity [Roll Forward]
Net Income	71,343			71,343
Other comprehensive income (loss)	(101)				(101)
Common stock dividends declared	(40,043)			(40,043)
Ending balance, shares at Dec. 31, 2015		34,668
Ending balance, value at Dec. 31, 2015	690,458	$ 34,668	316,268	339,165	357
Increase (Decrease) in Common Equity [Roll Forward]
Net Income	75,560			75,560
Other comprehensive income (loss)	(155)				(155)
Common stock dividends declared	(41,775)			(41,775)
Ending balance, shares at Dec. 31, 2016		34,668
Ending balance, value at Dec. 31, 2016	$ 724,088	$ 34,668	$ 316,268	$ 372,950	$ 202

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Madison Gas and Electric Company Consolidated Statements of Common Equity - USD ($) shares in Thousands, $ in Thousands	Total	MGE [Member]		Common Stock [Member]	Common Stock [Member] MGE [Member]	Additional Paid-In Capital [Member] MGE [Member]	Retained Earnings [Member]	Retained Earnings [Member] MGE [Member]	Accumulated Other Comprehensive (Loss)/ Income [Member]	Accumulated Other Comprehensive (Loss)/ Income [Member] MGE [Member]	Noncontrolling Interest [Member] MGE [Member]
Beginning balance, shares at Dec. 31, 2013				34,668	17,348
Beginning balance, value at Dec. 31, 2013		$ 576,454			$ 17,348	$ 192,417		$ 247,534		$ 192	$ 118,963
Increase (Decrease) in Common Equity [Roll Forward]
Net Income		81,938						55,628			26,310
Other comprehensive income (loss)	$ 81	(48)							$ 81	(48)
Cash dividends paid to parent by MGE		(26,500)						(26,500)
Dividend in kind to parent		0
Equity contribution received by noncontrolling interest		1,775									1,775
Distributions to parent from noncontrolling interest		(21,359)									(21,359)
Ending balance, shares at Dec. 31, 2014				34,668	17,348
Ending balance, value at Dec. 31, 2014		612,260			$ 17,348	192,417		276,662		144	125,689
Increase (Decrease) in Common Equity [Roll Forward]
Cumulative effect of new accounting principle	(142)	(142)					$ (142)	(142)
Beginning balance, value - Adjusted at Dec. 31, 2014		612,118						276,520
Increase (Decrease) in Common Equity [Roll Forward]
Net Income		71,465						45,368			26,097
Other comprehensive income (loss)	(101)	(121)							(101)	(121)
Cash dividends paid to parent by MGE		(30,000)						(30,000)
Dividend in kind to parent		0
Equity contribution received by noncontrolling interest		3,230									3,230
Distributions to parent from noncontrolling interest		(14,708)									(14,708)
Ending balance, shares at Dec. 31, 2015				34,668	17,348
Ending balance, value at Dec. 31, 2015		641,984			$ 17,348	192,417		291,888		23	140,308
Increase (Decrease) in Common Equity [Roll Forward]
Net Income		74,592						51,234			23,358
Other comprehensive income (loss)	$ (155)	(4)							$ (155)	(4)
Cash dividends paid to parent by MGE		(50,000)	[1]					(50,000)
Dividend in kind to parent		(15,822)						(15,822)
Equity contribution received by noncontrolling interest		1,598									1,598
Distributions to parent from noncontrolling interest		(24,113)									(24,113)
Deconsolidation of noncontrolling interest		(25,486)									(25,486)
Ending balance, shares at Dec. 31, 2016				34,668	17,348
Ending balance, value at Dec. 31, 2016		$ 602,749			$ 17,348	$ 192,417		$ 277,300		$ 19	$ 115,665

[1] Excludes $15.8 million dividend in kind to MGE Energy from MGE.

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Consolidated Statements of Common Equity (Parentheticals) - $ / shares	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Dividends per share of common stock	$ 0.308	$ 0.308	$ 0.295	$ 0.295	$ 0.295	$ 0.295	$ 0.283	$ 0.283	$ 1.21	$ 1.16	$ 1.11

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies.

a.Basis of Presentation - MGE Energy and MGE.

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which give recognition to the rate making accounting policies for regulated operationsprescribed by the regulatory authorities having jurisdiction, principally the PSCW and FERC. MGE's accounting records conform to the FERC uniform system of accounts.

b.Principles of Consolidation - MGE Energy and MGE.

MGE, a wholly owned subsidiary of MGE Energy, is a regulated electric and gas utility headquartered in Madison, Wisconsin. MGE Energy and MGE consolidate all majority owned subsidiaries in which it has controlling influence.

Additional wholly owned subsidiaries of MGE Energy include CWDC, MAGAEL, MGE Power, MGE State Energy Services, MGE Services, MGE Transco, MGEE Transco, and NGV Fueling Services. MGE Power owns 100% of MGE Power Elm Road and MGE PowerWest Campus. MGE Power and its subsidiaries are part of MGE Energy's nonregulated energy operations, which were formed to own and lease electric generation projects to assist MGE. MGE Transco and MGEE Transco are nonregulated entities formed to manage the investments in ATC and ATC Holdco, respectively.On December 1, 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy. See Footnote 4 for further discussion of the transfer of MGE's investment in MGE Transco.

MGE Energy and MGE consolidate variable interest entities (VIEs) for which it is the primary beneficiary. Variable interest entities are legal entities that possess any of the following characteristics: equity investors who have an insufficient amount of equity at risk to finance their activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity holders who do not receive expected losses or returns significant to the VIE. If MGE Energy or MGE is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, all relevant facts and circumstances are considered, including: the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the expected losses and/or the right to receive the expected returns of the VIE. Ongoing reassessments of all VIEs are performed to determine if the primary beneficiary status has changed. MGE has consolidated MGE Power Elm Road and MGE PowerWest Campus. Both entities are VIEs. MGE is considered the primary beneficiary of these entities as a result of contractual agreements. See Footnote 2 for more discussion of these entities.

Prior to December 1, 2016, MGE Transco was jointly owned by MGE Energy and MGE. MGE's ownership interest in MGE Transco declined below a majority in July 2016. As a result of the change in majority ownership, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. See Footnote 8 for further discussion regarding the deconsolidation of noncontrolling interest.

The consolidated financial statements reflect the application of certain accounting policies described in this note. All significant intercompany accounts and transactions have been eliminated in consolidation.

c.Use of Estimates - MGE Energy and MGE.

In order to prepare consolidated financial statements in conformity with GAAP, management must make estimates and assumptions. These estimates could affect reported amounts of assets, liabilities, and disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management's estimates.

d. Cash Equivalents and Restricted Cash - MGE Energy and MGE.

Cash Equivalents

MGE Energy and MGE consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

MGE has certain cash accounts that are restricted to uses other than current operations and designated for a specific purpose. MGE's restricted cash accounts include cash held by trustees for certain employee benefits and cash deposits held by third parties. As of December 31,2016and 2015, there was $3.7 million and $2.9 million, respectively, of cash deposits held by third parties. These are included in "Other current assets" on the consolidated balance sheets.

Receivable – Margin Account

Cash amounts held by counterparties as margin for certain financial transactions are recorded as receivable – margin account in "Other current assets" on the consolidated balance sheets. As of December 31,2016 and2015, the receivable – margin account balance of $1.3 million and $2.3 million, respectively, is shown net of any collateral posted against derivative positions. As of December 31,2016, no cash collateral was posted against derivative positions. As of December 31,2015, there was $1.0 million of collateral posted against derivative positions. Changes in this cash account are considered cash flows from operating activities to match with the costs being hedged. The costs being hedged are fuel for electric generation, purchased power, and cost of gas sold.

e.Trade Receivables, Allowance for Doubtful Accounts, and Concentration Risk - MGE Energy and MGE.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. However, a 1% late payment charge is recorded on all receivables unpaid after the due date. The allowance for doubtful accounts associated with these receivables represents our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine our allowance for doubtful accounts based on historical write-off experience, regional economic data, and review of the accounts receivable aging. MGE manages this concentration and the related credit risk through its credit and collection policies, which are consistent with state regulatory requirements.

f.Inventories - MGE Energy and MGE.

Inventories consist of natural gas in storage, fossil fuels, materials and supplies, and renewable energy credits (RECs). MGE values natural gas in storage, fossil fuels, and materials and supplies using average cost.

REC allowances are included in "Materials and supplies" on the consolidated balance sheets and are recorded based on specific identification. These allowances are charged to purchase power expense as they are used in operations. MGE's REC allowance balance as of December 31,2016 and 2015, was $0.3 million.

g.Chattel Paper Agreements - MGE Energy and MGE.

MGE makes available to qualifying customers a financing program for the purchase and installation of energy-related equipment that will provide more efficient use of utility service at the customer's property. The energy-related equipment installed at the customer sites is used to secure the customer loans. MGE is a party to a chattel paper purchase agreement with a financial institution under which it can sell or finance an undivided interest with recourse, in up to $10.0 million of the financing program receivables, until July 31, 2017.The length of the MGE guarantee to the financial institution varies from one to ten years depending on the term of the underlying customer loan. The loan balances outstanding at December 31,2016, approximate the fair value of the energy-related equipment acting as collateral. MGE accounts for these agreements as secured borrowings.

As of December 31,2016, the remaining contractual maturities of the chattel paper agreements were as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Repurchase-to-Maturity Transactions:
Loans	$	559	$	620	$	595	$	568	$	432	$	1,121

h.Regulatory Assets and Liabilities - MGE Energy and MGE.

Regulatory assets and regulatory liabilities are recorded consistent with regulatory treatment. Regulatory assets represent costs which are deferred due to the probable future recovery from customers through regulated rates. Regulatory liabilities represent the excess recovery of costs or accrued credits which were deferred because MGE believes it is probable such amounts will be returned to customers through future regulated rates. Regulatory assets and liabilities are amortized in the consolidated statements of income consistent with the recovery or refund included in customer rates. MGE believes that it is probable that its recorded regulatory assets and liabilities will be recovered and refunded, respectively, in future rates. See Footnote 6 for further information.

i.Debt Issuance Costs - MGE Energy and MGE.

Premiums, discounts, and expenses incurred with the issuance of outstanding long-term debt are amortized over the life of the debt issue. Any call premiums or unamortized expenses associated with refinancing higher-cost debt obligations used to finance utility-regulated assets and operations are amortized consistent with regulatory treatment of those items. These costs are included as a direct deduction to the related debt liability on the consolidated balance sheets.

j.Property, Plant, and Equipment - MGE Energy and MGE.

Property, plant, and equipment is recorded at original cost. Cost includes indirect costs consisting of payroll taxes, pensions, postretirement benefits, other fringe benefits, and administrative and general costs. Also, included in the cost is AFUDC for utility property and capitalized interest for nonregulated property. Additions for significant replacements of property are charged to property, plant, and equipment at cost; and minor items are charged to maintenance expense. Depreciation rates on utility property are approved by the PSCW, based on the estimated economic lives of property, and include estimates for salvage value and removal costs. Removal costs of utility property, less any salvage value, are adjusted through regulatory liabilities. Depreciation rates on nonregulated property are based on the estimated economic lives of the property. See Footnote 3 for further information.

Provisions at composite straight-line depreciation rates approximate the following percentages for the cost of depreciable property:

	2016	2015	2014
Electric(a)	2.5 %	2.6 %	2.6 %
Gas(a)	2.1 %	1.7 %	1.7 %
Nonregulated	2.3 %	2.4 %	2.4 %

(a)In December 2015, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2016.

k.Asset Retirement Obligations - MGE Energy and MGE.

MGE Energy and MGE are required to record a liability for the fair value of an ARO to be recognized in the period in which it is incurred if it can be reasonably estimated. The offsetting associated asset retirement costs are capitalized as a long-lived asset and depreciated over the asset's useful life. The expected present value technique used to calculate the fair value of ARO liabilities includes assumptions about costs, probabilities, settlement dates, interest accretion, and inflation. Revisions to the assumptions, including the timing or amount of expected asset retirement costs, could result in increases or decreases to the AROs. All asset retirement obligations are recorded as "Other long-term liabilities" on the consolidated balance sheets. MGE has regulatory treatment and recognizes regulatory assets or liabilities for the timing differences between when we recover legal AROs in rates and when we would recognize these costs. See Footnote 18 for further information.

l.Repairs and Maintenance Expense - MGE Energy and MGE.

MGE utilizes the direct expensing method for planned major maintenance projects. Under this method, MGE expenses all costs associated with major planned maintenance activities as incurred.

m.Purchased Gas Adjustment Clause - MGE Energy and MGE.

MGE's natural gas rates are subject to a fuel adjustment clause designed to recover or refund the difference between the actual cost of purchased gas and the amount included in rates. Differences between the amounts billed to customers and the actual costs recoverable are deferred and recovered or refunded in future periods by means of prospective monthly adjustments to rates. At December 31,2016 and 2015, MGE had over collected $0.9 million and $0.8 million, respectively. These amounts are included in "Regulatory liabilities - current" on the consolidated balance sheets.

n.Revenue Recognition - MGE Energy and MGE.

Operating revenues are recorded as service is rendered or energy is delivered to customers. Meters are read on a systematic basis throughout the month based on established meter-reading schedules. At the end of the month, MGE accrues an estimate for the unbilled amount of energy delivered to customers. The unbilled revenue estimate is based on daily system demand volumes, weather factors, estimated line losses, estimated customer usage by class, and applicable customer rates.

o.Utility Cost Recovery - MGE Energy and MGE.

MGE's rates include a provision for fuel costs. The PSCW allows Wisconsin utilities to defer electric fuel-related costs, less excess revenues, that fall outside a symmetrical cost tolerance band. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. Such deferred amounts will be recognized in "Purchased power" expense in MGE Energy's and MGE's consolidated income statements each period. The cumulative effects of these deferred amounts will be recorded in "Regulatory assets" or "Regulatory liabilities" on MGE Energy's and MGE's consolidated balance sheets until they are reflected in future billings to customers. See Footnote 16.b. for further information regarding the regulatory rules applicable to the recovery of electric fuel costs.

p.Regional Transmission Organizations - MGE Energy and MGE.

MGE reports on a net basis transactions on the MISO markets in which it buys and sells power within the same hour to meet electric energy delivery requirements. This treatment resulted in a $77.2 million, a $68.6 million, and a $91.1 million reduction to sales to the market and purchase power expense for MISO markets for the years ended December 31,2016, 2015, and 2014, respectively.

q.Allowance for Funds Used During Construction - MGE Energy and MGE.

Allowance for funds used during construction is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a return on shareholder's capital used for construction purposes. In the consolidated income statements, the cost of borrowed funds (AFUDC-debt) is presented as an offset to "Interest expense" and the return on shareholder's capital (AFUDC-equity funds) is shown as an item within "Other income." For both 2016 and 2015, as approved by the PSCW, MGE capitalized AFUDC-debt and equity on 50% of applicable average construction work in progress at 7.93%. For 2014, MGE capitalized AFUDC-debt and equity on 50% of applicable average construction work in progress at 8.21%. For 2016, 2015, and 2014, MGE received specific approval to recover 100% AFUDC on certain environmental costs for Columbia. These amounts are recovered under the ratemaking process over the service lives of the related properties.

r.Investments - MGE Energy and MGE.

Investments in limited liability companies that have specific ownership accounts in which MGE Energy or MGE's ownership interest is more than minor and are considered to have significant influence are accounted for using the equity method. All other investments are carried at fair value or at cost, as appropriate. See Footnote 4 for further information.

s.Capitalized Software Costs - MGE Energy and MGE.

Property, plant, and equipment includes the net book value of capitalized costs of internal use software totaling $12.3 million and $12.0 million at December 31,2016 and 2015, respectively. During 2016, 2015, and 2014, MGE recorded $3.0 million, $2.2 million, and $1.6million, respectively, of amortization expense related to these costs. These costs are amortized on a straight-line basis over the estimated useful lives of the assets. For internal use software, the useful lives range from five to ten years.

t.Impairment of Long-Lived Assets - MGE Energy and MGE.

MGE reviews plant and equipment and other property for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. MGE's policy for determining when long-lived assets are impaired is to recognize an impairment loss if the sum of the expected future cash flows (undiscounted and without interest charges) from an asset are less than the carrying amount of that asset. If an impairment loss is recognized, the amount that will be recorded will be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. There is no impairment of long-lived assets at December 31,2016, 2015, and 2014.

u.Income Taxes and Excise Taxes - MGE Energy and MGE.

Income taxes

Under the liability method, income taxes are deferred for all temporary differences between pretax financial and taxable income and between the book and tax basis of assets and liabilities using the tax rates scheduled by law to be in effect when the temporary differences reverse. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. A valuation allowance is recorded for those benefits that do not meet this criterion.

Accounting for uncertainty in income taxes applies to all tax positions and requires a recognition threshold and measurement standard for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. The threshold is defined for recognizing tax return positions in the financial statements as "more likely than not" that the position is sustainable, based on its merits. Subsequent recognition, derecognition, and measurement is based on management's best judgment given the facts, circumstances, and information available at the reporting date.

Regulatory and accounting principles have resulted in a regulatory liability related to income taxes. Excess deferred income taxes result from past taxes provided at rates higher than current rates. The income tax regulatory liability and deferred investment tax credit reflect the revenue requirement associated with the return of these tax benefits to customers.

Investment tax credits from regulated operations are amortized over related property service lives.

Excise taxes

MGE Energy, through its utility operations, pays a state license fee tax in lieu of property taxes on property used in utility operations. License fee tax is calculated as a percentage of adjusted operating revenues of the prior year. The electric tax rate is 3.19% for retail sales and 1.59% for sales of electricity for resale by the purchaser. The tax rate on sales of natural gas is 0.97%. The tax is required to be estimated and prepaid in the year prior to its computation and expensing. License fee tax expense, included in "Other general taxes," was $14.5 million, $14.7 million, and $14.6 million for the years ended December 31,2016, 2015, and 2014, respectively.

Operating income taxes, including tax credits and license fee tax, are included in rates for utility related items.

v.Share-Based Compensation - MGE Energy and MGE.

Under two separate incentive plans, eligible participants, including employees and non-employee directors, may receive performance units that entitle the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the set performance period. Under the plans, these awards are subject to a prescribed vesting schedule and must be settled in cash. Accordingly, no new shares of common stock are issued in connection with the plans.

MGE Energy and MGE initially measure the cost of the employee or director services received in exchange for a performance unit award based on the current market value of MGE Energy common stock. The fair value of the award is subsequently re-measured at each reporting date through the settlement date. Changes in fair value during the requisite period are recognized as compensation cost over that period.

See Footnote 14 for additional information regarding the plans.

w.Comprehensive Income - MGE Energy and MGE.

Total comprehensive income includes all changes in equity during a period except those resulting from investments by and distributions to shareholders. Comprehensive income is reflected in the consolidated statements of comprehensive income.

x.Derivative and Hedging Instruments - MGE Energy and MGE.

As part of regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. MGE recognizes all derivatives in the consolidated balance sheets at fair value, with changes in the fair value of derivative instruments to be recorded in current earnings or deferred in accumulated other comprehensive income (loss), depending on whether a derivative is designated as, and is effective as, a hedge and on the type of hedge transaction. Derivative activities are in accordance with the company's risk management policy.

If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Cash flows from such derivative instruments are classified on a basis consistent with the nature of the underlying hedged item.

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Variable Interest Entities

12 Months Ended

Dec. 31, 2016

Variable Interest Entities Disclosure [Abstract]

Variable Interest Entities

Variable Interest Entities - MGE Energy and MGE.

a. MGE Power Elm Road.

MGE Power Elm Road is not a subsidiary of MGE; however, it has been consolidated in the financial statements of MGE. MGE Power Elm Road was created for the purpose of owning new generating assets. Its sole principal assets are an undivided ownership interest in two coal-fired generating plants located in Oak Creek, Wisconsin, which it leases to MGE pursuant to long-term leases. Based on the nature and terms of the contractual agreements, MGE is expected to absorb a majority of the expected losses, residual value, or both, associated with the ownership of MGE Power Elm Road and therefore holds a variable interest in MGE Power Elm Road, even though it has no equity interest in MGE Power Elm Road. MGE Energy and MGE consolidate VIEs for which they are the primary beneficiary. MGE has the power to direct the activities that most significantly impact the Elm Road Units' economic performance and is also the party most closely associated with MGE Power Elm Road. As a result, MGE is the primary beneficiary. At December 31, MGE has included the following significant accounts on its consolidated balance sheets related to its interest in this VIE:

(In thousands)		2016		2015
Property, plant, and equipment, net	$	175,502	$	177,904
Construction work in progress		3,241		2,400
Deferred income taxes		42,525		40,865
Long-term debt		62,021		64,622
Noncontrolling interest		80,362		79,113

Long-term debt excluding debt issuance costs consists of $62.6 million at December 31,2016, of senior secured notes that require that MGE Power Elm Road maintain a projected and actual debt service coverage ratio at the end of any calendar quarter of not less than 1.25 to 1.00for the trailing 12-month period. The debt is secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of the Elm Road Units pursuant to the related long-term leases.As of December 31, 2016, MGE Power Elm Road is in compliance with the covenant requirements.

MGE has been and will continue to recover in rates the lease payments made to MGE Power Elm Road.MGE received approval from the PSCW to collect in rates the carrying costs incurred by MGE Power Elm Road. The total carrying costs on the Elm Road Units is $62.5 million. MGE collected carrying costs in rates over a six year period that began in 2010. Of these costs, $17.0 million relates to the capitalized interest and the debt portion of the units. These costs will be recognized over the period in which the generating units will be depreciated. The remaining $45.5 million represents the equity portion and was recognized over the period allowed for recovery in rates which ended in 2015.

b. MGE Power West Campus.

MGE Power West Campus is not a subsidiary of MGE; however, it has been consolidated in the financial statements of MGE. MGE Power West Campus was created for the purpose of owning new generating assets. Its sole principal asset is the WCCF, which it leases to MGE pursuant to a long-term lease. MGE is responsible for operation of the plant during the term of the lease. Based on the nature and terms of these contractual relationships, MGE absorbs a majority of the expected losses, residual value, or both, associated with the ownership and operation of the WCCF and therefore holds a variable interest in MGE Power West Campus, even though it has no equity interest in MGE Power West Campus. MGE has the power to direct the activities that most significantly impact WCCF's economic performance and is also the party most closely associated with MGE Power West Campus. As a result, MGE is the primary beneficiary. At December 31, MGE has included the following significant accounts on its consolidated balance sheets related to its interest in this VIE:

(In thousands)		2016		2015
Property, plant, and equipment, net	$	81,588	$	84,403
Affiliate receivables		4,769		5,295
Deferred income taxes		19,912		19,612
Long-term debt		44,932		46,510
Noncontrolling interest		35,303		37,603

Long-term debt excluding debt issuance costs consists of $45.1 million at December 31,2016, of senior secured notes that require that MGE Power West Campus maintain a projected debt service coverage ratio of not less than 1.25 to 1.00 and debt to total capitalization ratio of not more than 0.65 to 1.00. The debt is secured by a collateral assignment of lease payments that MGE is making to MGE Power West Campus for use of the cogeneration facility pursuant to the long-term lease. As of December 31, 2016, MGE Power West Campus is in compliance with the covenant requirements.

MGE has been and will continue to recover lease payments made to MGE Power West Campus in rates. Also, MGE received approval from the PSCW to collect approximately $12.1 million in carrying costs incurred by MGE Power West Campus during construction of the facility. The carrying costs were recovered in rates over a 10 year period that started in 2005 and ended in 2015.

c. Other Variable Interest Entities.

MGE has a variable interest in entities through purchase power agreements relating to purchased energy from the facilities covered by the agreements. As of December 31,2016 and 2015, MGE had 51 megawatts and 61 megawatts, respectively, of capacity available under these agreements. MGE evaluated the variable interest entities for possible consolidation. The interest holder is considered the primary beneficiary of the entity and is required to consolidate the entity if the interest holder has the power to direct the activities that most significantly impact the economics of the variable interest entity. MGE examined qualitative factors such as the length of the remaining term of the contracts compared with the remaining lives of the plants, who has the power to direct the operations and maintenance of the facilities, and other factors, and determined MGE is not the primary beneficiary of the variable interest entities. There is not a significant potential exposure to loss as a result of involvement with these variable interest entities.

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Property, Plant, and Equipment

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

Property, Plant, and Equipment - MGE Energy and MGE.

Property, plant, and equipment consisted of the following at December 31:

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Utility:
Electric(a)	$	1,171,004	$	1,147,701	$	1,171,021	$	1,147,718
Gas		395,790		384,163		395,801		384,175
Total utility plant		1,566,794		1,531,864		1,566,822		1,531,893
Less: Accumulated depreciation and amortization(a)		579,965		578,410		579,965		578,410
In-service utility plant, net		986,829		953,454		986,857		953,483
Nonregulated:
Nonregulated		317,810		315,589		317,014		314,750
Less: Accumulated depreciation and amortization		59,370		51,949		59,223		51,818
In-service nonregulated plant, net		258,440		263,640		257,791		262,932
Construction work in progress:
Utility construction work in progress(a)		31,356		23,837		31,356		23,837
Nonregulated construction work in progress		5,434		2,514		5,434		2,514
Total property, plant, and equipment	$	1,282,059	$	1,243,445	$	1,281,438	$	1,242,766

(a)As of December 31,2016, MGE has classified $14.8 million of Columbia assets as held-for-sale on the consolidated balance sheets related to the partial sale of plant assets to WPL. See Footnote 5.a. for further discussion.

MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust. As of December 31,2016 and 2015, there was $1.2 million of bonds outstanding under that indenture. See Footnote 9 for further discussion of the mortgage indenture.

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Investments

12 Months Ended

Dec. 31, 2016

Investments Disclosure [Abstract]

Investments

Investments - MGE Energy and MGE.

a. Equity Method Investments, Available for Sale Securities, and Other Investments.

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Available for sale securities:
Cost basis	$	2,216	$	2,225	$	455	$	480
Gross unrealized gains		346		599		40		40
Gross unrealized losses		(8)		(2)		(8)		(2)
Fair value		2,554		2,822		487		518
Equity method investments:
ATC and ATC Holdco(a)		72,458		69,466		-		69,466
Other		1,158		1,184		-		-
Total equity method investments		73,616		70,650		-		69,466
Other investments		120		159		-		-
Total	$	76,290	$	73,631	$	487	$	69,984

(a)MGE Transco holds an ownership interest in ATC, and MGEE Transco holds an ownership interest in ATC Holdco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. See Footnote 8 for further discussion of noncontrolling interest. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see "ATC and ATC Holdco" below for additional information.

MGE Energy's and MGE's available for sale securities represent publicly traded securities and private equity investments in common stock of companies in various industries.

During the years endedDecember 31,2016, 2015, and 2014, certain investments were liquidated. As a result of these liquidations, MGE Energy and MGE received the following:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Cash proceeds	$	408	$	19	$	38	$	16	$	19	$	-
Gain (loss) on sale		121		10		21		(8)		10		-

b. ATC and ATC Holdco.

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which, as of December 1, 2016, is owned by MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary of MGE Energy.

MGE Transco and MGEE Transco have accounted for their investment in ATC and ATC Holdco, respectively, under the equity method of accounting. For the years endedDecember 31,2016, 2015, and 2014, MGE Transco recorded the following:

(In thousands)		2016		2015		2014
Equity earnings from investment in ATC	$	8,670	$	7,728	$	9,150
Dividends received from ATC(a)		7,926		6,645		7,740
Capital contributions to ATC		2,486		710		1,775

(a)As of December 31, 2016, MGE Transco recorded a $2.1 million receivable from ATC for a cash dividend received in January 2017.

ATC Holdco's activities commenced in late December 2016 and had an immaterial impact on results of operations, cash flows, and financial condition.

At December 31,2016 and 2015, MGE Transco held a 3.6% ownership interest in ATC. At December 31,2016, MGEE Transco held a 4.0% ownership interest in ATC Holdco. On January 31, 2017, MGE Transco made a $1.4million capital contribution to ATC, and on January 10, 2017, MGEE Transco made a $0.2million capital contribution to ATC Holdco.

In June 2016, the PSCW required MGE to transfer its interest in ATC to MGE Energy, which was to be completed by December 31, 2022. The requirement arose in the context of requests for regulatory approvals by several owners of ATC in connection with a reorganization of ATC. MGE's ownership interest in ATC, held through MGE Transco, was transferred net of deferred tax liabilities to MGE Energy by way of a dividend in kind of $15.8 million as of December 1, 2016. As a result of the transfer, MGE's ownership interest in MGE Transco was completely eliminated in favor of MGE Energy. See Footnote 12 for further discussion of the transfer of deferred tax liabilities. The change had no effect on MGE Energy's consolidated financial statements.

ATC's summarized financial data for the years endedDecember 31,2016, 2015, and 2014 is as follows:

(In thousands)
Income statement data for the year ended December 31,		2016		2015		2014
Operating revenues	$	650,806	$	615,836	$	635,033
Operating expenses		(322,517)		(319,321)		(307,451)
Other income		3,225		1,176		117
Interest expense, net		(98,758)		(97,250)		(88,970)
Earnings before members' income taxes	$	232,756	$	200,441	$	238,729

Balance sheet data as of December 31,		2016		2015
Current assets	$	75,790	$	80,520
Noncurrent assets		4,312,893		3,948,265
Total assets	$	4,388,683	$	4,028,785
Current liabilities	$	495,126	$	330,248
Long-term debt		1,865,302		1,790,718
Other noncurrent liabilities		271,495		244,991
Members' equity		1,756,760		1,662,828
Total members' equity and liabilities	$	4,388,683	$	4,028,785

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Joint Plant Ownership

12 Months Ended

Dec. 31, 2016

Regulated Operations [Abstract]

Joint Plant Ownership

Joint Plant Ownership - MGE Energy and MGE.

a. Columbia.

MGE and two other utilities jointly own Columbia, a coal-fired generating facility located in Portage, Wisconsin, which, at December 31,2016, accounts for 30% (225 MW) of MGE's net summer rated capacity. Power from this facility is shared in proportion to each company's ownership interest. At December 31,2016, MGE had a 22.0% ownership interest in Columbia. The other owners are WPL, which operates Columbia, and WPSC. MGE's share of fuel, operating, and maintenance expenses for Columbia was $39.5 million, $38.2 million, and $28.1 million for the years ended December 31,2016, 2015, and 2014, respectively.

Each owner provides its own financing and reflects its respective portion of facilities and operating costs in its financial statements. MGE's interest in Columbia's gross utility plant in service, and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Utility plant	$	270,898	$	273,762
Accumulated depreciation		(81,935)		(84,864)
Property, plant, and equipment, net		188,963		188,898
Construction work in progress		21,120		17,110
Total property, plant, and equipment	$	210,083	$	206,008

In 2016, MGE and WPL negotiated anamendment to the existing Columbia joint operating agreement,that has been approved by the PSCW, under which MGE will have the option to reduce its obligation to pay certain capital expenditures (other than SCR-related expenditures) at Columbia in exchange for a proportional reduction in MGE's ownership in Columbia. On January 1 of each year, beginning in 2017 and ending June 1, 2020, the ownership percentage will be adjusted,through a partial sale, based on the amount of capital expenditures foregone. In December 2016, MGE jointly filed a request with the co-owners of Columbia for FERC approval of the amendment to the Columbia joint operating agreement, effective January 1, 2017. MGE currently expects to receive FERC's decision on the amendment in 2017.

During 2016, MGE accrued $14.8 million of 2016 capital expenditures that MGE has forgone as part of theownership transfer agreement with WPL. As of December 31,2016, MGE classified $14.8million of Columbia assets as held-for-sale on the consolidated balance sheets. In January 2017, MGE reduced its ownership interest in Columbia from 22.0% to 20.4% through the partial sale of plant assets to WPL.

b. Elm Road.

MGE Power Elm Road owns an 8.33% ownership interest in each of two 615 MW coal-fired generating units in Oak Creek, Wisconsin, which, at December 31,2016, accounts for 14% (106 MW) of MGE's net summer rated capacity. Unit 1 entered commercial operation on February 2, 2010. Unit 2 entered commercial operation on January 12, 2011. MGE Power Elm Road's sole principal asset is that ownership interest in those generating units. MGE Power Elm Road's interest in the Elm Road Units is leased to MGE pursuant to long-term leases.

The remainder of the ownership interest in the Elm Road Units is held by two other entities, one of which is also responsible for the Units' operation. Each owner provides its own financing and reflects its respective portion of the facility and costs in its financial statements. MGE's share of fuel, operating, and maintenance expenses for the Elm Road Units was $21.2million, $20.9 million, and $20.3 million for the years ended December 31,2016, 2015, and 2014, respectively. MGE Power Elm Road's interest in the portion of the Elm Road Units in-service and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Nonregulated plant	$	204,292	$	202,326
Accumulated depreciation		(28,790)		(24,422)
Property, plant, and equipment, net		175,502		177,904
Construction work in progress		3,241		2,400
Total property, plant, and equipment	$	178,743	$	180,304

c. WCCF.

MGE Power West Campus and the UW jointly own the West Campus Cogeneration Facility located on the UW campus in Madison, Wisconsin. MGE Power West Campus owns 55% of the facility and the UW owns 45% of the facility. The UW owns a controlling interest in the chilled-water and steam plants, which are used to meet the growing needs for air-conditioning and steam-heat capacity for the UW campus. MGE Power West Campus owns a controlling interest in the electric generation plant, which is leased and operated by MGE.

Each owner provides its own financing and reflects its respective portion of the facility and operating costs in its financial statements. MGE Power West Campus' interest in WCCF and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Nonregulated plant	$	111,330	$	111,141
Accumulated depreciation		(29,742)		(26,738)
Property, plant, and equipment, net		81,588		84,403
Construction work in progress		1,009		113
Total property, plant, and equipment	$	82,597	$	84,516

Operating charges are allocated to the UW based on formulas contained in the operating agreement. Under the provisions of this arrangement, the UW is required to reimburse MGE for their allocated portion of fuel and operating expenses. For the years endedDecember 31,2016, 2015, and 2014, the UW allocated share of fuel and operating costs was $5.5 million, $3.7 million, and $2.8 million, respectively.

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Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2016

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

Regulatory Assets and Liabilities - MGE Energy and MGE.

The following regulatory assets and liabilities are reflected in MGE's consolidated balance sheets as of December 31:

(In thousands)		2016		2015
Regulatory Assets
Asset retirement obligation	$	5,563	$	4,849
Conservation costs		444		-
Debt related costs		10,211		10,672
Derivatives		49,281		54,083
Environmental costs		55		368
Tax recovery related to AFUDC equity		9,403		8,950
Unfunded pension and other postretirement liability		86,475		78,181
Other		3,467		634
Total Regulatory Assets	$	164,899	$	157,737
Regulatory Liabilities
Conservation costs	$	-	$	231
Deferred fuel savings		6,016		9,515
Elm Road		3,473		643
Income taxes		1,302		1,559
Non-ARO removal costs		16,415		17,137
Renewable energy credits		339		327
Other		1,538		888
Total Regulatory Liabilities	$	29,083	$	30,300

MGE expects to recover its regulatory assets and return its regulatory liabilities through rates charged to customers based on PSCW decisions made during the ratemaking process or based on PSCW long-standing policies and guidelines. The adjustments to rates for these regulatory assets and liabilities will occur over the periods either specified by the PSCW or over the corresponding period related to the asset or liability. Management believes it is probable that MGE will continue to recover from customers the regulatory assets described above based on prior and current ratemaking treatment for such costs. All regulatory assets for which a cash outflow had been made are earning a return, except for amounts expended for environmental costs.

Asset Retirement Obligation

See Footnote 18 for further discussion.

Conservation Costs

MGE has received regulatory treatment for certain conservation expenditures. The expenditures are used for Focus on Energy programs, Wisconsin's statewide energy efficiency and renewable resource program, to promote energy efficiency on the customer's premises. Costs for Focus on Energy programs are estimated in MGE's rates utilizing escrow accounting. The escrow accounting allows the utility to true-up its actual costs incurred and reflect the amount of the true-up in its next rate case filing.

Debt Related Costs

This balance includes debt issuance costs of extinguished debt and other debt related expenses, including make-whole premiums. The PSCW has allowed rate recovery on unamortized issuance costs for extinguished debt facilities. When the facility replacing the old facility is deemed by the PSCW to be more favorable for the ratepayers, the PSCW will allow rate recovery of any unamortized issuance costs related to the old facility. These amounts are recovered over the term of the new facility.

Derivatives

MGE has physical and financial contracts that are defined as derivatives. The amounts recorded for the net mark-to-market value of the commodity based contracts is offset with a corresponding regulatory asset or liability because these transactions are part of the PGA or fuel rules clause authorized by the PSCW. A significant portion of the recorded amount is related to a purchased power agreement that provides MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. This agreement is accounted for as a derivative contract. See Footnote 15 for further discussion.

Environmental Costs

MGE has been allowed to defer actual costs on certain environmental matters, including clean up of two landfill sites and legal expenditures pertaining to the response to the EPA Clean Air Act enforcement matter at Columbia. For further discussion of the Columbia Clean Air Act litigation, see Footnote 17.c.

Tax Recovery Related to AFUDC Equity

AFUDC equity represents the after-tax equity cost associated with utility plant construction and results in a temporary difference between the book and tax basis of such plant. It is probable under PSCW regulation that MGE will recover in future rates the future increase in taxes payable represented by the deferred income tax liability. The amounts will be recovered in rates over the depreciable life of the asset for which AFUDC was applied. Tax recovery related to AFUDC equity represents the revenue requirement related to recovery of these future taxes payable, calculated at current statutory tax rates.

Unfunded Pension and Other Postretirement Liability

MGE is required to recognize the unfunded status of defined benefit pension and other postretirement pension plans as a net liability or asset on the balance sheet with an offset to a regulatory asset or liability. The unfunded status represents future expenses that are expected to be recovered in rates. See Footnote 13 for further discussion.

Deferred Fuel Savings

The fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band. Any over/under recovery of the actual costs is determined on an annual basis and is adjusted in future billings to electric retail customers. See Footnote 16.b. for further discussion.

Elm Road

Costs associated with Elm Road are estimated in MGE's rates utilizing escrow accounting and include costs for lease payments, management fees, community impact mitigation, and operating costs. Also, MGE has deferred payments made to MGE Power Elm Road for carrying costs during construction of the facility. MGE has collected the carrying costs in rates over a six year period that ended in 2015. All other costs are collected in rates over a one to two year period.

Income Taxes

Excess deferred income taxes result from past taxes provided at rates higher than current rates. The regulatory liability and deferred investment tax credit reflects the revenue requirement associated with the return of these tax benefits to customers.

Non-ARO Removal Costs

In connection with accounting for asset retirement obligations, companies are required to reclassify cumulative collections for non-ARO removal costs as a regulatory liability, with an offsetting entry to accumulated depreciation. Under the current rate structure, these removal costs are being recovered as a component of depreciation expense.

Renewable Energy Credits

MGE receives renewable energy credits from certain purchase power agreements. The value of the credits are recorded as inventory and expensed when the credit is redeemed or expired. A regulatory liability has been established for the value of the renewable energy credits included in inventory. In Wisconsin, renewable energy credits expire four years after the year of acquisition.

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Common Equity

12 Months Ended

Dec. 31, 2016

Equity [Abstract]

Common Equity

Common Equity.

a. Common Stock - MGE Energy and MGE.

On December 20, 2013, MGE Energy's Board of Directors declared a three-for-two stock split of MGE Energy's outstanding shares of common stock, effective in the form of a stock dividend. Shareholders of record at the close of business on January 24, 2014, received one additional share of MGE Energy common stock for every two shares of common stock owned on that date. The additional shares were distributed on February 7, 2014. Shareholders received cash in lieu of any fractional shares of common stock they otherwise would have received in connection with the dividend. All share and per share data provided in this report give effect to this stock split.

MGE Energy sells shares of its common stock through its Stock Plan. Those shares may be newly issued shares or shares that MGE Energy has purchased in the open market for resale to participants in the Stock Plan. All sales under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC. For the years endedDecember 31,2016 and 2015, MGE Energy did not issue any new shares of common stock under the Stock Plan.

MGE Energy purchases shares on the open market to provide shares to meet obligations to participants in the Stock Plan. The shares are purchased on the open market through a securities broker-dealer and then are reissued under the Stock Plan as needed to meet share delivery requirements. The volume and timing of share repurchases in the open market depends upon the level of dividend reinvestment and optional share purchases being made from time to time by plan participants. As a result, there is no specific maximum number of shares to be repurchased and no specified termination date for the repurchases.

During the years endedDecember 31,2016 and 2015, MGE Energy paid $41.8 million (or $1.21 per share) and $40.0 million (or $1.16 per share), respectively, in cash dividends on its common stock. Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends, above the PSCW authorized amount that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. See Footnote 9 for further discussion of the mortgage indenture covenants. During the years endedDecember 31,2016 and 2015, MGE paid $50.0 million and $30.0 million, respectively, in cash dividends to MGE Energy. In 2016, MGE also transferred its ownership interest in MGE Transco to MGE Energy in the form of a dividend in kind of $15.8 million. See Footnote 4 for further information.

b. Dilutive Shares Calculation - MGE Energy.

MGE Energy does not hold any dilutive securities.

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Noncontrolling Interest

12 Months Ended

Dec. 31, 2016

Noncontrolling Interest [Line Items]

Noncontrolling Interest

Noncontrolling Interest - MGE.

The noncontrolling interest on MGE's consolidated balance sheets at December 31 was as follows:

(In thousands)		2016		2015
MGE Power Elm Road(a)	$	80,362	$	79,113
MGE Power West Campus(a)		35,303		37,603
MGE Transco(b)		-		23,592
Total Noncontrolling Interest	$	115,665	$	140,308

The net income attributable to noncontrolling interest, net of tax, for the years ended December 31,2016, 2015, and 2014was as follows:

(In thousands)		2016		2015		2014
MGE Power Elm Road(a)	$	14,748	$	16,577	$	16,160
MGE Power West Campus(a)		7,200		7,348		7,666
MGE Transco(b)		1,410		2,172		2,484
Net Income Attributable to Noncontrolling Interest, Net of Tax	$	23,358	$	26,097	$	26,310

(a)MGE Power Elm Road and MGE Power West Campus are not subsidiaries of MGE; however, they have been consolidated in the consolidated financial statements of MGE (see Footnote 2). MGE Power Elm Road and MGE Power West Campus are100% owned by MGE Power, and MGE Power is 100% owned by MGE Energy. MGE Energy's proportionate share of the equity and net income (through its wholly owned subsidiary MGE Power) of MGE Power Elm Road and MGE Power West Campus is classified within the MGE consolidated financial statements as noncontrolling interest.

(b)At December 31,2016, MGE Energy is the owner of MGE Transco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority as a result of continued funding of ATC capital contributions by MGE Energy.As a result of the change in majority ownership in MGE Transco, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. The change in consolidation was applied prospectively by reducing its investment and noncontrolling interest on MGE's consolidated financial statements. The change had no effect on MGE Energy's consolidated financial statements; however, MGE Energy's proportionate share of the equity and net income of MGE Transco classified as noncontrolling interest was deconsolidated from MGE's financial statements. No gain or loss was recognized in July 2016 due to MGE ceasing to have a controlling financial interest.

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Long-Term Debt

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt- MGE Energy and MGE.

a.Long-Term Debt.

		2016				2015
(In thousands)		MGE Energy		MGE		MGE Energy		MGE
First Mortgage Bonds:(a)
7.70%, 2028 Series	$	1,200	$	1,200	$	1,200	$	1,200
Tax Exempt Debt:
3.45%, 2027 Series,
Industrial Development Revenue Bonds		19,300		19,300		19,300		19,300
Medium-Term Notes:(b)
5.25%, due 2017(c)		30,000		30,000		30,000		30,000
6.12%, due 2028		20,000		20,000		20,000		20,000
7.12%, due 2032		25,000		25,000		25,000		25,000
6.247%, due 2037		25,000		25,000		25,000		25,000
Total Medium-Term Notes		100,000		100,000		100,000		100,000
Other Long-Term Debt:(d)
5.59%, due 2018(e)		20,000		20,000		20,000		20,000
3.38%, due 2020(e)		15,000		15,000		15,000		15,000
3.09%, due 2023(e)		30,000		30,000		30,000		30,000
3.29%, due 2026(e)		15,000		15,000		15,000		15,000
5.68%, due 2033(f)		27,120		27,120		28,063		28,063
5.19%, due 2033(f)		17,983		17,983		18,640		18,640
5.26%, due 2040(e)		15,000		15,000		15,000		15,000
5.04%, due 2040(g)		38,472		38,472		40,138		40,138
4.74%, due 2041(g)		24,167		24,167		25,167		25,167
4.38%, due 2042(e)		28,000		28,000		28,000		28,000
4.42%, due 2043(e)		20,000		20,000		20,000		20,000
4.47%, due 2048(e)		20,000		20,000		20,000		20,000
Total Other Long-Term Debt		270,742		270,742		275,008		275,008
Long-term debt due within one year		(4,333)		(4,333)		(4,266)		(4,266)
Unamortized discount and debt issuance costs		(4,118)		(4,118)		(4,498)		(4,498)
Total Long-Term Debt	$	382,791	$	382,791	$	386,744	$	386,744

(a)MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust, under which its first mortgage bonds are issued. The Mortgage Indenture provides that dividends or any other distribution or purchase of shares may not be made if the aggregate amount thereof since December 31, 1945 would exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31,2016, approximately $338.5 million was available for the payment of dividends under this covenant.

(b)The indenture under which MGE's Medium-Term notes are issued provides that those notes will be entitled to be equally and ratably secured in the event that MGE issues any additional first mortgage bonds.

(c)MGE had $30 million of medium-term notes mature in January 2017. MGE issued $40 million of new long-term unsecured debt on January 13, 2017, to refinance the maturing $30 million medium-term notes and assist with the financing of additional capital expenditures. The new debt carries an interest rate of 3.76% per annum over its 35-year term. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt. In accordance with applicable accounting guidance, MGE has classified the $30 million of maturing medium-term notes as long-term debt on the consolidated balance sheets for the year ended December 31, 2016.

(d)Unsecured notes issued pursuant to various Note Purchase Agreements with one or more purchasers. The notes are not issued under, or governed by, MGE's Indenture dated as of September 1, 1998, which governs MGE's Medium-Term Notes.

(e)Issued by MGE. Under that Note Purchase Agreement: (i) note holders have the right to require MGE to repurchase their notes at par in the event of an acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy, (ii) MGE must maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%, and (iii) MGE cannot issue "Priority Debt" in an amount exceeding 20% of its consolidated assets. Priority Debt is defined as any indebtedness of MGE secured by liens other than specified liens permitted by the Note Purchase Agreement and certain unsecured indebtedness of certain subsidiaries. As of December 31, 2016, MGE was in compliance with the covenant requirements.

(f)Issued by MGE Power West Campus. The Note Purchase Agreements require it to maintain a projected debt service coverage ratio of not less than 1.25 to 1.00, and debt to total capitalization ratio of not more than 0.65 to 1.00. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power West Campus for use of its ownership interest in the WCCF pursuant to a long-term lease.As of December 31, 2016, MGE Power West Campuswas in compliance with the covenant requirements.

(g)Issued by MGE Power Elm Road. The Note Purchase Agreement requires MGE Power Elm Road to maintain a projected and actual debt service coverage ratio at the end of any calendar quarter of not less than 1.25 to 1.00 for the trailing 12-month period. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of its ownership interest in the Elm Road Units pursuant to long-term leases.As of December 31, 2016, MGE Power Elm Road was in compliance with the covenant requirements.

b. Long-Term Debt Maturities.

Below is MGE Energy's and MGE's aggregate maturities for all long-term debt for years following December 31,2016.

		MGE
(In thousands)		Energy		MGE *
2017	$	4,358		4,358
2018		24,452		24,452
2019		4,553		4,553
2020		19,659		19,659
2021		4,771		4,771
Future years		333,449		333,449
Total	$	391,242	$	391,242

*Includes $45.1million for MGE Power West Campus and $62.6 million for MGE Power Elm Road, all of which are consolidated with MGE's debt (see Footnote 2 for further information).

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Notes Payable to Banks, Commercial Paper, and Lines of Credit

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Notes Payable to Banks, Commercial Paper, and Lines of Credit

Notes Payable to Banks, Commercial Paper, and Lines of Credit.

a. MGE Energy.

At December 31,2016, MGE Energy had an unsecured, committed revolving line of credit of $50 million expiring June 1, 2020. At December 31,2016, no borrowings were outstanding under this facility.

The agreement requires MGE Energy to maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%. A change in control constitutes a default under the agreement. Change in control events are defined as (i) a failure by MGE Energy to hold 100% of the outstanding voting equity interest in MGE or (ii) the acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy by one person or two or more persons acting in concert.As of December 31, 2016, MGE Energywas in compliance with the covenant requirements.

b.MGE.

For short-term borrowings, MGE generally issues commercial paper (issued at the prevailing discount rate at the time of issuance), which is supported by unused committed bank lines of credit. At December 31,2016, MGE had two unsecured, committed revolving lines of credit for a total of $100 million expiring June 1, 2020. At December 31,2016, no borrowings were outstanding under these facilities, and MGE had no commercial paper outstanding.

The agreements require MGE to maintain a ratio of consolidated debt to consolidated total capitalization not to exceed a maximum of 65%. The ratio calculation excludes assets, liabilities, revenues, and expenses included in MGE's financial statements as the result of the consolidation of VIEs, such as MGE Power West Campus and MGE Power Elm Road. A change in control constitutes a default under the agreements. Change in control events are defined as (i) a failure by MGE Energy to hold 100% of the outstanding voting equity interest in MGE or (ii) the acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy by one person or two or more persons acting in concert. As of December 31, 2016, MGE was in compliance with the covenant requirements.

c. MGE Energy and MGE.

Information concerning short-term borrowings for the past two years is shown below:

		As of December 31,
(In thousands)		2016		2015
MGE Energy(a)
Available lines of credit	$	150,000	$	150,000
Short-term debt outstanding	$	-	$	-
Weighted-average interest rate		-%		-%
During the year:
Maximum short-term borrowings	$	-	$	17,500
Average short-term borrowings	$	-	$	1,511
Weighted-average interest rate		-%		0.17%
MGE
Available lines of credit	$	100,000	$	100,000
Commercial paper outstanding	$	-	$	-
Weighted-average interest rate		-%		-%
During the year:
Maximum short-term borrowings	$	-	$	17,500
Average short-term borrowings	$	-	$	1,511
Weighted-average interest rate		-%		0.17%

(a)MGE Energy short-term borrowings include MGE Energy and MGE lines of credit and MGE commercial paper.

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Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments - MGE Energy and MGE.

Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The accounting standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability including assumptions about risk. The standard also establishes a three level fair value hierarchy based upon the observability of the assumptions used and requires the use of observable market data when available. The levels are:

Level 1 - Pricing inputs are quoted prices within active markets for identical assets or liabilities.

Level 2 - Pricing inputs are quoted prices within active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations that are correlated with or otherwise verifiable by observable market data.

Level 3 - Pricing inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability.

a. Fair Value of Financial Assets and Liabilities Recorded at the Carrying Amount.

At December 31,2016 and 2015, the carrying amount of cash, cash equivalents, and outstanding commercial paper approximates fair market value due to the short maturity of those investments and obligations. The estimated fair market value of MGE Energy's and MGE's long-term debt is based on quoted market prices for similar financial instruments at December 31.Since long-term debt is not traded in an active market, it is classified as Level 2.The estimated fair market value of financial instruments are as follows:

		2016				2015
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	95,959	$	95,959	$	81,384	$	81,384
Liabilities:
Long-term debt(a)		391,242		430,122		395,508		435,767
MGE
Assets:
Cash and cash equivalents	$	10,768	$	10,768	$	26,760	$	26,760
Liabilities:
Long-term debt(a)		391,242		430,122		395,508		435,767
(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized
discount of $4.1 million and $4.5 million at December 31, 2016 and 2015, respectively.

b. Recurring Fair Value Measurements.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.

	Fair Value as of December 31, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		500		500		-		-
Total Assets	$	2,027	$	1,541	$	-	$	486
Liabilities:
Derivatives, net	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
MGE
Assets:
Derivatives, net	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		143		143		-		-
Total Assets	$	1,670	$	1,184	$	-	$	486
Liabilities:
Derivatives, net	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
	Fair Value as of December 31, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		759		759		-		-
Total Assets	$	993	$	759	$	-	$	234
Liabilities:
Derivatives, net(b)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
MGE
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		148		148		-		-
Total Assets	$	382	$	148	$	-	$	234
Liabilities:
Derivatives, net(b)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
(b)     These amounts are shown gross and exclude $1.0 million of collateral that was posted against
derivative positions with counterparties as of December 31, 2015.

No transfers were made in or out of Level 1 or Level 2 for the year ended December 31, 2016.

Investments include exchange-traded investment securities valued using quoted prices on active exchanges and are therefore classified as Level 1.

Derivatives include exchange-traded derivative contracts, over-the-counter transactions, a purchased power agreement, and FTRs. Most exchange-traded derivative contracts are valued based on unadjusted quoted prices in active markets and are therefore classified as Level 1. A small number of exchange-traded derivative contractsare valued using quoted market pricing in markets with insufficient volumes and are therefore considered unobservable and classified as Level 3. Transactions done with an over-the-counter party are on inactive markets and are therefore classified as Level 3. These transactions are valued based on quoted prices from markets with similar exchange-traded transactions. FTRs are priced based upon monthly auction results for identical or similar instruments in a closed market with limited data available and are therefore classified as Level 3.

The purchased power agreement (see Footnote 15) was valued using an internally-developed pricing model and therefore is classified as Level 3. The model projects future market energy prices and compares those prices to the projected power costs to be incurred under the contract. Inputs to the model require significant management judgment and estimation. Future energy prices are based on a forward power pricing curve using exchange-traded contracts in the electric futures market, where such exchange-traded contracts exist, and upon calculations based on forward gas prices, where such exchange-traded contracts do not exist. A basis adjustment is applied to the market energy price to reflect the price differential between the market price delivery point and the counterparty delivery point. The historical relationship between the delivery points is reviewed and a discount (below 100%) or premium (above 100%) is derived. This comparison is done for both peak times when demand is high and off peak times when demand is low. If the basis adjustment is lowered, the fair value measurement will decrease, and if the basis adjustment is increased, the fair value measurement will increase.

The projected power costs anticipated to be incurred under the purchased power agreement are determined using many factors, including historical generating costs, future prices, and expected fuel mix of the counterparty. An increase in the projected fuel costs would result in a decrease in the fair value measurement of the purchased power agreement. A significant input that MGE estimates is the counterparty's fuel mix in determining the projected power cost. MGE also considers the assumptions that market participants would use in valuing the asset or liability. This consideration includes assumptions about market risk such as liquidity, volatility, and contract duration. The fair value model uses a discount rate that incorporates discounting, credit, and model risks.

The following table presents the significant unobservable inputs used in the pricing model as of December 31:

	Model Input
Significant Unobservable Inputs	2016	2015
Basis adjustment:
On peak	91.9%	96.9%
Off peak	93.4%	95.1%
Counterparty fuel mix:
Internal generation	55%-75%	60%-75%
Purchased power	45%-25%	40%-25%

The deferred compensation plan allows participants to defer certain cash compensation into a notional investment account. These amounts are included within other deferred liabilities in the consolidated balance sheets of MGE Energy and MGE. The notional investments earn interest based upon the semiannual rate of U.S. Treasury Bills having a 26week maturity increased by 1% compounded monthly with a minimum annual rate of 7%, compounded monthly. The notional investments are based upon observable market data, however since the deferred compensation obligations themselves are not exchanged in an active market they are classified as Level 2.

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis.

(In thousands)		2016		2015		2014
Balance as of January 1,	$	(53,501)	$	(53,986)	$	(64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities		3,195		484		10,642
Included in other comprehensive income		-		-		-
Included in earnings		(5,347)		(6,635)		5,129
Included in current assets		(142)		-		-
Purchases		23,346		23,052		26,382
Sales		-		-		-
Issuances		-		-		-
Settlements		(17,857)		(16,416)		(31,511)
Transfers in and/or out of Level 3		-		-		-
Balance as of December 31,	$	(50,306)	$	(53,501)	$	(53,986)
Total gains (losses) included in earnings attributed to the
change in unrealized gains (losses) related to assets and
liabilities held at December 31,(c)	$	-	$	-	$	-

The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis (c).

(In thousands)
Year Ended December 31,		2016		2015		2014
Purchased power expense	$	(5,262)	$	(6,663)	$	5,137
Cost of gas sold expense		(85)		28		(8)
Total	$	(5,347)	$	(6,635)	$	5,129

(c)MGE's exchange-traded derivative contracts, over-the-counter party transactions, purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.

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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes.

a. MGE Energy and MGE Income Taxes.

MGE Energy files a consolidated federal income tax return that includes the operations of all subsidiary companies. The subsidiaries calculate their respective federal income tax provisions as if they were separate taxable entities.

On a consolidated and separate company basis, the income tax provision consists of the following provision (benefit) components for the years endedDecember 31:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Current payable:
Federal	$	16,908	$	16,837	$	(891)	$	17,521	$	19,295	$	637
State		3,287		2,774		(589)		3,497		3,443		(451)
Net-deferred:
Federal		17,571		15,951		39,284		16,391		13,538		38,553
State		4,850		5,976		10,600		4,485		5,305		10,625
Amortized investment tax credits		(103)		(175)		(219)		(103)		(175)		(219)
Total income tax provision	$	42,513	$	41,363	$	48,185	$	41,791	$	41,406	$	49,145

Theconsolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:

	MGE Energy			MGE
	2016	2015	2014	2016	2015	2014
Statutory federal income tax rate	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %
State income taxes, net of federal benefit	5.1 %	5.2 %	5.1 %	5.1 %	5.2 %	5.1 %
Amortized investment tax credits	(0.1)%	(0.2)%	(0.2)%	(0.1)%	(0.2)%	(0.2)%
Credit for electricity from wind energy	(1.6)%	(1.8)%	(1.7)%	(1.7)%	(1.8)%	(1.7)%
Domestic manufacturing deduction	(1.3)%	(1.4)%	-%	(1.3)%	(1.4)%	-%
AFUDC equity, net	(0.2)%	(0.1)%	(0.8)%	(0.2)%	(0.1)%	(0.8)%
Other, net, individually insignificant	(0.9)%	-%	0.1 %	(0.9)%	-%	0.1 %
Effective income tax rate	36.0 %	36.7 %	37.5 %	35.9 %	36.7 %	37.5 %

The significant components of deferred tax liabilities (assets) that appear on the consolidated balance sheets as of December 31are as follows:

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Property-related	$	344,721	$	327,918	$	344,630	$	327,822
Investment in ATC(a)		71,898		38,213		-		30,382
Bond transactions		1,324		1,422		1,324		1,422
Pension and other postretirement benefits		63,516		57,697		63,516		57,697
Derivatives		20,304		21,660		20,304		21,660
Tax deductible prepayments		8,404		8,011		8,404		8,011
Other		16,606		14,997		16,571		14,831
Gross deferred income tax liabilities		526,773		469,918		454,749		461,825
Investment in ATC(a)		(31,212)		-		-		-
Accrued expenses		(22,410)		(21,391)		(22,410)		(21,391)
Pension and other postretirement benefits		(48,860)		(46,582)		(48,860)		(46,582)
Deferred tax regulatory account		(903)		(1,047)		(903)		(1,047)
Derivatives		(20,304)		(21,660)		(20,304)		(21,660)
Other		(19,340)		(18,523)		(19,224)		(18,589)
Gross deferred income tax assets		(143,029)		(109,203)		(111,701)		(109,269)
Less valuation allowance		69		70		69		70
Net deferred income tax assets		(142,960)		(109,133)		(111,632)		(109,199)
Deferred income taxes	$	383,813	$	360,785	$	343,117	$	352,626

(a)As of December 1, 2016, MGE transferred its ownership interest in ATC to MGE Energy, resulting in a deferred intercompany gain and a corresponding step-up in tax basis.

Our state valuation allowance reduces MGE Energy's and MGE's deferred tax assets for state carryforward losses to estimated realizable value due to the uncertainty of future income estimates in various state tax jurisdictions.For tax purposes, as of December 31,2016, both MGE Energy and MGE had approximately $1.4 million of state tax net operating loss deductions subject to a valuation allowance that expire between 2020 and 2023 if unused.

b. Accounting for Uncertainty in Income Taxes - MGE Energy and MGE.

MGE Energy and MGE account for the difference between the tax benefit amount taken on prior year tax returns, or expected to be taken on a current year tax return, and the tax benefit amount recognized in the financial statements as an unrecognized tax benefit.

A tabular reconciliation of unrecognized tax benefits and interest from January 1, 2014 to December 31, 2016, is as follows:

(In thousands)
Unrecognized Tax Benefits:		2016		2015		2014
Unrecognized tax benefits, January 1,	$	2,528	$	2,365	$	2,363
Additions based on tax positions related to the current year		452		488		610
Additions based on tax positions related to the prior years		39		520		618
Reductions based on tax positions related to the prior years		(532)		(845)		(1,226)
Unrecognized tax benefits, December 31,	$	2,487	$	2,528	$	2,365
(In thousands)
Interest on Unrecognized Tax Benefits:		2016		2015		2014
Accrued interest on unrecognized tax benefits, January 1,	$	311	$	92	$	101
Reduction in interest expense on uncertain tax positions		(27)		(102)		(97)
Interest expense on uncertain tax positions		104		321		88
Accrued interest on unrecognized tax benefits, December 31,	$	388	$	311	$	92

Unrecognized tax benefits are liabilities shown with "Other deferred liabilities" on the consolidated balance sheets. The interest component is offset by a regulatory asset.

At December 31,2016, 2015, and 2014, MGE Energy and MGE had unrecognized tax benefits primarily related to temporary tax differences associated with the change in income tax method of accounting for electric generation and electric and gas distribution repairs. In addition, at December 31,2016, MGE Energy and MGE had unrecognized tax benefits relating to permanent differences and tax credits of less than $0.1 million. There were no unrecognized tax benefits at December 31,2015 or 2014, related to federal permanent differences and tax credits.

The unrecognized tax benefits at December 31,2016, are not expected to significantly increase or decrease within the next twelve months. In addition, statutes of limitations will expire for MGE Energy and MGE tax returns. The impact of the statutes of limitations expiring is not anticipated to be material. The following table shows tax years that remain subject to examination by major jurisdiction:

Taxpayer	Open Years
MGE Energy and consolidated subsidiaries in federal return	2013 through 2016
MGE Energy Wisconsin combined reporting corporation return	2012 through 2016

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Pension Plans and Other Postretirement Benefits

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Pension Plans and Other Postretirement Benefits

Pension Plans and Other Postretirement Benefits - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits, and defined contribution 401(k) benefit plans for its employees and retirees. MGE's costs for the 401(k) plans were $3.1 million, $2.8 million, and $2.5 million in 2016, 2015, and 2014, respectively. A measurement date of December 31 is utilized for all pension and postretirement benefit plans.

All employees hired after December 31, 2006, have been enrolled in the defined contribution pension plan, rather than the defined benefit pension plan previously in place.

a.Benefit Obligations and Plan Assets.

(In thousands)		Pension Benefits				Other Postretirement Benefits
Change in Benefit Obligations:		2016		2015		2016		2015
Net benefit obligation at beginning of year	$	332,565	$	340,233	$	74,935	$	78,478
Service cost		5,365		7,263		1,271		1,559
Interest cost		12,393		13,766		2,681		3,075
Plan participants' contributions		-		-		767		741
Actuarial loss (gain)(a)		11,412		(17,576)		2,638		(5,828)
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Less: federal subsidy on benefits paid(b)		-		-		187		190
Benefit obligation at end of year	$	349,556	$	332,565	$	78,842	$	74,935
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	290,716	$	288,548	$	40,170	$	38,952
Actual return on plan assets		24,181		4,153		3,236		603
Employer contributions		9,215		9,136		2,641		3,154
Plan participants' contributions		-		-		767		741
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Fair value of plan assets at end of year	$	311,933	$	290,716	$	43,177	$	40,170
Funded Status at December 31	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

(a) In 2016, lower discount rates were the main driver of the actuarial loss.

(b) In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For the years ended December 31, 2016 and 2015, the subsidy due to MGE was $0.2 million.

The accumulated benefit obligation for the defined benefit pension plans at the end of 2016 and 2015 was $319.9 million and $302.5 million, respectively.

The amounts recognized in the consolidated balance sheets to reflect the funded status of the plans at December 31 are as follows:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Long-term asset	$	2,020	$	-	$	-	$	-
Current liability		(972)		(966)		-		(52)
Long-term liability		(38,671)		(40,883)		(35,665)		(34,713)
Net liability	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31 and are recorded as regulatory assets in our consolidated balance sheets:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Net actuarial loss	$	84,656	$	80,660	$	14,728	$	13,086
Prior service benefit		(446)		(436)		(12,489)		(15,158)
Transition obligation		-		-		26		29
Total	$	84,210	$	80,224	$	2,265	$	(2,043)

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Projected Benefit Obligation in Excess of Plan Assets		2016		2015
Projected benefit obligation, end of year	$	227,739	$	332,565
Fair value of plan assets, end of year		188,096		290,716

The accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Accumulated Benefit Obligation in Excess of Plan Assets		2016		2015
Accumulated benefit obligation, end of year	$	26,927	$	24,606
Fair value of plan assets, end of year		-		-

b. Net Periodic Cost.

(In thousands)		Pension Benefits						Other Postretirement Benefits
Components of Net Periodic Cost (Benefit):		2016		2015		2014		2016		2015		2014
Service cost	$	5,365	$	7,263	$	6,179	$	1,271	$	1,559	$	1,339
Interest cost		12,393		13,766		13,574		2,681		3,075		3,166
Expected return on assets		(22,365)		(22,682)		(22,051)		(2,829)		(2,812)		(2,615)
Amortization of:
Transition obligation		-		-		-		3		3		3
Prior service cost (benefit)		10		23		204		(2,669)		(2,669)		(2,669)
Actuarial loss		5,600		5,395		703		589		953		252
Net periodic cost (benefit)	$	1,003	$	3,765	$	(1,391)	$	(954)	$	109	$	(524)

c. Plan Assumptions.

The weighted-average assumptions used to determine the benefit obligations were as follows for the years ended December 31:

	Pension Benefits		Other Postretirement Benefits
	2016	2015	2016	2015
Discount rate(a)	4.29%	4.51%	4.11%	4.32%
Rate of compensation increase	3.71%	3.78%	N/A	N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year	N/A	N/A	6.25%	6.5%
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate)	N/A	N/A	5.0%	5.0%
Year that the rate reaches the ultimate trend rate	N/A	N/A	2022	2022

(a) In 2015, MGE refined its methodology for using discount rates to measure the components of net periodic benefit cost. The refined methodology uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components.

The weighted-average assumptions used to determine the net periodic cost were as follows for the years ended December 31:

	Pension Benefits			Other Postretirement Benefits
	2016	2015	2014	2016	2015	2014
Discount rate	4.51%	4.11%	4.88%	4.32%	3.96%	4.69%
Expected rate of return on plan assets	7.65%	7.80%	8.10%	6.96%	7.06%	7.07%
Rate of compensation increase	3.76%	3.84%	3.93%	N/A	N/A	N/A

The assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.The following table shows how an assumed 1% increase or 1% decrease in health care cost trends could impact postretirement benefits in 2016 dollars:

(In thousands)		1% Increase		1% Decrease
Effect on other postretirement benefit obligation	$	1,175	$	(1,479)
Effect on total service and interest cost components		54		(67)

MGE employs a building-block approach in determining the expected long-term rate of return for asset classes. Historical markets are studied and long-term historical relationships among asset classes are analyzed, consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as interest rates and dividend yields, are evaluated before long-term capital market assumptions are determined.

The expected long-term nominal rate of return for plan assets is primarily a function of expected long-term real rates of return for component asset classes and the plan's target asset allocation in conjunction with an inflation assumption. Peer data and historical returns are reviewed to check for appropriateness.

d. Investment Strategy.

MGE employs a total return investment approach whereby a mix of equities, fixed income, and real estate investments are used to maximize the expected long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan-funded status, and corporate financial condition. The investment portfolio contains a diversified blend of equity, fixed income, and real estate investments. Investment risk is measured and monitored on an ongoing basis through periodic investment portfolio reviews and liability measurements.

The asset allocation for MGE's pension plans at the end of 2016 and 2015, and the target allocation for 2017, by asset category, follows:

	Target Allocation	Percentage of Plan Assets at Year End
		2016	2015
Equity securities(a)	63.0 %	65.0 %	63.0 %
Fixed income securities	30.0 %	27.0 %	29.0 %
Real estate	7.0 %	8.0 %	8.0 %
Total	100.0 %	100.0 %	100.0 %

(a) Target allocations for equity securities are broken out as follows: 45.5% United States equity,

17.5% non-United States equity.

The fair value of plan assets for the postretirement benefit plans is $43.2 million and $40.2 million at the end of 2016 and 2015, respectively. Of this amount, $37.0 million and $34.1 million at the end of 2016and 2015, respectively, were held in the master pension trust and are allocable to postretirement health expenses. The target asset allocation and investment strategy for the portion of assets held in the master pension trust are the same as that explained for MGE's pension plans. The remainder of postretirement benefit assets are held either in an insurance continuance fund for the payment of retiree life benefits or health benefit trusts for payment of retiree health premiums. The asset allocation for the insurance continuance fund is determined by the life insurer. The target asset allocation for the health benefit trusts are established based on a similar investment strategy as assets held in the master pension trust, with consideration for liquidity needs in the health benefit trusts.

e. Concentrations of Credit Risk.

MGE evaluated its pension and other postretirement benefit plans' asset portfolios for the existence of significant concentrations of credit risk as of December 31,2016. Types of concentrations that were evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, and foreign country. As of December 31,2016, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in MGE pension and postretirement benefit plan assets.

f. Fair Value Measurements of Plan Assets.

Pension and other postretirement benefit plan investments are recorded at fair value. See Footnote 11 for more information regarding the fair value hierarchy.

The following descriptions are the categories of underlying plan assets held within the pension and other postretirement benefit plans as of December 31,2016:

Cash and Cash Equivalents – This category includes highly liquid investments with maturities of less than three months which are traded in active markets.

Equity Securities – These securities consist of U.S. and international stock funds. The U.S. stock funds are primarily invested in domestic equities. Securities in these funds are typically priced using the closing price from the applicable exchange, NYSE, Nasdaq, etc. The international funds are composed of international equities. Securities are priced using the closing price from the appropriate local stock exchange.

Fixed Income Securities – These securities consist of U.S. bond funds and short-term funds. U.S. bond funds are priced by a pricing agent using inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. The short-term funds are valued initially at cost and adjusted for amortization of any discount or premium.

Real Estate – The fair value of real estate properties is determined through an external appraisal process.

Insurance Continuance Fund (ICF) – The ICF is a supplemental retirement plan that includes assets that have been segregated and restricted to pay retiree term life insurance premiums.

Fixed Rate Fund – The Fixed Rate fund is supported by an underlying portfolio of fixed income securities, including public bonds, commercial mortgages, and private placement bonds. Public market data and GAAP reported market values are used when available to determine fair value.

All of the fair values of MGE's plan assets are measured using net asset value, except for cash and cash equivalents which are considered level 1 investments. The fair values of MGE's plan assets by asset category are as follows:

(In thousands)		2016		2015
Cash and Cash Equivalents	$	284	$	300
Equity Securities:
U.S. Large Cap		107,406		98,949
U.S. Mid Cap		25,966		22,446
U.S. Small Cap		33,836		27,561
International Blend		59,054		55,948
Fixed Income Securities:
Short-Term Fund		4,318		3,388
High Yield Bond		17,978		16,225
Long Duration Bond		71,512		73,112
Real Estate		29,441		27,231
Insurance Continuance Fund		1,514		1,518
Fixed Rate Fund		3,801		4,208
Total	$	355,110	$	330,886

g. Expected Cash Flows.

Contributions to the qualified plans for 2017 were $6.0 million, which was paid in January 2017. MGE does not expect to make contributions to the plans for 2018.The contributions for years after 2018 are not yet currently estimated. MGE has adopted the asset smoothing as permitted in accordance with the Pension Protection Act of 2006, including modifications made by WRERA.

Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions.

In 2016, MGE made $14.5 millionin employer contributions to its pension and postretirement plans.

h. Benefit Payments.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

		Pension		Other Postretirement Benefits
(In thousands)		Pension Benefits		Gross Postretirement Benefits		Expected Medicare Part D Subsidy		Net Postretirement Benefits
2017	$	13,468	$	3,623	$	(232)	$	3,391
2018		14,618		3,998		(252)		3,746
2019		15,632		4,442		(274)		4,168
2020		16,429		4,932		(302)		4,630
2021		17,263		5,442		(326)		5,116
2022 - 2026		99,725		31,065		(2,122)		28,943

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Share-Based Compensation

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation - MGE Energy and MGE.

Under MGE Energy'sDirector Incentive Plan and Performance Unit Plan, non-employee directors and eligible employees may receive performance units that entitle the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the set performance period. In accordance with the plans' provisions, these awards are subject to prescribed vesting schedules and must be settled in cash. Accordingly, no shares of common stock will be issued in connection with the plans.

On the grant date, MGE Energy and MGE measure the cost of the directoror employee services received in exchange for a performance unit award based on the current market value of MGE Energy common stock. The fair value of the awards is re-measured quarterly, including at December 31,2016, as required by applicable accounting standards. Changes in fair value as well as the original grant are recognized as compensation cost. Since this amount is re-measured throughout the vesting period, the compensation cost is subject to variability.

Units granted under the Director Incentive Plan are subject to a three-year vesting schedule. The most recent three years of units granted under this plan are as follows:

Grant Date	MGE Energy Units Granted
January 20, 2017	4,032
January 15, 2016	3,773
January 16, 2015	3,794

Units granted under the Performance Unit Plan are subject to a five-year vesting schedule. The most recent units granted under this plan are as follows:

Grant Date	MGE Energy Units Granted
February 19, 2016	19,055
February 20, 2015	18,948
February 21, 2014	21,991
February 15, 2013	22,884

For nonretirement eligible employees, stock-based compensation costs are accrued and recognized using the graded vesting method. Compensation cost for retirement eligible employees or employees that will become retirement eligible during the vesting schedule are recognized on an abridged horizon.

During the years endedDecember 31,2016, 2015, and 2014, MGE recorded $3.1 million, $1.0 million,and $2.0 million, respectively, in compensation expense as a result of awards under the plans. In January 2016, cash payments of $1.2 million were distributed relating to awards that were granted in 2011. During the year endedDecember 31,2015, MGE recorded a $0.2 million gain on 4,676 units forfeited. No forfeitures occurred during theyears endedDecember 31,2016 and 2014. At December 31,2016, $6.9 million of outstandingawards are vested, and of this amount, no cash settlements have occurred.

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Derivative and Hedging Instruments

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative and Hedging Instruments

Derivative and Hedging Instruments - MGE Energy and MGE.

a. Purpose.

As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, MGE Energy and MGE recognize such derivatives in the consolidated balance sheets at fair value. MGE's financial commodity derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism.

b. Notional Amounts.

The gross notional volume of open derivatives is as follows:

	December 31, 2016	December 31, 2015
Commodity derivative contracts	393,395 MWh	355,580 MWh
Commodity derivative contracts	4,195,000 Dth	5,037,500 Dth
FTRs	2,251 MW	2,000 MW
PPA	3,250 MW	3,850 MW

c.Financial Statement Presentation.

MGE purchases and sells exchange-traded and over-the-counter options, swaps, and future contracts. These arrangements are primarily entered into to help stabilize the price risk associated with gas or power purchases. These transactions are employed by both MGE's gas and electric segments. Additionally, as a result of the firm transmission agreements that MGE holds on electricity transmission paths in the MISO market,MGE holdsFTRs. An FTR is a financial instrument that entitles the holder to a stream of revenues or charges based on the differences in hourly day-ahead energy prices between two points on the transmission grid. The fair values of these instruments are offset with a corresponding regulatory asset/liability depending on whether they are in a net loss/gain position. Depending on the nature of the instrument, the gain or loss associated with these transactions will be reflected as cost of gas sold, fuel for electric generation, or purchased power expense in the delivery month applicable to the instrument. At December 31,2016, the fair value of exchange traded derivatives and FTRs exceeded their cost basis by $1.3 million. At December 31, 2015, the cost basis of exchange traded derivatives and FTRs exceeded their fair value by $0.8 million.

MGE is a party to a purchased power agreement that provides MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. The agreement also allows MGE an option to extend the contract after the base term. The agreement is accounted for as a derivative contract and is recognized at its fair value on the consolidated balance sheets. However, the derivative qualifies for regulatory deferral and is recognized with a corresponding regulatory asset or liability depending on whether the fair value is in a loss or gain position. The fair value of the contract at December 31,2016 and 2015, reflects a loss position of $50.6 million and $53.3 million, respectively. The actual cost will be recognized in purchased power expense in the month of purchase.

The following table summarizes the fair value of the derivative instruments on the consolidated balance sheets. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, MGE Energy and MGE have netted instruments with the same counterparty under a master netting agreement as well as the netting of collateral.

		Derivative Assets		Derivative Liabilities
(In thousands)					Balance Sheet Location
December 31, 2016
Commodity derivative contracts(a)	$	1,227	$	164	Other current assets
Commodity derivative contracts(a)		157		54	Other deferred charges
FTRs		143		-	Other current assets
PPA		N/A		7,620	Derivative liability (current)
PPA		N/A		42,970	Derivative liability (long-term)
December 31, 2015
Commodity derivative contracts(a)	$	146	$	1,266	Derivative liability (current)
Commodity derivative contracts(a)		144		70	Derivative liability (long-term)
FTRs		234		-	Other current assets
PPA		N/A		8,340	Derivative liability (current)
PPA		N/A		44,930	Derivative liability (long-term)

(a)As of December 31, 2015, collateral of $1.0 million was posted against and netted with derivative liability positions on the consolidated balance sheets. No collateral was posted against derivative positions as of December 31, 2016.

The following tables show the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the consolidated balance sheets.

Offsetting of Derivative Assets
		Gross Amounts		Gross Amounts Offset in Balance Sheets		Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
(In thousands)
December 31, 2016
Commodity derivative contracts	$	1,384	$	(218)	$	-	$	1,166
FTRs		143		-		-		143
December 31, 2015
Commodity derivative contracts	$	290	$	(290)	$	-	$	-
FTRs		234		-		-		234

Offsetting of Derivative Liabilities
		Gross Amounts		Gross Amounts Offset in Balance Sheets		Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
(In thousands)
December 31, 2016
Commodity derivative contracts	$	218	$	(218)	$	-	$	-
PPA		50,590		-		-		50,590
December 31, 2015
Commodity derivative contracts	$	1,336	$	(290)	$	(1,038)	$	8
PPA		53,270		-		-		53,270

The following tables summarize the unrealized and realized gains (losses) related to the derivative instruments on the consolidated balance sheets at December 31,2016 and 2015, and the consolidated income statements for the years ended December 31,2016 and 2015.

		2016				2015
		Current and Long-Term Regulatory Asset		Other Current Assets		Current and Long-Term Regulatory Asset		Other Current Assets
(In thousands)
Balance at January 1,	$	54,082	$	1,208	$	54,998	$	1,001
Unrealized loss		1,575		-		8,586		-
Realized (loss) gain reclassified to a deferred account		(1,060)		1,060		(2,953)		2,953
Realized loss reclassified to income statement		(5,316)		(2,038)		(6,549)		(2,746)
Balance at December 31,	$	49,281	$	230	$	54,082	$	1,208

		Realized Losses (Gains)
		2016				2015
		Fuel for Electric Generation/ Purchased Power		Cost of Gas Sold		Fuel for Electric Generation/ Purchased Power		Cost of Gas Sold
(In thousands)
Year Ended December 31:
Commodity derivative contracts	$	1,154	$	2,064	$	2,236	$	2,548
FTRs		(445)		-		(309)		-
PPA		4,581		-		4,820		-

MGE's commodity derivative contracts, FTRs, and PPA are subject to regulatory deferral. These derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Realized gains and losses are deferred on the consolidated balance sheets and are recognized in earnings in the delivery month applicable to the instrument. As a result of the above described treatment, there are no unrealized gains or losses that flow through earnings.

The PPA has a provision that may require MGE to post collateral if MGE's debt rating falls below investment grade (i.e., below BBB-). The amount of collateral that it may be required to post varies from $20.0 million to $40.0 million, depending on MGE's nominated capacity amount. As of December 31,2016, no collateral is required to be, or has been, posted. Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of December 31,2016, no counterparties were in a net liability position. As of December 31,2015, certain counterparties were in a net liability of less than $0.1 million.

Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss. However, MGE enters into transactions only with companies that meet or exceed strict credit guidelines, and it monitors these counterparties on an ongoing basis to mitigate nonperformance risk in its portfolio. As of December 31,2016, no counterparties have defaulted.

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Rate Matters

12 Months Ended

Dec. 31, 2016

Regulated Operations [Abstract]

Rate Matters

Rate Matters - MGE Energy and MGE.

a. Rate Proceedings.

On December 15, 2016, the PSCW authorized MGE to decrease 2017 rates for retail electric customers by 0.8% or $3.3million and to increase rates for retail gas customers by 1.9% or $3.1million. The decrease in retail electric rates is attributable to declining fuel and purchased power costs. The increase in retail gas rates covers costs associated with MGE's natural gas system infrastructure improvements. The authorized return on common stock equity for 2017 is 9.8% on 57.2% common equity. The PSCW also approved MGE's request to extend the current accounting treatment for transmission related costs through 2018.

In July 2015, the PSCW approved MGE's request to extend the current accounting treatment for transmission related costs through 2016, conditioned upon MGE not filing a base rate case for 2016. This accounting treatment allows MGE to reflect any differential between transmission costs reflected in rates and actual costs incurred in its next rate case filing.

On December 23, 2014, the PSCW authorized MGE to increase 2015 rates for retail electric customers by 3.8% or $15.4 million and to decrease gas rates by 2.0% or $3.8 million. The increase in retail electric rates cover costs associated with the construction of emission-reduction equipment at Columbia, improvements and reliability of the state's electric transmission system, fuel and purchased power related to coal delivery costs, partially offset by lower cost as a result of market conditions for pension and postretirement benefit costs. The authorized return on common stock equity was 10.2%.

The PSCW also approved changes to customer rates and rate design for gas service that became effective January 1, 2015. Gas rate design consists of a fixed monthly customer charge and a variable charge tied to actual usage, in addition to the separate charge through the PGA for natural gas commodity costs. The change shifted more of the rate recovery to the monthly charge, reflecting the related fixed costs of providing gas services, and reduced the variable usage-based charge. Thus, gas net income is expected to be more evenly distributed during the year and less sensitive to weather.

On July 26, 2013, the PSCW authorized MGE to freeze electric and natural gas rates at 2013 levels for 2014. The order authorized 100% AFUDC on the Columbia scrubber construction project and deferral of increased costs related to ATC and MISO network upgrade fees. As part of the rate freeze plan authorized by the PSCW, effective January 1, 2014, approximately $6.3 million associated with a 2012 fuel rule surplus credit was amortized in 2014. The fuel credit accrued interest at MGE's weighted cost of capital. The authorized return on common stock equity was unchanged at 10.3%.

b. Fuel Rules.

Fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is currently set at plus or minus 2%. Under fuel rules, MGE would defer costs, less any excess revenues, if its actual electric fuel costs exceeded 102% of the electric fuel costs allowed in its latest rate order. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. Conversely, MGE is required to defer the benefit of lower costs if actual electric fuel costs were less than 98% of the electric fuel costs allowed in that order.

In August 2015, the PSCW approved a $0.00256/kWh fuel credit that began on September 1, 2015, and continued throughout 2016. The fuel credit established a mechanism to return $10.9million of fuel savings to electric customers as a bill credit. MGE returned $2.6million of electric fuel-related savings to customers through bill credits during the period from September 1, 2015, through December 31, 2015. MGE returned $8.3million of electric fuel-related savings during the year endedDecember 31,2016.

In January 2016, the PSCW lowered MGE's 2016 fuel rules monitored costs by $14.8 million as a result of continued lower projected fuel costs in 2016. Also, in March 2016, MGE filed its 2015 fuel plan reconciliation application showing an overcollection of 2015 fuel rules monitored costs. In July 2016, the PSCW issued a final order stating that MGE shall refund the additional fuel savings incurred during 2015 and 2016 for a total of $15.7million to its retail electric customers over a one-month period. In September 2016, MGE returned $15.5million to customers through bill credits.

As of December 31,2016, MGE has deferred $5.6 million of 2016 fuel savings that were in excess of the fuel savings included within the fuel credits referenced above. These costs will be subject to the PSCW's annual review of 2016 fuel costs, expected to be completed in 2017.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies.

a. Purchase Contracts - MGE Energy and MGE.

MGE Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet their obligations to deliver electricity and natural gas to customers. As of December 31,2016, the future minimum commitments related to these purchase contracts were as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Coal(a)	$	21,246	$	14,763	$	7,281	$	-	$	-	$	-
Natural gas
Transportation and storage(b)		20,859		20,645		19,483		15,226		8,443		23,331
Supply(c)		17,783		-		-		-		-		-
Purchase power(d)		48,056		46,563		33,670		32,577		33,266		66,231
Other		14,902		324		143		-		-		-
	$	122,846	$	82,295	$	60,577	$	47,803	$	41,709	$	89,562

(a)Total coal commitments for the Columbia and Elm Road Units, including transportation. Fuel procurement for MGE's jointly owned Columbia and Elm Road Units is handled by WPL and WEPCO, respectively, who are the operators of those facilities. If any minimum purchase obligations must be paid under these contracts, management believes these obligations would be considered costs of service and recoverable in rates.

(b)MGE's natural gas transportation and storage contracts require fixed monthly payments for firm supply pipeline transportation and storage capacity. The pricing components of the fixed monthly payments for the transportation and storage contracts are established by FERC but may be subject to change. Management expects to recover these costs in future customer rates.

(c)These commitments include market-based pricing. Management expects to recover these costs in future customer rates.

(d)MGE has several purchase power agreements to help meet future electric supply requirements. Management expects to recover these costs in future customer rates. In October 2008, MGE entered into a purchase power agreement to help meet future electric supply requirements. Under this agreement, MGE has agreed to purchase 50 MW of wind power from Osceola Windpower II, LLC, which is located in Iowa. This facility became operational in October 2008. MGE does not have any capacity payment commitments under this agreement. However, MGE is obligated to purchase its ratable share of the energy produced by the project. MGE's commitment related to its ratable share of energy produced by the project has been estimated and is included in the above numbers. Management expects to recover these costs in future customer rates.

b. Leases - MGE Energy and MGE.

MGE has noncancelable operating leases, primarily for combustion turbines, railcars, and computer equipment. The operating leases generally do not contain renewal options, with the exception of certain railcar operating leases. These leases have a renewal option of one year or less. MGE is required to pay all executory costs, such as maintenance and insurance, for its leases.

Future minimum rental payments at December 31,2016, under agreements classified as operating leases with noncancelable terms in excess of one year are as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Minimum lease payments	$	1,331	$	959	$	441	$	310	$	278	$	8,020

Rental expense under operating leases totaled $2.0 million, $2.1 million, and $2.5 million for 2016, 2015, and 2014, respectively.

c. Environmental - MGE Energy and MGE.

Water Quality

Water quality regulations promulgated by the EPA and WDNR in accordance with the Federal Water Pollution Control Act, or more commonly known as the Clean Water Act (CWA), impose restrictions on discharges of various pollutants into surface waters. The CWA also regulates surface water quality issues that affect aquatic life, such as water temperatures, intake structures, and wetlands filling. The CWA also includes discharge standards, which require the use of effluent-treatment processes equivalent to categorical "best practicable" or "best available" technologies. The CWA regulates discharges from "point sources," such as power plants, through establishing discharge limits in water discharge permits. MGE's power plants operate under Wisconsin Pollution Discharge Elimination System (WPDES) permits issued by the WDNR to ensure compliance with these discharge limits. Permits are subject to periodic renewal.

EPA's Effluent Limitations Guidelines (ELG) and Standards for Steam Electric Power Generating Point Source Category

In November 2015, the EPA published its final rule setting Effluent Limitations Guidelines (ELG) for the steam electric power generating industry. The ELG rule establishes federal limits on the amount of metals and other pollutants that can be discharged in wastewater from new and existing steam electric generation plants. The ELG rule mostly covers pollutants that are captured by certain air pollution control systems and via wet ash handling systems at coal-burning power plants with units greater than 50 MW generation capacity. The operators of our Columbia and Elm Road Units have indicated that equipment upgrades may be necessary to comply with the new discharge standards. The rule will be applied to Wisconsin-based power plants as they renew their WPDES permits, beginning in 2018 but no later than 2023. Management believes that any compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

EPA Cooling Water Intake Rules (Section 316(b))

Section 316(b) of the Clean Water Act requires that the cooling water intake structures at electric power plants meet best available technology standards so that mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens) are reduced. The EPA finalized its 316(b) rule for existing facilities in 2014. Section 316(b) requirements are implemented in Wisconsin through modifications to plants' WPDES permits, which govern plant wastewater discharges. The WDNR is currently developing guidance and rules to implement the EPA 316(b) rule.

Our WCCF, Blount, and Columbia plants are considered existing plants under this rule. Our WCCF facility already employs a system that meets the 316(b) rule. Our Blount plant has conducted historical studies that will show that it will likely be in compliance with this rule when its WPDES permit is renewed in 2017. The operator of our Columbia plant is conducting an intake study to demonstrate compliance with the 316(b) rule and/or identify design criteria needed to meet the new rule requirements prior to Columbia's 2017 WPDES permit renewal. The exact requirements at Blount and Columbia, however, will not be known until the WDNR finalizes its rule, approves the plant operators' approach, and those sites' WPDES permits are modified to account for this rule. Nonetheless, MGE expects that the 316(b) rule will not have material effects on its existing plants.

Energy Efficiency and Renewables

The Wisconsin Energy Efficiency and Renewables Act requires that 10% of the state's electricity be generated from renewable sources. MGE is in compliance with the requirement. The costs to comply with the Act and its accompanying regulations are being recovered in rates.

Air Quality

Federal and state air quality regulations impose restrictions on various emissions including emissions of particulate matter (PM), sulfur dioxide (SO₂), nitrogen oxides (NO_x), and other pollutants, and require permits for operation of emission sources. These permits have been obtained by MGE and must be renewed periodically. Current EPA initiatives under the Clean Air Act, including a recent update to the Cross-State Air Pollution Rule (CSAPR), and recently revised National Ambient Air Quality Standards (NAAQS) for ozone have the potential to result in additional operating and capital expenditure costs for MGE.

EPA's Greenhouse Gas (GHG) Reduction Guidelines under the Clean Air Act 111(d) Rule

In October 2015, the EPA finalized its Clean Power Plan (CPP) rule with an effective date of December 2015, setting guidelines and approval criteria for states to use in developing plans to control GHG emissions from existing fossil fuel-fired electric generating units (EGUs) and systems. Implementation of the rule is expected to have a direct impact on existing coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs.

In October 2015, many states (including Wisconsin) and other litigants filed petitions with the U.S. Court of Appeals for the District of Columbia Circuit asking for a stay of the CPP rule, and seeking expedited review of the petitioners' challenges to the CPP's legality. The parties' request to stay the rule was denied by the D.C. Circuit on January 20, 2016, but the D.C. Circuit issued an expedited schedule for resolving the merits of the litigation. On January 26, 2016, several parties filed a request for a stay of the CPP with the U.S. Supreme Court.

On February 9, 2016, the U.S. Supreme Court issued a stay blocking implementation of the CPP pending the Court's own review. The CPP may not be implemented until the Supreme Court lifts the stay, presumably after the courts ultimately resolve the underlying legality of the rule. Oral arguments were held before the D.C. Circuit in September 2016 and a decision by the D.C. Circuit is expected in 2017.

Given the pending legal proceedings, the nature and timing of any final requirements is subject to uncertainty. If the rule remains substantially in its present form, it is expected to have a material impact on MGE.

National Ambient Air Quality Standards (NAAQS) and Related Rules

The EPA's NAAQS regulations have been developed to set ambient levels of six pollutants to protect sensitive human populations (primary NAAQS) and the environment (secondary NAAQS) from the negative effects of exposure to these pollutants at higher levels. The Clean Air Act requires that the EPA periodically review, and adjust as necessary, the NAAQS for these six air pollutants. The EPA's NAAQS review can result in a lowering of the allowed ambient levels of a pollutant, a change in how the pollutant is monitored, and/or a change in which sources of that pollutant are regulated. States implement any necessary monitoring and measurement changes and recommend areas for attainment (meets the ambient requirements) or nonattainment (does not meet these standards). The EPA makes the final attainment and nonattainment determinations. States must come up with a state implementation plan (SIP) to get nonattainment areas into attainment and maintain air quality in attainment areas. A company with facilities located in a nonattainment area will be most affected. Their facilities may be subject to additional data submissions and measurement during permitting renewals, their facilities may need to meet new emission limitations set by the SIP (which could result in significant capital expenditures), and the company may have additional expenses and/or difficulties expanding existing facilities or building new facilities. The process from determining acceptable primary and/or secondary NAAQS to executing SIPs can take years. Nonetheless, because the NAAQS regulations have the potential to affect both existing and new facilities in areas, MGE continuously monitors changes to these rules to evaluate whether changes could impact our operations. In addition, the EPA has adopted interstate transport rules such as the CSAPR to address contributions to NAAQS nonattainment from upwind sources in neighboring states. In the following paragraphs we discuss specific NAAQS and transport rule developments that may affect MGE.

Ozone NAAQS

In October 2015, the EPA revised the primary and secondary ozone NAAQS, lowering each to 70 ppb. The rule became effective in December 2015. In November 2016, the EPA introduced a proposed implementation rule for the revised standard. Based on current ozone monitoring data, it appears that Milwaukee County (where our Elm Road Units are located) will likely not attain the lowered standards, and Dane and Columbia Counties (where our WCCF/Blount and Columbia Units are located, respectively) may attain them. Final attainment designations for these three counties will be based upon air monitoring data for years 2014-2016. The EPA will finalize the designations by October 1, 2017 based on that data. Once these EPA designations are complete, the State of Wisconsin will need to develop implementation plans for each county designated as nonattainment, which could affect operations and emission control obligations for plants located within the nonattainment counties.

The State of Wisconsin has joined a lawsuit filed by several states challenging the EPA's new ozone standard, alleging that the new standard is not attainable and the EPA is not properly considering background levels in setting its ozone attainment levels. Oral arguments in this case are scheduled to begin in April 2017. MGE will continue to monitor the EPA's progress on attainment designations and related litigation to assess potential impacts at our facilities, particularly our Elm Road Units.

Sulfur Dioxide (SO₂) NAAQS

In March 2015, the EPA identified MGE's Columbia Plant in Columbia County as a large stationary source of SO₂ that may exceed the one hour SO₂ NAAQS standard and was subject to a State of Wisconsin proposed county attainment/nonattainment determination. In September 2015, Wisconsin sent a letter to the EPA proposing that Columbia County be designated as being in attainment for the SO₂ NAAQS based on recent modeling demonstrating that SO₂ pollution controls on the Columbia Plant had brought the county into attainment. In June 2016, the EPA issued a final rule classifying Columbia County as an unclassified/attainment area. MGE does not anticipate any material costs from this rule.

Nitrogen Dioxide (NO₂) NAAQS

The WDNR has revised its state rules to incorporate the EPA's one hour NO₂ NAAQS rule that was finalized in 2010. The effective date of the state rule was August 1, 2016. The WDNR is currently seeking input from the public on ideas for implementing this one-hour standard. Wisconsin's NO₂ NAAQS rule will affect our stationary fossil-fuel generation sources by requiring that we demonstrate consistency with the NAAQS when applying for certain air permits. Sources that cannot demonstrate compliance with the NAAQS may be required to install emission controls or restrict operations. MGE will continue to monitor developments while the WDNR implements guidance for compliance with the one-hour NAAQS.

EPA's Cross-State Air Pollution Rule: Proposed Ozone Season Update based on 2008 Ozone NAAQS

The EPA's Cross-State Air Pollution Rule (CSAPR) is an interstate air pollution transport rule designed to reduce ozone and fine particulate (PM2.5) air levels in areas that the EPA has determined are being affected by pollution from neighboring and upwind states. This is accomplished in the CSAPR through a reduction in SO₂ and NO_x from qualifying fossil-fuel fired power plants in upwind or "contributing" states. NO_x and SO₂ contribute to fine particulate pollution, and NO_x contributes to ozone formation. Reductions are achieved through a cap and trade system. Individual plants can meet their caps through modifications and/or buying allowances on the market.

In October 2016, the EPA finalized rulemaking for an update to CSAPR that incorporated 2008 Ozone NAAQS levels into the rule (the original CSAPR is based on 1997 Ozone NAAQS levels). The update affects 22 states, including Wisconsin, by further limiting statewide NO_x allowances in each of those states. The rule also includes revisions to CSAPR that are designed to address issues remaining from the D.C. Circuit remand of CSAPR, including Wisconsin's inclusion in the NO_x ozone season portion of the rule. The State of Wisconsin filed a legal challenge to the CSAPR update rule asserting, among other things, that the rule over-controls NO_x emissions in Wisconsin.

The CSAPR Update rule will further reduce summertime (or Ozone Season) NO_x emissions allocations from power plants starting in 2017. MGE intends to meet the rule requirements through a combination of owned, received, and purchased. Depending on the number of allocations MGE receives for ozone season, the number of allocations that MGE must purchase, and the cost of allocations, this requirement could be material for MGE.

Clean Air Visibility Rule (CAVR)

Columbia is subject to the best available retrofit technology (BART) regulations, a subsection of the EPA's Clean Air Visibility Rule (CAVR), which may require pollution control retrofits. Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR equals compliance with BART, should mean that Columbia will not need to do additional work to meet BART requirements. At this time, however, the BART regulatory obligations, compliance strategies, and costs remain uncertain due to the continued legal challenges surrounding CSAPR and CAVR.

In December 2016, the EPA introduced a final rule (posted online but not yet scheduled for publication in the Federal Register) extending state implementation plan deadlines by three years from 2018 to 2021 for the next implementation phase of the CAVR, which goes beyond BART and may affect utilities. This extension would allow for states to coordinate their CAVR compliance with other compliance efforts, which should lessen the burden to comply. It is too early to determine if the rule will affect MGE. MGE will continue to monitor developments.

Solid Waste

EPA's Coal Combustion Residuals Rule

In December 2014, the EPA finalized its Disposal of Coal Combustion Residuals from Electric Utilities (CCR) rule. The rule became effective in October 2015. It provides that coal ash will be regulated as a solid waste, and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash. The rule also regulates landfills, ash ponds, and other surface impoundments for coal combustion residuals by regulating their design, location, monitoring, and operation. This portion of the rule is accomplished in phases to allow for sites with onsite storage and/or disposal to evaluate their compliance with the rule's design criteria. Landfills and impoundments that cannot meet design criteria will need to close formally within defined timeframes.

The Columbia and Elm Road Units co-owners and plant operators are working through the phased requirements to plan and implement changes necessary at those facilities to meet design criteria. Review of our Elm Road Units has indicated that the costs to comply with this rule are not expected to be significant. Columbia's operator has developed a preliminary implementation schedule for meeting the various deadlines spelled out in the rule. Costs at Columbia will be dependent on what is determined during the evaluation stage. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

Columbia

Based upon current available information, compliance with various environmental requirements and initiatives is expected to result in significant additional operating and capital expenditures at Columbia as noted below.

Columbia Clean Air Act Litigation

Columbia is a coal-fired generating station operated by WPL in which WPL, WPSC, and MGE have ownership interests. In December 2009, the EPA sent a Notice of Violation (NOV) to the co-owners, including MGE. The NOV alleged that WPL, which is the plant operator, and the Columbia co-owners failed to comply with appropriate pre-construction review and permitting requirements and, as a result, violated the Prevention of Significant Deterioration program requirements, Title V Operating Permit requirements of the CAA, and the Wisconsin SIP. In June 2013, the court approved and entered a consent decree entered by the EPA, Sierra Club, and the co-owners of Columbia. One of the requirements of the consent decree requires installation of an SCR system at Columbia Unit 2 by December 31, 2018. Installation of the SCR has been approved by the PSCW and is currently under construction. MGE's share of the projected cost for the SCR system is estimated to be $22-$24 million, with expected completion in 2018.

d.Legal Matters- MGE Energy and MGE.

MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE maintains accruals for such costs that are probable of being incurred and subject to reasonable estimation. The accrued amount for these matters is not material to the financial statements. MGE does not expect the resolution of these matters to have a material adverse effect on its consolidated results of operations, financial condition, or cash flows.

e. Other Commitments.

MGE Energy holds investments in nonpublic entities. From time to time, these entities require additional capital infusions from their investors. MGE Energy has committed to contribute $11.4 million in capital for such infusions. The timing of these infusions is dependent on the needs of the investee and is therefore uncertain at this time.

In addition, MGE Energy has a three year agreement with a venture debt fund expiring in December 2019. MGE Energy has committed to invest up to a total of $1.5 million into this fund. As of December 31,2016, MGE Energy has $0.4 million remaining in commitments. The timing of infusions is dependent on the needs of the fund and is therefore uncertain at this time.

MGE has several other commitments related to various projects. Payments for these commitments are expected to be as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Other commitments	$	1,317	$	1,175	$	511	$	497	$	440	$	5,646

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Asset Retirement Obligations

12 Months Ended

Dec. 31, 2016

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

Asset Retirement Obligations - MGE Energy and MGE.

MGE recorded an obligation for the fair value of its legal liability for asset retirement obligations (AROs) associated with removal of the West Campus Cogeneration Facility and the Elm Road Units, electric substations, combustion turbine generating units, wind generating facilities, and photovoltaic generating facilities, all of which are located on property not owned by MGE Energy and MGE and would need to be removed upon the ultimate end of the associated leases. The significant conditional AROs identified by MGE included the costs of abandoning in place gas services and mains, the abatement and disposal of equipment and buildings contaminated with asbestos and PCBs, and the proper disposal and removal of tanks, batteries, and underground cable. Changes in management's assumptions regarding settlement dates, settlement methods, or assigned probabilities could have a material effect on the liabilities recorded by MGE at December 31,2016, as well as the regulatory asset recorded.

MGE also may have AROs relating to the removal of various assets, such as certain electric and gas distribution facilities. These facilities are generally located on property owned by third parties, on which MGE is permitted to operate by lease, permit, easement, license, or service agreement. The asset retirement obligations associated with these facilities cannot be reasonably determined due to the indeterminate life of the related agreements.

The following table summarizes the change in AROs. Amounts include conditional AROs.

(In thousands)		2016		2015
Balance at January 1,	$	24,360	$	19,744
Liabilities incurred(a)		1,303		2,380
Accretion expense		1,269		1,131
Liabilities settled		(110)		(124)
Revisions in estimated cash flows(a)		64		1,229
Balance at December 31,	$	26,886	$	24,360

(a)In the second quarter of 2015, MGE recorded an obligation of $2.3 million for the fair value of its legal liability for AROs associated with the effect of the final Coal Combustion Residual Rule at Columbia. An additional $1.3 million was recorded in the fourth quarter, associated with this ARO, based on revised estimates.

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Adoption of Accounting Principles and Recently Issued Accounting Pronouncements

12 Months Ended

Dec. 31, 2016

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements - MGE Energy and MGE.

a. Revenue from Contracts with Customers.

In May 2014, the FASB issued authoritative guidance within the Codification's Revenue Recognition topic that provides guidance on the recognition, measurement, and disclosure of revenue from contracts with customers. The new standard establishes a five step model for recognizing and measuring revenue from contracts with customers and replaces existing guidance on revenue recognition. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

MGE Energy and MGE have been assessing the impact of this guidance on revenue streams within the scope of the new standard. All retail electric and gas revenues are tariff rates approved by the PSCW. Based on our evaluation of the new standard, retail revenues will be recognized within the period in which utility service is provided to the customer and the performance obligation is fulfilled, consistent with our current revenue recognition model. Electric revenues for sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may also include bilateral sales to other utilities or power marketers. Revenues for sales to the market will be recognized when the sale is completed within the market operated by MISO, similar to the recognition under our current revenue recognition model. In addition, revenues from the transportation of gas will continue to be recognized upon the performance of services for the respective customer. Based on our assessment of the new standard, revenue recognition for retail revenues, sales to the market, and transportation of gas will be consistent with our current revenue recognition model. However, additional disclosures regarding the nature, amount, timing, and uncertainty of these revenue streams and related cash flows arising from contracts with customers will be required as a result of the new standard.

The Power and Utilities Task Force of the AICPA is formulating a utility industry-specific interpretation of the guidance regarding the collectability threshold of probable within the new standard. The collectability criterion could impact the timing of revenue recognition for uncollectible accounts. The Power and Utilities Task Force of the AICPA is also requesting the FASB issue an industry-specific clarification regarding the accounting treatment of upfront contributions in the aid of construction, also known as CIAC. The final clarification on this topic could result in a material impact on the consolidated financial statements. Management continues to analyze newly-released interpretative guidance and assess the related impacts to the current revenue recognition model.

This authoritative guidance will become effective January 1, 2018, and MGE Energy and MGE anticipate adopting the standard upon the effective date. Adoption of this standard is permitted under one of two methods: the full retrospective method or the modified retrospective method. MGE Energy and MGE are continuing to assess the permitted implementation methods and the impact on our financial statements.

b.Consolidation.

In February 2015, the FASB issued authoritative guidance within the Codification's Consolidation topic that provides guidance on the evaluation of certain legal entities for consolidation purposes. This authoritative guidance became effective January 1, 2016. This guidance had no impact on our financial statements.

c.Debt Issuance Costs.

In April 2015, the FASB issued authoritative guidance within the Codification's Interest topic that provides guidance on the presentation of debt issuance costs in financial statements. This authoritative guidance became effective January 1, 2016, and changed the presentation of debt issuance costs on the balance sheet. Prior to the authoritative guidance, debt issuance costs were treated as a deferred asset, and beginning January 1, 2016, these costs are included as a direct deduction to the related debt liability on the consolidated balance sheets. As of December 31, 2016, assets (other deferred assets and other) and liabilities (long-term debt) decreased approximately $3.9 million as a cumulative result of the guidance. In addition, this guidance was applied retrospectively to all prior periods presented, resulting in a decrease to assets and liabilities of $4.3 million for the year ended December 31, 2015.

d. Financial Instruments.

In January 2016, the FASB issued authoritative guidance within the Codification's Financial Instruments topic that provides guidance on the recognition and measurement of financial instruments. This authoritative guidance will become effective January 1, 2018, and will require equity investments to be measured at fair value with changes in fair value recognized in net income rather than in other comprehensive income. As a result of this guidance, MGE Energy and MGE will no longer have any other comprehensive income. This standard will be applied using a modified retrospective approach, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of all prior periods presented.

e. Leases.

In February 2016, the FASB issued authoritative guidance within the Codification's Leases topic that provides guidance on the classification, recognition, measurement, and disclosure of leases. The new leasing standard establishes that a lease conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Under the new guidance, lessees will be required to recognize all leases with terms greater than one year, including operating leases, on the consolidated balance sheet by recording a right-of-use asset and lease liability. Prior to the authoritative guidance, only capital leases were recognized on the balance sheet by lessees. The new accounting guidance as applied by lessors is materially consistent from that applied under current GAAP.

Management has begun utilizing a bottoms-up approach to analyze the impact of the standard on our lease portfolio. MGE Energy and MGE have been reviewing current accounting policies and procedures to identify potential differences in accounting treatment that would result from applying the requirements of the new standard to our existing lease portfolio. In addition, we are identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure requirements under the new standard. This authoritative guidance will become effective January 1, 2019, with early adoption permitted. The new leasing standard requires entities to recognize and measure leases at the beginning of the earliest comparative period presented using a modified retrospective approach. MGE Energy and MGE are currently assessing the impact this pronouncement will have on our financial statements.

f. Restricted Cash.

In November 2016, the FASB issued authoritative guidance within the Codification's Statement of Cash Flows topic that provides guidance on the classification and presentation of changes in restricted cash within the statement of cash flows. The new standard was issued to eliminate a current diversity in practice for the accounting treatment of restricted cash. Under the new guidance, reporting entities will be required to explain the changes in the total of restricted and unrestricted cash and cash equivalents when reconciling the beginning and ending balances on the statement of cash flows. Prior to the authoritative guidance, changes in restricted cash were presented as either cash flows from operating, investing, or financing activities within the statement of cash flows, as appropriate based on the nature of the restriction. Also under the new standard, reporting entities will be required to provide a reconciliation from the balance sheet to the statement of cash flows and disclose the nature of the restrictions of cash. This authoritative guidance will become effective January 1, 2018. Upon the effective date, MGE Energy and MGE will change the presentation of restricted cash to reflect this change in accounting guidance. MGE Energy and MGE will also retrospectively apply the guidance to all prior periods presented. As of December 31, 2016, MGE Energy and MGE had $5.1 million of restricted cash classified within other current assets on the consolidated balance sheets.

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Segment Information

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Information

Segment Information - MGE Energy and MGE.

The electric utility business purchases, generates and distributes electricity, and contracts for transmission service. The gas utility business purchases and distributes natural gas and contracts for the transportation of natural gas. Both the electric and gas segments operate through MGE Energy's principal subsidiary, MGE.

The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power, MGE Power Elm Road, and MGE Power West Campus. These subsidiaries own and lease electric generating capacity to assist MGE. MGE Power Elm Road has an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin, which are leased to MGE, and MGE Power West Campus owns a controlling interest in the electric generation plant of a natural gas-fired cogeneration facility on the UW campus. MGE Power West Campus's portion is also leased to MGE.

The transmission investment segment invests, through MGE Transco, in ATC, a company that provides electric transmission services primarily in Wisconsin and MGEE Transco, in ATC Holdco, a company formed to pursue electric transmission development and investments outside of Wisconsin. See Footnote 4 for further discussion.

The "All Others" segment includes: corporate, CWDC, MAGAEL, MGE State Energy Services, MGE Services, and NGV Fueling Services. These entities' operations consist of investing in companies and property which relate to the regulated operations, financing the regulated operations, or owning and operating natural gas compression equipment.

General corporate expenses include the cost of executive management, corporate accounting and finance, information technology, risk management, human resources and legal functions, and employee benefits that are allocated to electric and gas segments based on formulas prescribed by the PSCW. Identifiable assets are those used in MGE's operations in each segment. Assets not allocated consist primarily of cash and cash equivalents, restricted cash, investments, other accounts receivable, and prepaid assets.

Sales between our electric and gas segments are based on PSCW approved tariffed rates. Additionally, intersegment operations related to the leasing arrangement between our electric segment and MGE Power Elm Road/MGE Power West Campus are based on terms previously approved by the PSCW. Consistent with internal reporting, management has presented the direct financing capital leases between MGE and MGE Power Elm Road/MGE Power West Campus based on actual lease payments included in rates. Lease payments made by MGE to MGE PowerElm Roadand MGE Power West Campusare shown as operating expenses. The lease payments received by MGE PowerElm Roadand MGE Power West Campusfrom MGE are shown as lease income in interdepartmental revenues. The depreciation expense associated with the Elm Road Unitsand WCCF is reflected in the nonregulated energy segment.

The following table shows segment information for MGE Energy's and MGE's operations:

(In thousands)MGE Energy		Electric		Gas		Non-Regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2016
Operating revenues	$	409,006	$	134,543	$	1,196	$	-	$	-	$	-	$	544,745
Interdepartmental revenues		1,912		21,378		43,930		-		-		(67,220)		-
Total operating revenues		410,918		155,921		45,126		-		-		(67,220)		544,745
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		(24)		-		(44,646)
Other operating expenses		(310,941)		(127,083)		(155)		(17)		(895)		67,220		(371,871)
Operating income (loss)		70,855		20,710		37,599		(17)		(919)		-		128,228
Other income, net		960		30		-		8,429		292		-		9,711
Interest (expense) income, net		(11,147)		(3,223)		(5,768)		-		272		-		(19,866)
Income (loss) before taxes		60,668		17,517		31,831		8,412		(355)		-		118,073
Income tax (provision) benefit		(20,115)		(6,894)		(12,775)		(2,836)		107		-		(42,513)
Net income (loss)	$	40,553	$	10,623	$	19,056	$	5,576	$	(248)	$	-	$	75,560
Year Ended December 31, 2015
Operating revenues	$	412,528	$	143,737	$	7,763	$	-	$	-	$	-	$	564,028
Interdepartmental revenues		513		11,780		39,435		-		-		(51,728)		-
Total operating revenues		413,041		155,517		47,198		-		-		(51,728)		564,028
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		(47)		-		(44,225)
Other operating expenses		(318,001)		(128,241)		(158)		(19)		(857)		51,728		(395,548)
Operating income (loss)		65,095		20,518		39,565		(19)		(904)		-		124,255
Other (deductions) income, net		400		(33)		-		7,728		518		-		8,613
Interest (expense) income, net		(11,187)		(3,203)		(5,993)		-		221		-		(20,162)
Income (loss) before taxes		54,308		17,282		33,572		7,709		(165)		-		112,706
Income tax (provision) benefit		(17,915)		(6,915)		(13,474)		(3,102)		43		-		(41,363)
Net income (loss)	$	36,393	$	10,367	$	20,098	$	4,607	$	(122)	$	-	$	71,343
Year Ended December 31, 2014
Operating revenues	$	394,849	$	221,720	$	3,283	$	-	$	-	$	-	$	619,852
Interdepartmental revenues		509		8,366		42,692		-		-		(51,567)		-
Total operating revenues		395,358		230,086		45,975		-		-		(51,567)		619,852
Depreciation and amortization		(26,933)		(6,308)		(7,407)		-		(47)		-		(40,695)
Other operating expenses		(297,409)		(194,203)		(139)		-		(875)		51,567		(441,059)
Operating income (loss)		71,016		29,575		38,429		-		(922)		-		138,098
Other (deductions) income, net		2,847		(86)		-		9,150		(1,832)		-		10,079
Interest (expense) income, net		(10,410)		(3,229)		(6,208)		-		174		-		(19,673)
Income (loss) before taxes		63,453		26,260		32,221		9,150		(2,580)		-		128,504
Income tax (provision) benefit		(22,070)		(10,480)		(12,932)		(3,664)		961		-		(48,185)
Net income (loss)	$	41,383	$	15,780	$	19,289	$	5,486	$	(1,619)	$	-	$	80,319

(In thousands)MGE		Electric		Gas		Non-Regulated Energy		Transmission Investment(b)		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2016
Operating revenues	$	409,030	$	134,572	$	1,196	$	-	$	-	$	544,798
Interdepartmental revenues		1,888		21,349		43,930		-		(67,167)		-
Total operating revenues		410,918		155,921		45,126		-		(67,167)		544,798
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		-		(44,622)
Other operating expenses(a)		(330,924)		(133,940)		(12,930)		-		67,167		(410,627)
Operating income(a)		50,872		13,853		24,824		-		-		89,549
Other (deductions) income, net(a)		828		(7)		-		4,360		-		5,181
Interest expense, net		(11,147)		(3,223)		(5,768)		-		-		(20,138)
Net income		40,553		10,623		19,056		4,360		-		74,592
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(23,358)		(23,358)
Net income attributable to MGE	$	40,553	$	10,623	$	19,056	$	4,360	$	(23,358)	$	51,234
Year Ended December 31, 2015
Operating revenues	$	412,550	$	143,752	$	7,763	$	-	$	-	$	564,065
Interdepartmental revenues		491		11,765		39,435		-		(51,691)		-
Total operating revenues		413,041		155,517		47,198		-		(51,691)		564,065
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		-		(44,178)
Other operating expenses(a)		(335,803)		(135,124)		(13,632)		(19)		51,691		(432,887)
Operating income (loss)(a)		47,293		13,635		26,091		(19)		-		87,000
Other (deductions) income, net(a)		287		(65)		-		4,626		-		4,848
Interest expense, net		(11,187)		(3,203)		(5,993)		-		-		(20,383)
Net income		36,393		10,367		20,098		4,607		-		71,465
Less: net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,097)		(26,097)
Net income attributable to MGE	$	36,393	$	10,367	$	20,098	$	4,607	$	(26,097)	$	45,368
Year Ended December 31, 2014
Operating revenues	$	394,871	$	221,741	$	3,283	$	-	$	-	$	619,895
Interdepartmental revenues		487		8,345		42,692		-		(51,524)		-
Total operating revenues		395,358		230,086		45,975		-		(51,524)		619,895
Depreciation and amortization		(26,933)		(6,308)		(7,407)		-		-		(40,648)
Other operating expenses(a)		(319,175)		(204,597)		(13,071)		-		51,524		(485,319)
Operating income(a)		49,250		19,181		25,497		-		-		93,928
Other (deductions) income, net(a)		2,543		(172)		-		5,486		-		7,857
Interest expense, net		(10,410)		(3,229)		(6,208)		-		-		(19,847)
Net income		41,383		15,780		19,289		5,486		-		81,938
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,310)		(26,310)
Net income attributable to MGE	$	41,383	$	15,780	$	19,289	$	5,486	$	(26,310)	$	55,628
(a) Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statements of Income.
(b) As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco.
See Footnote 4 for additional information.

The following table shows segment information for MGE Energy's and MGE's assets and capital expenditures:
		Utility						Consolidated
(In thousands) MGE Energy		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2016	$	1,021,905	$	318,603	$	27,338	$	271,277	$	74,535	$	465,202	$	(377,800)	$	1,801,060
December 31, 2015(c)		974,235		298,435		49,753		277,858		69,470		434,868		(378,216)		1,726,403
December 31, 2014(c)		945,790		306,106		41,124		280,542		67,697		438,898		(390,636)		1,689,521
Capital Expenditures:
Year ended Dec. 31, 2016	$	50,699	$	29,136	$	-	$	3,824	$	-	$	-	$	-	$	83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		-		72,030
Year ended Dec. 31, 2014		68,067		22,104		-		2,505		-		-		-		92,676

		Utility						Consolidated
(In thousands)MGE		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment(d)		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2016	$	1,021,905	$	318,603	$	27,338	$	271,227	$	-	$	(221)	$	1,638,852
December 31, 2015(c)		974,235		298,435		49,753		277,808		69,470		(187)		1,669,514
December 31, 2014(c)		945,790		306,106		41,124		280,492		67,697		(6,521)		1,634,688
Capital Expenditures:
Year ended Dec. 31, 2016	$	50,699	$	29,136	$	-	$	3,824	$	-	$	-	$	83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		72,030
Year ended Dec. 31, 2014		68,067		22,104		-		2,505		-		-		92,676
(c) Reflects retrospective application of new accounting pronouncement related to debt issuance costs, see Footnote 19 for additional information.
(d) In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see Footnote 4 for additional information.

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Quarterly Summary of Operations

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Summary of Operations

Quarterly Summary of Operations - MGE Energy (unaudited).

(In thousands, except per share amounts)		Quarters Ended
2016		March 31		June 30		September 30		December 31
Operating revenues:
Electric revenues	$	93,690	$	100,615	$	119,147	$	96,750
Gas revenues		53,837		20,961		17,570		42,175
Total Operating Revenues		147,527		121,576		136,717		138,925
Operating expenses		117,996		93,364		90,190		114,967
Operating income		29,531		28,212		46,527		23,958
Interest and other income, net		(2,558)		(2,778)		(2,933)		(1,886)
Income tax provision		(9,945)		(9,284)		(15,714)		(7,570)
Earnings on common stock	$	17,028	$	16,150	$	27,880	$	14,502
Earnings per common share	$	0.49	$	0.47	$	0.80	$	0.42
Dividends per share	$	0.295	$	0.295	$	0.308	$	0.308
2015
Operating revenues:
Electric revenues	$	100,206	$	101,457	$	123,364	$	95,264
Gas revenues		69,928		20,669		17,431		35,709
Total Operating Revenues		170,134		122,126		140,795		130,973
Operating expenses		138,283		98,077		94,618		108,795
Operating income		31,851		24,049		46,177		22,178
Interest and other income, net		(2,986)		(2,562)		(2,472)		(3,529)
Income tax provision		(10,587)		(8,008)		(15,351)		(7,417)
Earnings on common stock	$	18,278	$	13,479	$	28,354	$	11,232
Earnings per common share	$	0.53	$	0.39	$	0.82	$	0.32
Dividends per share	$	0.283	$	0.283	$	0.295	$	0.295

Notes:

• The quarterly results of operations within a year may not be comparable because of seasonal and other factors.

• The sum of earnings per share of common stock for any four quarters may vary slightly from the earnings per share of common stock for the equivalent twelve-month period due to rounding.

• MGE Energy's operations are based primarily on its utility subsidiary MGE.

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Related Party Transactions

12 Months Ended

Dec. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions - MGE Energy and MGE.

ATC

During 2016, 2015, and 2014, MGE recorded $29.1 million, $28.2 million, and $26.8 million, respectively, for transmission services received from ATC. MGE also provides a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. For the years endedDecember 31,2016 and 2014, MGE had a receivable due from ATC of $0.1 million. For the year endedDecember 31,2015, MGE had a receivable due from ATC of $0.2 million.

For additional discussion on MGE's relationship with ATC, see Footnote 4.

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Condensed Parent Company Financial Statements

12 Months Ended

Dec. 31, 2016

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Parent Company Financial Statements

Schedule I
Condensed Parent Company Financial Statements
MGE Energy, Inc.
Statements of Comprehensive Income
(Parent Company Only)
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Operating Expenses:
Other operations and maintenance	$	720	$	690	$	689
Total Operating Expenses		720		690		689
Operating Loss		(720)		(690)		(689)
Equity in earnings of investments		75,581		71,306		81,811
Other income (loss), net		435		526		(1,879)
Other interest		176		136		93
Income before income taxes		75,472		71,278		79,336
Income tax provision		88		65		983
Net Income		75,560		71,343		80,319
Other Comprehensive Income, Net of Tax:
Unrealized (loss) gain on available-for-sale securities, net of
tax ($104, $67, and ($54))		(155)		(101)		81
Comprehensive Income	$	75,405	$	71,242	$	80,400
The accompanying notes are an integral part of the above consolidated financial statements.

MGE Energy, Inc.
Statements of Cash Flows
(Parent Company Only)
(In thousands)
		For the Years Ended December 31,
		2016		2015		2014
Net Cash Flows Provided by Operating Activities	$	74,994	$	37,085	$	48,165
Investing Activities:
Other investing		(2,764)		(3,690)		(2,422)
Cash Used for Investing Activities		(2,764)		(3,690)		(2,422)
Financing Activities:
Cash dividends paid on common stock		(41,775)		(40,043)		(38,429)
Other financing		(11)		-		(89)
Cash Used for Financing Activities		(41,786)		(40,043)		(38,518)
Change in cash and cash equivalents:		30,444		(6,648)		7,225
Cash and cash equivalents at beginning of period		51,781		58,429		51,204
Cash and cash equivalents at end of period	$	82,225	$	51,781	$	58,429
The accompanying notes are an integral part of the above consolidated financial statements.

Schedule I
Condensed Parent Company Financial Statements (continued)
MGE Energy, Inc.
Balance Sheets
(Parent Company Only)
(In thousands)
		At December 31,
ASSETS		2016		2015
Current Assets:
Cash and cash equivalents	$	82,225	$	51,781
Accounts receivable, net:
Accounts receivable from affiliates		83		20
Other current assets		1,221		1,386
Total Current Assets		83,529		53,187
Other deferred assets and other		201		249
Investments:
Investments in affiliates		684,968		649,276
Other investments		1,161		1,447
Total Investments		686,129		650,723
Total Assets	$	769,859	$	704,159
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable to affiliates	$	530	$	530
Accrued taxes		218		263
Other current liabilities		115		144
Total Current Liabilities		863		937
Other Credits:
Deferred income taxes		40,672		7,998
Accounts payable to affiliates		4,236		4,766
Total Other Credits		44,908		12,764
Shareholders' Equity:
Common shareholders' equity		350,936		350,936
Retained income		372,950		339,165
Other comprehensive income		202		357
Total Shareholders' Equity		724,088		690,458
Commitments and contingencies (see Footnote 3)		-		-
Total Liabilities and Shareholders' Equity	$	769,859	$	704,159
The accompanying notes are an integral part of the above consolidated financial statements.

Schedule I

Condensed Parent Company Financial Statements (continued)

Notes to Condensed Financial Statements

(Parent Company Only)

1. Basis of Presentation.

MGE Energy is a holding company and conducts substantially all of its business operations through its subsidiaries. For Parent Company only presentation, investment in subsidiaries are accounted for using the equity method. These condensed Parent Company financial statements and related notes have been prepared in accordance with Rule 12-04, Schedule I of Regulation S-X. These statements should be read in conjunction with the financial statements and the notes in Item 8. Financial Statements and Supplementary Data of the Annual Report on Form 10-K for the year ended December 31, 2016.

2.Credit Agreements.

As of December 31,2016, MGE Energy had access to an unsecured, committed credit facility with aggregate bank commitments of $50.0 million. At December 31,2016, no borrowings were outstanding under this facility.

See Footnote 10 of the Notes to Consolidated Financial Statements for further information regarding MGE Energy's credit agreements.

3. Commitments and Contingencies.

See Footnote 17 of the Notes to Consolidated Financial Statements for commitments and contingencies.

4. Dividends from Affiliates.

		Dividends from Affiliates
(In thousands)		2016		2015		2014
MGE(a)	$	50,000	$	30,000	$	26,500
MGE Power Elm Road		13,500		10,000		13,500
MGE Power West Campus		9,500		3,000		6,000
MGE Transco		1,107		1,708		1,859
Total	$	74,107	$	44,708	$	47,859

(a)Excludes $15.8 million dividend in kind to MGE Energy from MGE.

Dividend Restrictions

Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order and, to a lesser degree, MGE's first mortgage bonds. The PSCW order restricts any dividends, above the PSCW authorized amount of $43 million, that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. MGE's thirteen month rolling average common equity ratio at December 31,2016, is 60.2% as determined under the calculation used in the rate proceeding. MGE was not restricted from paying cash dividends in 2016. Cash dividends of $50.0 million and $30.0 million were paid by MGE to MGE Energy in 2016 and 2015, respectively. In 2016, MGE also transferred its ownership interest in MGE Transco to MGE Energy in the form of a dividend in kind of $15.8 million. The rate proceeding calculation includes as indebtedness imputed amounts for MGE's outstanding purchase power capacity payments and other PSCW adjustments, but does not include the indebtedness associated with MGE Power Elm Roador MGE Power West Campus, which are consolidated into MGE's financial statements but are not direct obligations of MGE.

MGE has covenanted with the holders of its first mortgage bonds not to declare or pay any dividend or make any other distribution on or purchase any shares of its common stock unless, after giving effect thereto, the aggregate amount of all such dividends and distributions and all amounts applied to such purchases, after December 31, 1945, shall not exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31,2016, approximately$338.5 million was available for the payment of dividends under this covenant.

See Footnotes 9 and 10 of the Notes to Consolidated Financial Statements for long-term debt and lines of credit dividend restrictions.

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Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2016

Valuation and Qualifying Accounts [Abstract]

Valuation and Qualifying Accounts

Schedule II
MGE Energy, Inc. and Madison Gas and Electric Company
Valuation and Qualifying Accounts
			Additions
		Balance at Beginning of Period	Charged to Costs and Expenses	Charged toOther Accounts	Net Accounts Written Off(a)		Balance at End of Period
Fiscal Year 2014:
Accumulated provision for uncollectibles	$	4,969,711	1,898,300	15,092	(2,134,446)	$	4,748,657
Fiscal Year 2015:
Accumulated provision for uncollectibles	$	4,748,657	595,500	25,500	(1,675,577)	$	3,694,080
Fiscal Year 2016:
Accumulated provision for uncollectibles	$	3,694,080	1,195,500	19,500	(1,465,784)	$	3,443,296
(a) Net of recovery of amounts previously written off.

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation - MGE Energy and MGE.

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which give recognition to the rate making accounting policies for regulated operationsprescribed by the regulatory authorities having jurisdiction, principally the PSCW and FERC. MGE's accounting records conform to the FERC uniform system of accounts.

Principles of Consolidation

Principles of Consolidation - MGE Energy and MGE.

MGE, a wholly owned subsidiary of MGE Energy, is a regulated electric and gas utility headquartered in Madison, Wisconsin. MGE Energy and MGE consolidate all majority owned subsidiaries in which it has controlling influence.

Additional wholly owned subsidiaries of MGE Energy include CWDC, MAGAEL, MGE Power, MGE State Energy Services, MGE Services, MGE Transco, MGEE Transco, and NGV Fueling Services. MGE Power owns 100% of MGE Power Elm Road and MGE PowerWest Campus. MGE Power and its subsidiaries are part of MGE Energy's nonregulated energy operations, which were formed to own and lease electric generation projects to assist MGE. MGE Transco and MGEE Transco are nonregulated entities formed to manage the investments in ATC and ATC Holdco, respectively.On December 1, 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy. See Footnote 4 for further discussion of the transfer of MGE's investment in MGE Transco.

MGE Energy and MGE consolidate variable interest entities (VIEs) for which it is the primary beneficiary. Variable interest entities are legal entities that possess any of the following characteristics: equity investors who have an insufficient amount of equity at risk to finance their activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity holders who do not receive expected losses or returns significant to the VIE. If MGE Energy or MGE is not the primary beneficiary and an ownership interest is held, the VIE is accounted for under the equity method of accounting. When assessing the determination of the primary beneficiary, all relevant facts and circumstances are considered, including: the power, through voting or similar rights, to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb the expected losses and/or the right to receive the expected returns of the VIE. Ongoing reassessments of all VIEs are performed to determine if the primary beneficiary status has changed. MGE has consolidated MGE Power Elm Road and MGE PowerWest Campus. Both entities are VIEs. MGE is considered the primary beneficiary of these entities as a result of contractual agreements. See Footnote 2 for more discussion of these entities.

Prior to December 1, 2016, MGE Transco was jointly owned by MGE Energy and MGE. MGE's ownership interest in MGE Transco declined below a majority in July 2016. As a result of the change in majority ownership, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. See Footnote 8 for further discussion regarding the deconsolidation of noncontrolling interest.

The consolidated financial statements reflect the application of certain accounting policies described in this note. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates - MGE Energy and MGE.

In order to prepare consolidated financial statements in conformity with GAAP, management must make estimates and assumptions. These estimates could affect reported amounts of assets, liabilities, and disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management's estimates.

Cash and Cash Equivalents

Cash Equivalents

MGE Energy and MGE consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Restricted Cash

Restricted Cash

MGE has certain cash accounts that are restricted to uses other than current operations and designated for a specific purpose. MGE's restricted cash accounts include cash held by trustees for certain employee benefits and cash deposits held by third parties. As of December 31,2016and 2015, there was $3.7 million and $2.9 million, respectively, of cash deposits held by third parties. These are included in "Other current assets" on the consolidated balance sheets.

Receivable Margin Account

Receivable – Margin Account

Cash amounts held by counterparties as margin for certain financial transactions are recorded as receivable – margin account in "Other current assets" on the consolidated balance sheets. As of December 31,2016 and2015, the receivable – margin account balance of $1.3 million and $2.3 million, respectively, is shown net of any collateral posted against derivative positions. As of December 31,2016, no cash collateral was posted against derivative positions. As of December 31,2015, there was $1.0 million of collateral posted against derivative positions. Changes in this cash account are considered cash flows from operating activities to match with the costs being hedged. The costs being hedged are fuel for electric generation, purchased power, and cost of gas sold.

Trade Receivables, Allowance for Doubtful Accounts, and Concentration Risk

Trade Receivables, Allowance for Doubtful Accounts, and Concentration Risk - MGE Energy and MGE.

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. However, a 1% late payment charge is recorded on all receivables unpaid after the due date. The allowance for doubtful accounts associated with these receivables represents our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine our allowance for doubtful accounts based on historical write-off experience, regional economic data, and review of the accounts receivable aging. MGE manages this concentration and the related credit risk through its credit and collection policies, which are consistent with state regulatory requirements.

Inventories

Inventories - MGE Energy and MGE.

Inventories consist of natural gas in storage, fossil fuels, materials and supplies, and renewable energy credits (RECs). MGE values natural gas in storage, fossil fuels, and materials and supplies using average cost.

REC allowances are included in "Materials and supplies" on the consolidated balance sheets and are recorded based on specific identification. These allowances are charged to purchase power expense as they are used in operations.

Chattel Paper Agreement

Chattel Paper Agreements - MGE Energy and MGE.

MGE makes available to qualifying customers a financing program for the purchase and installation of energy-related equipment that will provide more efficient use of utility service at the customer's property. The energy-related equipment installed at the customer sites is used to secure the customer loans. MGE is a party to a chattel paper purchase agreement with a financial institution under which it can sell or finance an undivided interest with recourse, in up to $10.0 million of the financing program receivables, until July 31, 2017.The length of the MGE guarantee to the financial institution varies from one to ten years depending on the term of the underlying customer loan. The loan balances outstanding at December 31,2016, approximate the fair value of the energy-related equipment acting as collateral. MGE accounts for these agreements as secured borrowings.

Regulatory Assets and Liabilities

Regulatory Assets and Liabilities - MGE Energy and MGE.

Regulatory assets and regulatory liabilities are recorded consistent with regulatory treatment. Regulatory assets represent costs which are deferred due to the probable future recovery from customers through regulated rates. Regulatory liabilities represent the excess recovery of costs or accrued credits which were deferred because MGE believes it is probable such amounts will be returned to customers through future regulated rates. Regulatory assets and liabilities are amortized in the consolidated statements of income consistent with the recovery or refund included in customer rates. MGE believes that it is probable that its recorded regulatory assets and liabilities will be recovered and refunded, respectively, in future rates.

Debt Issuance Costs

Debt Issuance Costs - MGE Energy and MGE.

Premiums, discounts, and expenses incurred with the issuance of outstanding long-term debt are amortized over the life of the debt issue. Any call premiums or unamortized expenses associated with refinancing higher-cost debt obligations used to finance utility-regulated assets and operations are amortized consistent with regulatory treatment of those items. These costs are included as a direct deduction to the related debt liability on the consolidated balance sheets.

Property, Plant, and Equipment

Property, Plant, and Equipment - MGE Energy and MGE.

Property, plant, and equipment is recorded at original cost. Cost includes indirect costs consisting of payroll taxes, pensions, postretirement benefits, other fringe benefits, and administrative and general costs. Also, included in the cost is AFUDC for utility property and capitalized interest for nonregulated property. Additions for significant replacements of property are charged to property, plant, and equipment at cost; and minor items are charged to maintenance expense. Depreciation rates on utility property are approved by the PSCW, based on the estimated economic lives of property, and include estimates for salvage value and removal costs. Removal costs of utility property, less any salvage value, are adjusted through regulatory liabilities. Depreciation rates on nonregulated property are based on the estimated economic lives of the property.

Provisions at composite straight-line depreciation rates approximate the following percentages for the cost of depreciable property:

	2016	2015	2014
Electric(a)	2.5 %	2.6 %	2.6 %
Gas(a)	2.1 %	1.7 %	1.7 %
Nonregulated	2.3 %	2.4 %	2.4 %

(a)In December 2015, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2016.

Asset Retirement Obligations Policy

Asset Retirement Obligations - MGE Energy and MGE.

MGE Energy and MGE are required to record a liability for the fair value of an ARO to be recognized in the period in which it is incurred if it can be reasonably estimated. The offsetting associated asset retirement costs are capitalized as a long-lived asset and depreciated over the asset's useful life. The expected present value technique used to calculate the fair value of ARO liabilities includes assumptions about costs, probabilities, settlement dates, interest accretion, and inflation. Revisions to the assumptions, including the timing or amount of expected asset retirement costs, could result in increases or decreases to the AROs. All asset retirement obligations are recorded as "Other long-term liabilities" on the consolidated balance sheets. MGE has regulatory treatment and recognizes regulatory assets or liabilities for the timing differences between when we recover legal AROs in rates and when we would recognize these costs.

Repairs and Maintenance Expense

Repairs and Maintenance Expense - MGE Energy and MGE.

MGE utilizes the direct expensing method for planned major maintenance projects. Under this method, MGE expenses all costs associated with major planned maintenance activities as incurred.

Purchased Gas Adjustment Clause

Purchased Gas Adjustment Clause - MGE Energy and MGE.

MGE's natural gas rates are subject to a fuel adjustment clause designed to recover or refund the difference between the actual cost of purchased gas and the amount included in rates. Differences between the amounts billed to customers and the actual costs recoverable are deferred and recovered or refunded in future periods by means of prospective monthly adjustments to rates.

These amounts are included in "Regulatory liabilities - current" on the consolidated balance sheets.

Revenue Recognition

Revenue Recognition - MGE Energy and MGE.

Operating revenues are recorded as service is rendered or energy is delivered to customers. Meters are read on a systematic basis throughout the month based on established meter-reading schedules. At the end of the month, MGE accrues an estimate for the unbilled amount of energy delivered to customers. The unbilled revenue estimate is based on daily system demand volumes, weather factors, estimated line losses, estimated customer usage by class, and applicable customer rates.

Utility Cost Recovery

Utility Cost Recovery - MGE Energy and MGE.

MGE's rates include a provision for fuel costs. The PSCW allows Wisconsin utilities to defer electric fuel-related costs, less excess revenues, that fall outside a symmetrical cost tolerance band. Any over/under recovery of the actual costs in a year is determined in the following year and is then reflected in future billings to electric retail customers. Such deferred amounts will be recognized in "Purchased power" expense in MGE Energy's and MGE's consolidated income statements each period. The cumulative effects of these deferred amounts will be recorded in "Regulatory assets" or "Regulatory liabilities" on MGE Energy's and MGE's consolidated balance sheets until they are reflected in future billings to customers.

Regional Transmission Organizations

Regional Transmission Organizations - MGE Energy and MGE.

MGE reports on a net basis transactions on the MISO markets in which it buys and sells power within the same hour to meet electric energy delivery requirements.

Allowance for Funds Used During Construction Policy

Allowance for Funds Used During Construction - MGE Energy and MGE.

Allowance for funds used during construction is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a return on shareholder's capital used for construction purposes. In the consolidated income statements, the cost of borrowed funds (AFUDC-debt) is presented as an offset to "Interest expense" and the return on shareholder's capital (AFUDC-equity funds) is shown as an item within "Other income." For both 2016 and 2015, as approved by the PSCW, MGE capitalized AFUDC-debt and equity on 50% of applicable average construction work in progress at 7.93%. For 2014, MGE capitalized AFUDC-debt and equity on 50% of applicable average construction work in progress at 8.21%. For 2016, 2015, and 2014, MGE received specific approval to recover 100% AFUDC on certain environmental costs for Columbia. These amounts are recovered under the ratemaking process over the service lives of the related properties.

Investments

Investments - MGE Energy and MGE.

Investments in limited liability companies that have specific ownership accounts in which MGE Energy or MGE's ownership interest is more than minor and are considered to have significant influence are accounted for using the equity method. All other investments are carried at fair value or at cost, as appropriate.

Capitalized Software Costs

Capitalized Software Costs - MGE Energy and MGE.

Property, plant, and equipment includes the net book value of capitalized costs of internal use software totaling $12.3 million and $12.0 million at December 31,2016 and 2015, respectively. During 2016, 2015, and 2014, MGE recorded $3.0 million, $2.2 million, and $1.6million, respectively, of amortization expense related to these costs. These costs are amortized on a straight-line basis over the estimated useful lives of the assets. For internal use software, the useful lives range from five to ten years.

Impairment of Long-Lived Assets Policy

Impairment of Long-Lived Assets - MGE Energy and MGE.

MGE reviews plant and equipment and other property for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. MGE's policy for determining when long-lived assets are impaired is to recognize an impairment loss if the sum of the expected future cash flows (undiscounted and without interest charges) from an asset are less than the carrying amount of that asset. If an impairment loss is recognized, the amount that will be recorded will be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Income Taxes and Excise Taxes

Income Taxes and Excise Taxes - MGE Energy and MGE.

Income taxes

Under the liability method, income taxes are deferred for all temporary differences between pretax financial and taxable income and between the book and tax basis of assets and liabilities using the tax rates scheduled by law to be in effect when the temporary differences reverse. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. A valuation allowance is recorded for those benefits that do not meet this criterion.

Accounting for uncertainty in income taxes applies to all tax positions and requires a recognition threshold and measurement standard for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. The threshold is defined for recognizing tax return positions in the financial statements as "more likely than not" that the position is sustainable, based on its merits. Subsequent recognition, derecognition, and measurement is based on management's best judgment given the facts, circumstances, and information available at the reporting date.

Regulatory and accounting principles have resulted in a regulatory liability related to income taxes. Excess deferred income taxes result from past taxes provided at rates higher than current rates. The income tax regulatory liability and deferred investment tax credit reflect the revenue requirement associated with the return of these tax benefits to customers.

Investment tax credits from regulated operations are amortized over related property service lives.

Excise taxes

MGE Energy, through its utility operations, pays a state license fee tax in lieu of property taxes on property used in utility operations. License fee tax is calculated as a percentage of adjusted operating revenues of the prior year. The electric tax rate is 3.19% for retail sales and 1.59% for sales of electricity for resale by the purchaser. The tax rate on sales of natural gas is 0.97%. The tax is required to be estimated and prepaid in the year prior to its computation and expensing. License fee tax expense, included in "Other general taxes," was $14.5 million, $14.7 million, and $14.6 million for the years ended December 31,2016, 2015, and 2014, respectively.

Operating income taxes, including tax credits and license fee tax, are included in rates for utility related items.

Share-based Compensation

Share-Based Compensation - MGE Energy and MGE.

Under two separate incentive plans, eligible participants, including employees and non-employee directors, may receive performance units that entitle the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the set performance period. Under the plans, these awards are subject to a prescribed vesting schedule and must be settled in cash. Accordingly, no new shares of common stock are issued in connection with the plans.

MGE Energy and MGE initially measure the cost of the employee or director services received in exchange for a performance unit award based on the current market value of MGE Energy common stock. The fair value of the award is subsequently re-measured at each reporting date through the settlement date. Changes in fair value during the requisite period are recognized as compensation cost over that period.

Comprehensive Income (Loss)

Comprehensive Income - MGE Energy and MGE.

Total comprehensive income includes all changes in equity during a period except those resulting from investments by and distributions to shareholders. Comprehensive income is reflected in the consolidated statements of comprehensive income.

Derivative and Hedging Instruments

Derivative and Hedging Instruments - MGE Energy and MGE.

As part of regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. MGE recognizes all derivatives in the consolidated balance sheets at fair value, with changes in the fair value of derivative instruments to be recorded in current earnings or deferred in accumulated other comprehensive income (loss), depending on whether a derivative is designated as, and is effective as, a hedge and on the type of hedge transaction. Derivative activities are in accordance with the company's risk management policy.

If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Cash flows from such derivative instruments are classified on a basis consistent with the nature of the underlying hedged item.

Common Equity

Common Stock

MGE Energy sells shares of its common stock through its Stock Plan. Those shares may be newly issued shares or shares that MGE Energy has purchased in the open market for resale to participants in the Stock Plan. All sales under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC.

MGE Energy purchases shares on the open market to provide shares to meet obligations to participants in the Stock Plan. The shares are purchased on the open market through a securities broker-dealer and then are reissued under the Stock Plan as needed to meet share delivery requirements. The volume and timing of share repurchases in the open market depends upon the level of dividend reinvestment and optional share purchases being made from time to time by plan participants. As a result, there is no specific maximum number of shares to be repurchased and no specified termination date for the repurchases.

Fair Value of Financial Instruments

Recurring Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The accounting standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability including assumptions about risk. The standard also establishes a three level fair value hierarchy based upon the observability of the assumptions used and requires the use of observable market data when available. The levels are:

Level 1 - Pricing inputs are quoted prices within active markets for identical assets or liabilities.

Level 2 - Pricing inputs are quoted prices within active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations that are correlated with or otherwise verifiable by observable market data.

Level 3 - Pricing inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability.

At December 31,2016 and 2015, the carrying amount of cash, cash equivalents, and outstanding commercial paper approximates fair market value due to the short maturity of those investments and obligations. The estimated fair market value of MGE Energy's and MGE's long-term debt is based on quoted market prices for similar financial instruments at December 31.Since long-term debt is not traded in an active market, it is classified as Level 2.

No transfers were made in or out of Level 1 or Level 2 for the year ended December 31, 2016.

Investments include exchange-traded investment securities valued using quoted prices on active exchanges and are therefore classified as Level 1.

Derivatives include exchange-traded derivative contracts, over-the-counter transactions, a purchased power agreement, and FTRs. Most exchange-traded derivative contracts are valued based on unadjusted quoted prices in active markets and are therefore classified as Level 1. A small number of exchange-traded derivative contractsare valued using quoted market pricing in markets with insufficient volumes and are therefore considered unobservable and classified as Level 3. Transactions done with an over-the-counter party are on inactive markets and are therefore classified as Level 3. These transactions are valued based on quoted prices from markets with similar exchange-traded transactions. FTRs are priced based upon monthly auction results for identical or similar instruments in a closed market with limited data available and are therefore classified as Level 3.

The purchased power agreement (see Footnote 15) was valued using an internally-developed pricing model and therefore is classified as Level 3. The model projects future market energy prices and compares those prices to the projected power costs to be incurred under the contract. Inputs to the model require significant management judgment and estimation. Future energy prices are based on a forward power pricing curve using exchange-traded contracts in the electric futures market, where such exchange-traded contracts exist, and upon calculations based on forward gas prices, where such exchange-traded contracts do not exist. A basis adjustment is applied to the market energy price to reflect the price differential between the market price delivery point and the counterparty delivery point. The historical relationship between the delivery points is reviewed and a discount (below 100%) or premium (above 100%) is derived. This comparison is done for both peak times when demand is high and off peak times when demand is low. If the basis adjustment is lowered, the fair value measurement will decrease, and if the basis adjustment is increased, the fair value measurement will increase.

The projected power costs anticipated to be incurred under the purchased power agreement are determined using many factors, including historical generating costs, future prices, and expected fuel mix of the counterparty. An increase in the projected fuel costs would result in a decrease in the fair value measurement of the purchased power agreement. A significant input that MGE estimates is the counterparty's fuel mix in determining the projected power cost. MGE also considers the assumptions that market participants would use in valuing the asset or liability. This consideration includes assumptions about market risk such as liquidity, volatility, and contract duration. The fair value model uses a discount rate that incorporates discounting, credit, and model risks.

The following table presents the significant unobservable inputs used in the pricing model as of December 31:

	Model Input
Significant Unobservable Inputs	2016	2015
Basis adjustment:
On peak	91.9%	96.9%
Off peak	93.4%	95.1%
Counterparty fuel mix:
Internal generation	55%-75%	60%-75%
Purchased power	45%-25%	40%-25%

The deferred compensation plan allows participants to defer certain cash compensation into a notional investment account. These amounts are included within other deferred liabilities in the consolidated balance sheets of MGE Energy and MGE. The notional investments earn interest based upon the semiannual rate of U.S. Treasury Bills having a 26week maturity increased by 1% compounded monthly with a minimum annual rate of 7%, compounded monthly. The notional investments are based upon observable market data, however since the deferred compensation obligations themselves are not exchanged in an active market they are classified as Level 2.

Income Taxes

Uncertainty in Income Taxes

MGE Energy and MGE account for the difference between the tax benefit amount taken on prior year tax returns, or expected to be taken on a current year tax return, and the tax benefit amount recognized in the financial statements as an unrecognized tax benefit.

Unrecognized tax benefits are liabilities shown with "Other deferred liabilities" on the consolidated balance sheets. The interest component is offset by a regulatory asset.

At December 31,2016, 2015, and 2014, MGE Energy and MGE had unrecognized tax benefits primarily related to temporary tax differences associated with the change in income tax method of accounting for electric generation and electric and gas distribution repairs. In addition, at December 31,2016, MGE Energy and MGE had unrecognized tax benefits relating to permanent differences and tax credits of less than $0.1 million. There were no unrecognized tax benefits at December 31,2015 or 2014, related to federal permanent differences and tax credits.

The unrecognized tax benefits at December 31,2016, are not expected to significantly increase or decrease within the next twelve months. In addition, statutes of limitations will expire for MGE Energy and MGE tax returns. The impact of the statutes of limitations expiring is not anticipated to be material.

Pension Plans and Other Postretirement Benefits

Fair Value of Pension and Other Postretirement Benefit Plan Assets

Pension and other postretirement benefit plan investments are recorded at fair value. See Footnote 11 for more information regarding the fair value hierarchy.

The following descriptions are the categories of underlying plan assets held within the pension and other postretirement benefit plans as of December 31,2016:

Cash and Cash Equivalents – This category includes highly liquid investments with maturities of less than three months which are traded in active markets.

Equity Securities – These securities consist of U.S. and international stock funds. The U.S. stock funds are primarily invested in domestic equities. Securities in these funds are typically priced using the closing price from the applicable exchange, NYSE, Nasdaq, etc. The international funds are composed of international equities. Securities are priced using the closing price from the appropriate local stock exchange.

Fixed Income Securities – These securities consist of U.S. bond funds and short-term funds. U.S. bond funds are priced by a pricing agent using inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. The short-term funds are valued initially at cost and adjusted for amortization of any discount or premium.

Real Estate – The fair value of real estate properties is determined through an external appraisal process.

Insurance Continuance Fund (ICF) – The ICF is a supplemental retirement plan that includes assets that have been segregated and restricted to pay retiree term life insurance premiums.

Fixed Rate Fund – The Fixed Rate fund is supported by an underlying portfolio of fixed income securities, including public bonds, commercial mortgages, and private placement bonds. Public market data and GAAP reported market values are used when available to determine fair value.

All of the fair values of MGE's plan assets are measured using net asset value, except for cash and cash equivalents which are considered level 1 investments.

Derivative and Hedging Instruments

Derivative Hedging

As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, MGE Energy and MGE recognize such derivatives in the consolidated balance sheets at fair value. MGE's financial commodity derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism.

Derivative Netting

All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, MGE Energy and MGE have netted instruments with the same counterparty under a master netting agreement as well as the netting of collateral.

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements

New Accounting Pronouncements

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements - MGE Energy and MGE.

a. Revenue from Contracts with Customers.

In May 2014, the FASB issued authoritative guidance within the Codification's Revenue Recognition topic that provides guidance on the recognition, measurement, and disclosure of revenue from contracts with customers. The new standard establishes a five step model for recognizing and measuring revenue from contracts with customers and replaces existing guidance on revenue recognition. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

MGE Energy and MGE have been assessing the impact of this guidance on revenue streams within the scope of the new standard. All retail electric and gas revenues are tariff rates approved by the PSCW. Based on our evaluation of the new standard, retail revenues will be recognized within the period in which utility service is provided to the customer and the performance obligation is fulfilled, consistent with our current revenue recognition model. Electric revenues for sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may also include bilateral sales to other utilities or power marketers. Revenues for sales to the market will be recognized when the sale is completed within the market operated by MISO, similar to the recognition under our current revenue recognition model. In addition, revenues from the transportation of gas will continue to be recognized upon the performance of services for the respective customer. Based on our assessment of the new standard, revenue recognition for retail revenues, sales to the market, and transportation of gas will be consistent with our current revenue recognition model. However, additional disclosures regarding the nature, amount, timing, and uncertainty of these revenue streams and related cash flows arising from contracts with customers will be required as a result of the new standard.

The Power and Utilities Task Force of the AICPA is formulating a utility industry-specific interpretation of the guidance regarding the collectability threshold of probable within the new standard. The collectability criterion could impact the timing of revenue recognition for uncollectible accounts. The Power and Utilities Task Force of the AICPA is also requesting the FASB issue an industry-specific clarification regarding the accounting treatment of upfront contributions in the aid of construction, also known as CIAC. The final clarification on this topic could result in a material impact on the consolidated financial statements. Management continues to analyze newly-released interpretative guidance and assess the related impacts to the current revenue recognition model.

This authoritative guidance will become effective January 1, 2018, and MGE Energy and MGE anticipate adopting the standard upon the effective date. Adoption of this standard is permitted under one of two methods: the full retrospective method or the modified retrospective method. MGE Energy and MGE are continuing to assess the permitted implementation methods and the impact on our financial statements.

b.Consolidation.

In February 2015, the FASB issued authoritative guidance within the Codification's Consolidation topic that provides guidance on the evaluation of certain legal entities for consolidation purposes. This authoritative guidance became effective January 1, 2016. This guidance had no impact on our financial statements.

c.Debt Issuance Costs.

In April 2015, the FASB issued authoritative guidance within the Codification's Interest topic that provides guidance on the presentation of debt issuance costs in financial statements. This authoritative guidance became effective January 1, 2016, and changed the presentation of debt issuance costs on the balance sheet. Prior to the authoritative guidance, debt issuance costs were treated as a deferred asset, and beginning January 1, 2016, these costs are included as a direct deduction to the related debt liability on the consolidated balance sheets. As of December 31, 2016, assets (other deferred assets and other) and liabilities (long-term debt) decreased approximately $3.9 million as a cumulative result of the guidance. In addition, this guidance was applied retrospectively to all prior periods presented, resulting in a decrease to assets and liabilities of $4.3 million for the year ended December 31, 2015.

d. Financial Instruments.

In January 2016, the FASB issued authoritative guidance within the Codification's Financial Instruments topic that provides guidance on the recognition and measurement of financial instruments. This authoritative guidance will become effective January 1, 2018, and will require equity investments to be measured at fair value with changes in fair value recognized in net income rather than in other comprehensive income. As a result of this guidance, MGE Energy and MGE will no longer have any other comprehensive income. This standard will be applied using a modified retrospective approach, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of all prior periods presented.

e. Leases.

In February 2016, the FASB issued authoritative guidance within the Codification's Leases topic that provides guidance on the classification, recognition, measurement, and disclosure of leases. The new leasing standard establishes that a lease conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Under the new guidance, lessees will be required to recognize all leases with terms greater than one year, including operating leases, on the consolidated balance sheet by recording a right-of-use asset and lease liability. Prior to the authoritative guidance, only capital leases were recognized on the balance sheet by lessees. The new accounting guidance as applied by lessors is materially consistent from that applied under current GAAP.

Management has begun utilizing a bottoms-up approach to analyze the impact of the standard on our lease portfolio. MGE Energy and MGE have been reviewing current accounting policies and procedures to identify potential differences in accounting treatment that would result from applying the requirements of the new standard to our existing lease portfolio. In addition, we are identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure requirements under the new standard. This authoritative guidance will become effective January 1, 2019, with early adoption permitted. The new leasing standard requires entities to recognize and measure leases at the beginning of the earliest comparative period presented using a modified retrospective approach. MGE Energy and MGE are currently assessing the impact this pronouncement will have on our financial statements.

f. Restricted Cash.

In November 2016, the FASB issued authoritative guidance within the Codification's Statement of Cash Flows topic that provides guidance on the classification and presentation of changes in restricted cash within the statement of cash flows. The new standard was issued to eliminate a current diversity in practice for the accounting treatment of restricted cash. Under the new guidance, reporting entities will be required to explain the changes in the total of restricted and unrestricted cash and cash equivalents when reconciling the beginning and ending balances on the statement of cash flows. Prior to the authoritative guidance, changes in restricted cash were presented as either cash flows from operating, investing, or financing activities within the statement of cash flows, as appropriate based on the nature of the restriction. Also under the new standard, reporting entities will be required to provide a reconciliation from the balance sheet to the statement of cash flows and disclose the nature of the restrictions of cash. This authoritative guidance will become effective January 1, 2018. Upon the effective date, MGE Energy and MGE will change the presentation of restricted cash to reflect this change in accounting guidance. MGE Energy and MGE will also retrospectively apply the guidance to all prior periods presented. As of December 31, 2016, MGE Energy and MGE had $5.1 million of restricted cash classified within other current assets on the consolidated balance sheets.

Segment Information

Segment Information

Segment Information - MGE Energy and MGE.

The electric utility business purchases, generates and distributes electricity, and contracts for transmission service. The gas utility business purchases and distributes natural gas and contracts for the transportation of natural gas. Both the electric and gas segments operate through MGE Energy's principal subsidiary, MGE.

The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power, MGE Power Elm Road, and MGE Power West Campus. These subsidiaries own and lease electric generating capacity to assist MGE. MGE Power Elm Road has an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin, which are leased to MGE, and MGE Power West Campus owns a controlling interest in the electric generation plant of a natural gas-fired cogeneration facility on the UW campus. MGE Power West Campus's portion is also leased to MGE.

The transmission investment segment invests, through MGE Transco, in ATC, a company that provides electric transmission services primarily in Wisconsin and MGEE Transco, in ATC Holdco, a company formed to pursue electric transmission development and investments outside of Wisconsin. See Footnote 4 for further discussion.

The "All Others" segment includes: corporate, CWDC, MAGAEL, MGE State Energy Services, MGE Services, and NGV Fueling Services. These entities' operations consist of investing in companies and property which relate to the regulated operations, financing the regulated operations, or owning and operating natural gas compression equipment.

General corporate expenses include the cost of executive management, corporate accounting and finance, information technology, risk management, human resources and legal functions, and employee benefits that are allocated to electric and gas segments based on formulas prescribed by the PSCW. Identifiable assets are those used in MGE's operations in each segment. Assets not allocated consist primarily of cash and cash equivalents, restricted cash, investments, other accounts receivable, and prepaid assets.

Sales between our electric and gas segments are based on PSCW approved tariffed rates. Additionally, intersegment operations related to the leasing arrangement between our electric segment and MGE Power Elm Road/MGE Power West Campus are based on terms previously approved by the PSCW. Consistent with internal reporting, management has presented the direct financing capital leases between MGE and MGE Power Elm Road/MGE Power West Campus based on actual lease payments included in rates. Lease payments made by MGE to MGE PowerElm Roadand MGE Power West Campusare shown as operating expenses. The lease payments received by MGE PowerElm Roadand MGE Power West Campusfrom MGE are shown as lease income in interdepartmental revenues. The depreciation expense associated with the Elm Road Unitsand WCCF is reflected in the nonregulated energy segment.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Schedule of Remaining Contractual Maturities for Chattel Paper Agreements

As of December 31,2016, the remaining contractual maturities of the chattel paper agreements were as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Repurchase-to-Maturity Transactions:
Loans	$	559	$	620	$	595	$	568	$	432	$	1,121

Straight-Line Depreciation Rates

Provisions at composite straight-line depreciation rates approximate the following percentages for the cost of depreciable property:

	2016	2015	2014
Electric(a)	2.5 %	2.6 %	2.6 %
Gas(a)	2.1 %	1.7 %	1.7 %
Nonregulated	2.3 %	2.4 %	2.4 %

(a)In December 2015, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2016.

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Variable Interest Entities (Tables)

12 Months Ended

Dec. 31, 2016

MGE Power Elm Road [Member]

Variable Interest Entity [Line Items]

Variable interest entities significant balance sheet accounts

At December 31, MGE has included the following significant accounts on its consolidated balance sheets related to its interest in this VIE:

(In thousands)		2016		2015
Property, plant, and equipment, net	$	175,502	$	177,904
Construction work in progress		3,241		2,400
Deferred income taxes		42,525		40,865
Long-term debt		62,021		64,622
Noncontrolling interest		80,362		79,113

MGE Power West Campus [Member]

Variable Interest Entity [Line Items]

Variable interest entities significant balance sheet accounts

At December 31, MGE has included the following significant accounts on its consolidated balance sheets related to its interest in this VIE:

(In thousands)		2016		2015
Property, plant, and equipment, net	$	81,588	$	84,403
Affiliate receivables		4,769		5,295
Deferred income taxes		19,912		19,612
Long-term debt		44,932		46,510
Noncontrolling interest		35,303		37,603

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Property, Plant, and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant, and Equipment

Property, plant, and equipment consisted of the following at December 31:

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Utility:
Electric(a)	$	1,171,004	$	1,147,701	$	1,171,021	$	1,147,718
Gas		395,790		384,163		395,801		384,175
Total utility plant		1,566,794		1,531,864		1,566,822		1,531,893
Less: Accumulated depreciation and amortization(a)		579,965		578,410		579,965		578,410
In-service utility plant, net		986,829		953,454		986,857		953,483
Nonregulated:
Nonregulated		317,810		315,589		317,014		314,750
Less: Accumulated depreciation and amortization		59,370		51,949		59,223		51,818
In-service nonregulated plant, net		258,440		263,640		257,791		262,932
Construction work in progress:
Utility construction work in progress(a)		31,356		23,837		31,356		23,837
Nonregulated construction work in progress		5,434		2,514		5,434		2,514
Total property, plant, and equipment	$	1,282,059	$	1,243,445	$	1,281,438	$	1,242,766

(a)As of December 31,2016, MGE has classified $14.8 million of Columbia assets as held-for-sale on the consolidated balance sheets related to the partial sale of plant assets to WPL. See Footnote 5.a. for further discussion.

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Investments (Tables)

12 Months Ended

Dec. 31, 2016

Investments Disclosure [Abstract]

Equity Method, Available for Sale Securities, and Other Investments

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Available for sale securities:
Cost basis	$	2,216	$	2,225	$	455	$	480
Gross unrealized gains		346		599		40		40
Gross unrealized losses		(8)		(2)		(8)		(2)
Fair value		2,554		2,822		487		518
Equity method investments:
ATC and ATC Holdco(a)		72,458		69,466		-		69,466
Other		1,158		1,184		-		-
Total equity method investments		73,616		70,650		-		69,466
Other investments		120		159		-		-
Total	$	76,290	$	73,631	$	487	$	69,984

(a)MGE Transco holds an ownership interest in ATC, and MGEE Transco holds an ownership interest in ATC Holdco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. See Footnote 8 for further discussion of noncontrolling interest. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see "ATC and ATC Holdco" below for additional information.

During the years endedDecember 31,2016, 2015, and 2014, certain investments were liquidated. As a result of these liquidations, MGE Energy and MGE received the following:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Cash proceeds	$	408	$	19	$	38	$	16	$	19	$	-
Gain (loss) on sale		121		10		21		(8)		10		-

Equity Method Investments Summarized Financial Data

For the years endedDecember 31,2016, 2015, and 2014, MGE Transco recorded the following:

(In thousands)		2016		2015		2014
Equity earnings from investment in ATC	$	8,670	$	7,728	$	9,150
Dividends received from ATC(a)		7,926		6,645		7,740
Capital contributions to ATC		2,486		710		1,775

(a)As of December 31, 2016, MGE Transco recorded a $2.1 million receivable from ATC for a cash dividend received in January 2017.

ATC's summarized financial data for the years endedDecember 31,2016, 2015, and 2014 is as follows:

(In thousands)
Income statement data for the year ended December 31,		2016		2015		2014
Operating revenues	$	650,806	$	615,836	$	635,033
Operating expenses		(322,517)		(319,321)		(307,451)
Other income		3,225		1,176		117
Interest expense, net		(98,758)		(97,250)		(88,970)
Earnings before members' income taxes	$	232,756	$	200,441	$	238,729

Balance sheet data as of December 31,		2016		2015
Current assets	$	75,790	$	80,520
Noncurrent assets		4,312,893		3,948,265
Total assets	$	4,388,683	$	4,028,785
Current liabilities	$	495,126	$	330,248
Long-term debt		1,865,302		1,790,718
Other noncurrent liabilities		271,495		244,991
Members' equity		1,756,760		1,662,828
Total members' equity and liabilities	$	4,388,683	$	4,028,785

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Joint Plant Ownership (Tables)

12 Months Ended

Dec. 31, 2016

Columbia Units [Member]

Jointly Owned Utility Plant Interests [Line Items]

Schedule of Joint Plant Ownership

MGE's interest in Columbia's gross utility plant in service, and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Utility plant	$	270,898	$	273,762
Accumulated depreciation		(81,935)		(84,864)
Property, plant, and equipment, net		188,963		188,898
Construction work in progress		21,120		17,110
Total property, plant, and equipment	$	210,083	$	206,008

Elm Road Units [Member]

Jointly Owned Utility Plant Interests [Line Items]

Schedule of Joint Plant Ownership

MGE Power Elm Road's interest in the portion of the Elm Road Units in-service and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Nonregulated plant	$	204,292	$	202,326
Accumulated depreciation		(28,790)		(24,422)
Property, plant, and equipment, net		175,502		177,904
Construction work in progress		3,241		2,400
Total property, plant, and equipment	$	178,743	$	180,304

West Campus [Member]

Jointly Owned Utility Plant Interests [Line Items]

Schedule of Joint Plant Ownership

MGE Power West Campus' interest in WCCF and the related accumulated depreciation reserves at December 31 were as follows:

(In thousands)		2016		2015
Nonregulated plant	$	111,330	$	111,141
Accumulated depreciation		(29,742)		(26,738)
Property, plant, and equipment, net		81,588		84,403
Construction work in progress		1,009		113
Total property, plant, and equipment	$	82,597	$	84,516

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Regulatory Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2016

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

The following regulatory assets and liabilities are reflected in MGE's consolidated balance sheets as of December 31:

(In thousands)		2016		2015
Regulatory Assets
Asset retirement obligation	$	5,563	$	4,849
Conservation costs		444		-
Debt related costs		10,211		10,672
Derivatives		49,281		54,083
Environmental costs		55		368
Tax recovery related to AFUDC equity		9,403		8,950
Unfunded pension and other postretirement liability		86,475		78,181
Other		3,467		634
Total Regulatory Assets	$	164,899	$	157,737
Regulatory Liabilities
Conservation costs	$	-	$	231
Deferred fuel savings		6,016		9,515
Elm Road		3,473		643
Income taxes		1,302		1,559
Non-ARO removal costs		16,415		17,137
Renewable energy credits		339		327
Other		1,538		888
Total Regulatory Liabilities	$	29,083	$	30,300

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Noncontrolling Interest (Tables) - MGE [Member]

12 Months Ended

Dec. 31, 2016

Noncontrolling Interest [Line Items]

Noncontrolling Interest in Balance Sheet

The noncontrolling interest on MGE's consolidated balance sheets at December 31 was as follows:

(In thousands)		2016		2015
MGE Power Elm Road(a)	$	80,362	$	79,113
MGE Power West Campus(a)		35,303		37,603
MGE Transco(b)		-		23,592
Total Noncontrolling Interest	$	115,665	$	140,308

Net Income Attributable to Noncontrolling Interest, Net of Tax

The net income attributable to noncontrolling interest, net of tax, for the years ended December 31,2016, 2015, and 2014was as follows:

(In thousands)		2016		2015		2014
MGE Power Elm Road(a)	$	14,748	$	16,577	$	16,160
MGE Power West Campus(a)		7,200		7,348		7,666
MGE Transco(b)		1,410		2,172		2,484
Net Income Attributable to Noncontrolling Interest, Net of Tax	$	23,358	$	26,097	$	26,310

(a)MGE Power Elm Road and MGE Power West Campus are not subsidiaries of MGE; however, they have been consolidated in the consolidated financial statements of MGE (see Footnote 2). MGE Power Elm Road and MGE Power West Campus are100% owned by MGE Power, and MGE Power is 100% owned by MGE Energy. MGE Energy's proportionate share of the equity and net income (through its wholly owned subsidiary MGE Power) of MGE Power Elm Road and MGE Power West Campus is classified within the MGE consolidated financial statements as noncontrolling interest.

(b)At December 31,2016, MGE Energy is the owner of MGE Transco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority as a result of continued funding of ATC capital contributions by MGE Energy.As a result of the change in majority ownership in MGE Transco, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. The change in consolidation was applied prospectively by reducing its investment and noncontrolling interest on MGE's consolidated financial statements. The change had no effect on MGE Energy's consolidated financial statements; however, MGE Energy's proportionate share of the equity and net income of MGE Transco classified as noncontrolling interest was deconsolidated from MGE's financial statements. No gain or loss was recognized in July 2016 due to MGE ceasing to have a controlling financial interest.

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Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

		2016				2015
(In thousands)		MGE Energy		MGE		MGE Energy		MGE
First Mortgage Bonds:(a)
7.70%, 2028 Series	$	1,200	$	1,200	$	1,200	$	1,200
Tax Exempt Debt:
3.45%, 2027 Series,
Industrial Development Revenue Bonds		19,300		19,300		19,300		19,300
Medium-Term Notes:(b)
5.25%, due 2017(c)		30,000		30,000		30,000		30,000
6.12%, due 2028		20,000		20,000		20,000		20,000
7.12%, due 2032		25,000		25,000		25,000		25,000
6.247%, due 2037		25,000		25,000		25,000		25,000
Total Medium-Term Notes		100,000		100,000		100,000		100,000
Other Long-Term Debt:(d)
5.59%, due 2018(e)		20,000		20,000		20,000		20,000
3.38%, due 2020(e)		15,000		15,000		15,000		15,000
3.09%, due 2023(e)		30,000		30,000		30,000		30,000
3.29%, due 2026(e)		15,000		15,000		15,000		15,000
5.68%, due 2033(f)		27,120		27,120		28,063		28,063
5.19%, due 2033(f)		17,983		17,983		18,640		18,640
5.26%, due 2040(e)		15,000		15,000		15,000		15,000
5.04%, due 2040(g)		38,472		38,472		40,138		40,138
4.74%, due 2041(g)		24,167		24,167		25,167		25,167
4.38%, due 2042(e)		28,000		28,000		28,000		28,000
4.42%, due 2043(e)		20,000		20,000		20,000		20,000
4.47%, due 2048(e)		20,000		20,000		20,000		20,000
Total Other Long-Term Debt		270,742		270,742		275,008		275,008
Long-term debt due within one year		(4,333)		(4,333)		(4,266)		(4,266)
Unamortized discount and debt issuance costs		(4,118)		(4,118)		(4,498)		(4,498)
Total Long-Term Debt	$	382,791	$	382,791	$	386,744	$	386,744

(a)MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust, under which its first mortgage bonds are issued. The Mortgage Indenture provides that dividends or any other distribution or purchase of shares may not be made if the aggregate amount thereof since December 31, 1945 would exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31,2016, approximately $338.5 million was available for the payment of dividends under this covenant.

(b)The indenture under which MGE's Medium-Term notes are issued provides that those notes will be entitled to be equally and ratably secured in the event that MGE issues any additional first mortgage bonds.

(c)MGE had $30 million of medium-term notes mature in January 2017. MGE issued $40 million of new long-term unsecured debt on January 13, 2017, to refinance the maturing $30 million medium-term notes and assist with the financing of additional capital expenditures. The new debt carries an interest rate of 3.76% per annum over its 35-year term. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt. In accordance with applicable accounting guidance, MGE has classified the $30 million of maturing medium-term notes as long-term debt on the consolidated balance sheets for the year ended December 31, 2016.

(d)Unsecured notes issued pursuant to various Note Purchase Agreements with one or more purchasers. The notes are not issued under, or governed by, MGE's Indenture dated as of September 1, 1998, which governs MGE's Medium-Term Notes.

(e)Issued by MGE. Under that Note Purchase Agreement: (i) note holders have the right to require MGE to repurchase their notes at par in the event of an acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy, (ii) MGE must maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%, and (iii) MGE cannot issue "Priority Debt" in an amount exceeding 20% of its consolidated assets. Priority Debt is defined as any indebtedness of MGE secured by liens other than specified liens permitted by the Note Purchase Agreement and certain unsecured indebtedness of certain subsidiaries. As of December 31, 2016, MGE was in compliance with the covenant requirements.

(f)Issued by MGE Power West Campus. The Note Purchase Agreements require it to maintain a projected debt service coverage ratio of not less than 1.25 to 1.00, and debt to total capitalization ratio of not more than 0.65 to 1.00. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power West Campus for use of its ownership interest in the WCCF pursuant to a long-term lease.As of December 31, 2016, MGE Power West Campuswas in compliance with the covenant requirements.

(g)Issued by MGE Power Elm Road. The Note Purchase Agreement requires MGE Power Elm Road to maintain a projected and actual debt service coverage ratio at the end of any calendar quarter of not less than 1.25 to 1.00 for the trailing 12-month period. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of its ownership interest in the Elm Road Units pursuant to long-term leases.As of December 31, 2016, MGE Power Elm Road was in compliance with the covenant requirements.

Schedule of Long-Term Debt Maturities

Below is MGE Energy's and MGE's aggregate maturities for all long-term debt for years following December 31,2016.

		MGE
(In thousands)		Energy		MGE *
2017	$	4,358		4,358
2018		24,452		24,452
2019		4,553		4,553
2020		19,659		19,659
2021		4,771		4,771
Future years		333,449		333,449
Total	$	391,242	$	391,242

*Includes $45.1million for MGE Power West Campus and $62.6 million for MGE Power Elm Road, all of which are consolidated with MGE's debt (see Footnote 2 for further information).

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Notes Payable to Banks, Commercial Paper, and Lines of Credit (Tables)

12 Months Ended

Dec. 31, 2016

Debt Disclosure [Abstract]

Schedule of Short-Term Borrowings

Information concerning short-term borrowings for the past two years is shown below:

		As of December 31,
(In thousands)		2016		2015
MGE Energy(a)
Available lines of credit	$	150,000	$	150,000
Short-term debt outstanding	$	-	$	-
Weighted-average interest rate		-%		-%
During the year:
Maximum short-term borrowings	$	-	$	17,500
Average short-term borrowings	$	-	$	1,511
Weighted-average interest rate		-%		0.17%
MGE
Available lines of credit	$	100,000	$	100,000
Commercial paper outstanding	$	-	$	-
Weighted-average interest rate		-%		-%
During the year:
Maximum short-term borrowings	$	-	$	17,500
Average short-term borrowings	$	-	$	1,511
Weighted-average interest rate		-%		0.17%

(a)MGE Energy short-term borrowings include MGE Energy and MGE lines of credit and MGE commercial paper.

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Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

The estimated fair market value of financial instruments are as follows:

		2016				2015
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	95,959	$	95,959	$	81,384	$	81,384
Liabilities:
Long-term debt(a)		391,242		430,122		395,508		435,767
MGE
Assets:
Cash and cash equivalents	$	10,768	$	10,768	$	26,760	$	26,760
Liabilities:
Long-term debt(a)		391,242		430,122		395,508		435,767
(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized
discount of $4.1 million and $4.5 million at December 31, 2016 and 2015, respectively.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.

	Fair Value as of December 31, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		500		500		-		-
Total Assets	$	2,027	$	1,541	$	-	$	486
Liabilities:
Derivatives, net	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
MGE
Assets:
Derivatives, net	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		143		143		-		-
Total Assets	$	1,670	$	1,184	$	-	$	486
Liabilities:
Derivatives, net	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
	Fair Value as of December 31, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		759		759		-		-
Total Assets	$	993	$	759	$	-	$	234
Liabilities:
Derivatives, net(b)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
MGE
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		148		148		-		-
Total Assets	$	382	$	148	$	-	$	234
Liabilities:
Derivatives, net(b)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
(b)     These amounts are shown gross and exclude $1.0 million of collateral that was posted against
derivative positions with counterparties as of December 31, 2015.

Significant Unobservable Inputs

The following table presents the significant unobservable inputs used in the pricing model as of December 31:

	Model Input
Significant Unobservable Inputs	2016	2015
Basis adjustment:
On peak	91.9%	96.9%
Off peak	93.4%	95.1%
Counterparty fuel mix:
Internal generation	55%-75%	60%-75%
Purchased power	45%-25%	40%-25%

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis.

(In thousands)		2016		2015		2014
Balance as of January 1,	$	(53,501)	$	(53,986)	$	(64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities		3,195		484		10,642
Included in other comprehensive income		-		-		-
Included in earnings		(5,347)		(6,635)		5,129
Included in current assets		(142)		-		-
Purchases		23,346		23,052		26,382
Sales		-		-		-
Issuances		-		-		-
Settlements		(17,857)		(16,416)		(31,511)
Transfers in and/or out of Level 3		-		-		-
Balance as of December 31,	$	(50,306)	$	(53,501)	$	(53,986)
Total gains (losses) included in earnings attributed to the
change in unrealized gains (losses) related to assets and
liabilities held at December 31,(c)	$	-	$	-	$	-

(c)MGE's exchange-traded derivative contracts, over-the-counter party transactions, purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.

Gains and Losses Included in Income for Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis (c).

(In thousands)
Year Ended December 31,		2016		2015		2014
Purchased power expense	$	(5,262)	$	(6,663)	$	5,137
Cost of gas sold expense		(85)		28		(8)
Total	$	(5,347)	$	(6,635)	$	5,129

(c)MGE's exchange-traded derivative contracts, over-the-counter party transactions, purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Provision

On a consolidated and separate company basis, the income tax provision consists of the following provision (benefit) components for the years endedDecember 31:

		MGE Energy						MGE
(In thousands)		2016		2015		2014		2016		2015		2014
Current payable:
Federal	$	16,908	$	16,837	$	(891)	$	17,521	$	19,295	$	637
State		3,287		2,774		(589)		3,497		3,443		(451)
Net-deferred:
Federal		17,571		15,951		39,284		16,391		13,538		38,553
State		4,850		5,976		10,600		4,485		5,305		10,625
Amortized investment tax credits		(103)		(175)		(219)		(103)		(175)		(219)
Total income tax provision	$	42,513	$	41,363	$	48,185	$	41,791	$	41,406	$	49,145

Effective Tax Rate Reconciliation

Theconsolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:

	MGE Energy			MGE
	2016	2015	2014	2016	2015	2014
Statutory federal income tax rate	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %	35.0 %
State income taxes, net of federal benefit	5.1 %	5.2 %	5.1 %	5.1 %	5.2 %	5.1 %
Amortized investment tax credits	(0.1)%	(0.2)%	(0.2)%	(0.1)%	(0.2)%	(0.2)%
Credit for electricity from wind energy	(1.6)%	(1.8)%	(1.7)%	(1.7)%	(1.8)%	(1.7)%
Domestic manufacturing deduction	(1.3)%	(1.4)%	-%	(1.3)%	(1.4)%	-%
AFUDC equity, net	(0.2)%	(0.1)%	(0.8)%	(0.2)%	(0.1)%	(0.8)%
Other, net, individually insignificant	(0.9)%	-%	0.1 %	(0.9)%	-%	0.1 %
Effective income tax rate	36.0 %	36.7 %	37.5 %	35.9 %	36.7 %	37.5 %

Deferred Tax Liabilities (Assets)

The significant components of deferred tax liabilities (assets) that appear on the consolidated balance sheets as of December 31are as follows:

		MGE Energy				MGE
(In thousands)		2016		2015		2016		2015
Property-related	$	344,721	$	327,918	$	344,630	$	327,822
Investment in ATC(a)		71,898		38,213		-		30,382
Bond transactions		1,324		1,422		1,324		1,422
Pension and other postretirement benefits		63,516		57,697		63,516		57,697
Derivatives		20,304		21,660		20,304		21,660
Tax deductible prepayments		8,404		8,011		8,404		8,011
Other		16,606		14,997		16,571		14,831
Gross deferred income tax liabilities		526,773		469,918		454,749		461,825
Investment in ATC(a)		(31,212)		-		-		-
Accrued expenses		(22,410)		(21,391)		(22,410)		(21,391)
Pension and other postretirement benefits		(48,860)		(46,582)		(48,860)		(46,582)
Deferred tax regulatory account		(903)		(1,047)		(903)		(1,047)
Derivatives		(20,304)		(21,660)		(20,304)		(21,660)
Other		(19,340)		(18,523)		(19,224)		(18,589)
Gross deferred income tax assets		(143,029)		(109,203)		(111,701)		(109,269)
Less valuation allowance		69		70		69		70
Net deferred income tax assets		(142,960)		(109,133)		(111,632)		(109,199)
Deferred income taxes	$	383,813	$	360,785	$	343,117	$	352,626

(a)As of December 1, 2016, MGE transferred its ownership interest in ATC to MGE Energy, resulting in a deferred intercompany gain and a corresponding step-up in tax basis.

Unrecognized Tax Benefits and Interest

A tabular reconciliation of unrecognized tax benefits and interest from January 1, 2014 to December 31, 2016, is as follows:

(In thousands)
Unrecognized Tax Benefits:		2016		2015		2014
Unrecognized tax benefits, January 1,	$	2,528	$	2,365	$	2,363
Additions based on tax positions related to the current year		452		488		610
Additions based on tax positions related to the prior years		39		520		618
Reductions based on tax positions related to the prior years		(532)		(845)		(1,226)
Unrecognized tax benefits, December 31,	$	2,487	$	2,528	$	2,365
(In thousands)
Interest on Unrecognized Tax Benefits:		2016		2015		2014
Accrued interest on unrecognized tax benefits, January 1,	$	311	$	92	$	101
Reduction in interest expense on uncertain tax positions		(27)		(102)		(97)
Interest expense on uncertain tax positions		104		321		88
Accrued interest on unrecognized tax benefits, December 31,	$	388	$	311	$	92

Tax Years that Remain Subject to Examination

The following table shows tax years that remain subject to examination by major jurisdiction:

Taxpayer	Open Years
MGE Energy and consolidated subsidiaries in federal return	2013 through 2016
MGE Energy Wisconsin combined reporting corporation return	2012 through 2016

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Pension Plans and Other Postretirement Benefits (Tables)

12 Months Ended

Dec. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of Benefit Obligations and Change in Plan Assets

(In thousands)		Pension Benefits				Other Postretirement Benefits
Change in Benefit Obligations:		2016		2015		2016		2015
Net benefit obligation at beginning of year	$	332,565	$	340,233	$	74,935	$	78,478
Service cost		5,365		7,263		1,271		1,559
Interest cost		12,393		13,766		2,681		3,075
Plan participants' contributions		-		-		767		741
Actuarial loss (gain)(a)		11,412		(17,576)		2,638		(5,828)
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Less: federal subsidy on benefits paid(b)		-		-		187		190
Benefit obligation at end of year	$	349,556	$	332,565	$	78,842	$	74,935
Change in Plan Assets:
Fair value of plan assets at beginning of year	$	290,716	$	288,548	$	40,170	$	38,952
Actual return on plan assets		24,181		4,153		3,236		603
Employer contributions		9,215		9,136		2,641		3,154
Plan participants' contributions		-		-		767		741
Gross benefits paid		(12,179)		(11,121)		(3,637)		(3,280)
Fair value of plan assets at end of year	$	311,933	$	290,716	$	43,177	$	40,170
Funded Status at December 31	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

(a) In 2016, lower discount rates were the main driver of the actuarial loss.

(b) In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For the years ended December 31, 2016 and 2015, the subsidy due to MGE was $0.2 million.

Schedule of Amounts Recognized in the Consolidated Balance Sheet

The amounts recognized in the consolidated balance sheets to reflect the funded status of the plans at December 31 are as follows:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Long-term asset	$	2,020	$	-	$	-	$	-
Current liability		(972)		(966)		-		(52)
Long-term liability		(38,671)		(40,883)		(35,665)		(34,713)
Net liability	$	(37,623)	$	(41,849)	$	(35,665)	$	(34,765)

Amounts Recognized in Regulatory Asset

The following table shows the amounts that have not yet been recognized in our net periodic benefit cost as of December 31 and are recorded as regulatory assets in our consolidated balance sheets:

		Pension Benefits				Other Postretirement Benefits
(In thousands)		2016		2015		2016		2015
Net actuarial loss	$	84,656	$	80,660	$	14,728	$	13,086
Prior service benefit		(446)		(436)		(12,489)		(15,158)
Transition obligation		-		-		26		29
Total	$	84,210	$	80,224	$	2,265	$	(2,043)

Scehdule of Projected Benefit Obligations in Excess of Plan Assets

The projected benefit obligation and fair value of plan assets for pension plans with a projected benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Projected Benefit Obligation in Excess of Plan Assets		2016		2015
Projected benefit obligation, end of year	$	227,739	$	332,565
Fair value of plan assets, end of year		188,096		290,716

Schedule of Accumulated Benefit Obligations in Excess of Plan Assets

The accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets were as follows:

(In thousands)		Pension Benefits
Accumulated Benefit Obligation in Excess of Plan Assets		2016		2015
Accumulated benefit obligation, end of year	$	26,927	$	24,606
Fair value of plan assets, end of year		-		-

Net Periodic Benefit Costs

(In thousands)		Pension Benefits						Other Postretirement Benefits
Components of Net Periodic Cost (Benefit):		2016		2015		2014		2016		2015		2014
Service cost	$	5,365	$	7,263	$	6,179	$	1,271	$	1,559	$	1,339
Interest cost		12,393		13,766		13,574		2,681		3,075		3,166
Expected return on assets		(22,365)		(22,682)		(22,051)		(2,829)		(2,812)		(2,615)
Amortization of:
Transition obligation		-		-		-		3		3		3
Prior service cost (benefit)		10		23		204		(2,669)		(2,669)		(2,669)
Actuarial loss		5,600		5,395		703		589		953		252
Net periodic cost (benefit)	$	1,003	$	3,765	$	(1,391)	$	(954)	$	109	$	(524)

Plan Assumptions

The weighted-average assumptions used to determine the benefit obligations were as follows for the years ended December 31:

	Pension Benefits		Other Postretirement Benefits
	2016	2015	2016	2015
Discount rate(a)	4.29%	4.51%	4.11%	4.32%
Rate of compensation increase	3.71%	3.78%	N/A	N/A
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year	N/A	N/A	6.25%	6.5%
Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate)	N/A	N/A	5.0%	5.0%
Year that the rate reaches the ultimate trend rate	N/A	N/A	2022	2022

(a) In 2015, MGE refined its methodology for using discount rates to measure the components of net periodic benefit cost. The refined methodology uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components.

The weighted-average assumptions used to determine the net periodic cost were as follows for the years ended December 31:

	Pension Benefits			Other Postretirement Benefits
	2016	2015	2014	2016	2015	2014
Discount rate	4.51%	4.11%	4.88%	4.32%	3.96%	4.69%
Expected rate of return on plan assets	7.65%	7.80%	8.10%	6.96%	7.06%	7.07%
Rate of compensation increase	3.76%	3.84%	3.93%	N/A	N/A	N/A

Effect of 1% Increase or Decrease in Health Care Costs

The following table shows how an assumed 1% increase or 1% decrease in health care cost trends could impact postretirement benefits in 2016 dollars:

(In thousands)		1% Increase		1% Decrease
Effect on other postretirement benefit obligation	$	1,175	$	(1,479)
Effect on total service and interest cost components		54		(67)

Fair Value of Plan Assets by Asset Category

The asset allocation for MGE's pension plans at the end of 2016 and 2015, and the target allocation for 2017, by asset category, follows:

	Target Allocation	Percentage of Plan Assets at Year End
		2016	2015
Equity securities(a)	63.0 %	65.0 %	63.0 %
Fixed income securities	30.0 %	27.0 %	29.0 %
Real estate	7.0 %	8.0 %	8.0 %
Total	100.0 %	100.0 %	100.0 %

(a) Target allocations for equity securities are broken out as follows: 45.5% United States equity,

17.5% non-United States equity.

All of the fair values of MGE's plan assets are measured using net asset value, except for cash and cash equivalents which are considered level 1 investments. The fair values of MGE's plan assets by asset category are as follows:

(In thousands)		2016		2015
Cash and Cash Equivalents	$	284	$	300
Equity Securities:
U.S. Large Cap		107,406		98,949
U.S. Mid Cap		25,966		22,446
U.S. Small Cap		33,836		27,561
International Blend		59,054		55,948
Fixed Income Securities:
Short-Term Fund		4,318		3,388
High Yield Bond		17,978		16,225
Long Duration Bond		71,512		73,112
Real Estate		29,441		27,231
Insurance Continuance Fund		1,514		1,518
Fixed Rate Fund		3,801		4,208
Total	$	355,110	$	330,886

Benefit Payments, Fiscal Year Maturity

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as follows:

		Pension		Other Postretirement Benefits
(In thousands)		Pension Benefits		Gross Postretirement Benefits		Expected Medicare Part D Subsidy		Net Postretirement Benefits
2017	$	13,468	$	3,623	$	(232)	$	3,391
2018		14,618		3,998		(252)		3,746
2019		15,632		4,442		(274)		4,168
2020		16,429		4,932		(302)		4,630
2021		17,263		5,442		(326)		5,116
2022 - 2026		99,725		31,065		(2,122)		28,943

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Share-Based Compensation (Tables) - Performance Units [Member]

12 Months Ended

Dec. 31, 2016

Director Incentive Agreement [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Performance Unit Graded Vesting Schedule

Units granted under the Director Incentive Plan are subject to a three-year vesting schedule. The most recent three years of units granted under this plan are as follows:

Grant Date	MGE Energy Units Granted
January 20, 2017	4,032
January 15, 2016	3,773
January 16, 2015	3,794

Performance Unit Plan [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Performance Unit Graded Vesting Schedule

Units granted under the Performance Unit Plan are subject to a five-year vesting schedule. The most recent units granted under this plan are as follows:

Grant Date	MGE Energy Units Granted
February 19, 2016	19,055
February 20, 2015	18,948
February 21, 2014	21,991
February 15, 2013	22,884

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Derivative and Hedging Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Gross Notional Volume of Open Derivatives

The gross notional volume of open derivatives is as follows:

	December 31, 2016	December 31, 2015
Commodity derivative contracts	393,395 MWh	355,580 MWh
Commodity derivative contracts	4,195,000 Dth	5,037,500 Dth
FTRs	2,251 MW	2,000 MW
PPA	3,250 MW	3,850 MW

Fair Value of Derivative Instruments on the Balance Sheet

The following table summarizes the fair value of the derivative instruments on the consolidated balance sheets. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, MGE Energy and MGE have netted instruments with the same counterparty under a master netting agreement as well as the netting of collateral.

		Derivative Assets		Derivative Liabilities
(In thousands)					Balance Sheet Location
December 31, 2016
Commodity derivative contracts(a)	$	1,227	$	164	Other current assets
Commodity derivative contracts(a)		157		54	Other deferred charges
FTRs		143		-	Other current assets
PPA		N/A		7,620	Derivative liability (current)
PPA		N/A		42,970	Derivative liability (long-term)
December 31, 2015
Commodity derivative contracts(a)	$	146	$	1,266	Derivative liability (current)
Commodity derivative contracts(a)		144		70	Derivative liability (long-term)
FTRs		234		-	Other current assets
PPA		N/A		8,340	Derivative liability (current)
PPA		N/A		44,930	Derivative liability (long-term)

(a)As of December 31, 2015, collateral of $1.0 million was posted against and netted with derivative liability positions on the consolidated balance sheets. No collateral was posted against derivative positions as of December 31, 2016.

Offsetting Assets

The following tables show the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the consolidated balance sheets.

Offsetting of Derivative Assets
		Gross Amounts		Gross Amounts Offset in Balance Sheets		Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
(In thousands)
December 31, 2016
Commodity derivative contracts	$	1,384	$	(218)	$	-	$	1,166
FTRs		143		-		-		143
December 31, 2015
Commodity derivative contracts	$	290	$	(290)	$	-	$	-
FTRs		234		-		-		234

Offsetting Liabilities

Offsetting of Derivative Liabilities
		Gross Amounts		Gross Amounts Offset in Balance Sheets		Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
(In thousands)
December 31, 2016
Commodity derivative contracts	$	218	$	(218)	$	-	$	-
PPA		50,590		-		-		50,590
December 31, 2015
Commodity derivative contracts	$	1,336	$	(290)	$	(1,038)	$	8
PPA		53,270		-		-		53,270

Derivative Gains and Losses in Balance Sheet

The following tables summarize the unrealized and realized gains (losses) related to the derivative instruments on the consolidated balance sheets at December 31,2016 and 2015, and the consolidated income statements for the years ended December 31,2016 and 2015.

		2016				2015
		Current and Long-Term Regulatory Asset		Other Current Assets		Current and Long-Term Regulatory Asset		Other Current Assets
(In thousands)
Balance at January 1,	$	54,082	$	1,208	$	54,998	$	1,001
Unrealized loss		1,575		-		8,586		-
Realized (loss) gain reclassified to a deferred account		(1,060)		1,060		(2,953)		2,953
Realized loss reclassified to income statement		(5,316)		(2,038)		(6,549)		(2,746)
Balance at December 31,	$	49,281	$	230	$	54,082	$	1,208

Derivative Gains and Losses in Income Statement

		Realized Losses (Gains)
		2016				2015
		Fuel for Electric Generation/ Purchased Power		Cost of Gas Sold		Fuel for Electric Generation/ Purchased Power		Cost of Gas Sold
(In thousands)
Year Ended December 31:
Commodity derivative contracts	$	1,154	$	2,064	$	2,236	$	2,548
FTRs		(445)		-		(309)		-
PPA		4,581		-		4,820		-

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

As of December 31,2016, the future minimum commitments related to these purchase contracts were as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Coal(a)	$	21,246	$	14,763	$	7,281	$	-	$	-	$	-
Natural gas
Transportation and storage(b)		20,859		20,645		19,483		15,226		8,443		23,331
Supply(c)		17,783		-		-		-		-		-
Purchase power(d)		48,056		46,563		33,670		32,577		33,266		66,231
Other		14,902		324		143		-		-		-
	$	122,846	$	82,295	$	60,577	$	47,803	$	41,709	$	89,562

(a)Total coal commitments for the Columbia and Elm Road Units, including transportation. Fuel procurement for MGE's jointly owned Columbia and Elm Road Units is handled by WPL and WEPCO, respectively, who are the operators of those facilities. If any minimum purchase obligations must be paid under these contracts, management believes these obligations would be considered costs of service and recoverable in rates.

(b)MGE's natural gas transportation and storage contracts require fixed monthly payments for firm supply pipeline transportation and storage capacity. The pricing components of the fixed monthly payments for the transportation and storage contracts are established by FERC but may be subject to change. Management expects to recover these costs in future customer rates.

(c)These commitments include market-based pricing. Management expects to recover these costs in future customer rates.

(d)MGE has several purchase power agreements to help meet future electric supply requirements. Management expects to recover these costs in future customer rates. In October 2008, MGE entered into a purchase power agreement to help meet future electric supply requirements. Under this agreement, MGE has agreed to purchase 50 MW of wind power from Osceola Windpower II, LLC, which is located in Iowa. This facility became operational in October 2008. MGE does not have any capacity payment commitments under this agreement. However, MGE is obligated to purchase its ratable share of the energy produced by the project. MGE's commitment related to its ratable share of energy produced by the project has been estimated and is included in the above numbers. Management expects to recover these costs in future customer rates.

Operating Leases, Future Minimum Rental Payments

Future minimum rental payments at December 31,2016, under agreements classified as operating leases with noncancelable terms in excess of one year are as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Minimum lease payments	$	1,331	$	959	$	441	$	310	$	278	$	8,020

Other Commitments

MGE has several other commitments related to various projects. Payments for these commitments are expected to be as follows:

(In thousands)		2017		2018		2019		2020		2021		Thereafter
Other commitments	$	1,317	$	1,175	$	511	$	497	$	440	$	5,646

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Asset Retirement Obligations (Tables)

12 Months Ended

Dec. 31, 2016

Asset Retirement Obligation Disclosure [Abstract]

Change in Asset Retirement Obligations

The following table summarizes the change in AROs. Amounts include conditional AROs.

(In thousands)		2016		2015
Balance at January 1,	$	24,360	$	19,744
Liabilities incurred(a)		1,303		2,380
Accretion expense		1,269		1,131
Liabilities settled		(110)		(124)
Revisions in estimated cash flows(a)		64		1,229
Balance at December 31,	$	26,886	$	24,360

(a)In the second quarter of 2015, MGE recorded an obligation of $2.3 million for the fair value of its legal liability for AROs associated with the effect of the final Coal Combustion Residual Rule at Columbia. An additional $1.3 million was recorded in the fourth quarter, associated with this ARO, based on revised estimates.

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Information

The following table shows segment information for MGE Energy's and MGE's operations:

(In thousands)MGE Energy		Electric		Gas		Non-Regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2016
Operating revenues	$	409,006	$	134,543	$	1,196	$	-	$	-	$	-	$	544,745
Interdepartmental revenues		1,912		21,378		43,930		-		-		(67,220)		-
Total operating revenues		410,918		155,921		45,126		-		-		(67,220)		544,745
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		(24)		-		(44,646)
Other operating expenses		(310,941)		(127,083)		(155)		(17)		(895)		67,220		(371,871)
Operating income (loss)		70,855		20,710		37,599		(17)		(919)		-		128,228
Other income, net		960		30		-		8,429		292		-		9,711
Interest (expense) income, net		(11,147)		(3,223)		(5,768)		-		272		-		(19,866)
Income (loss) before taxes		60,668		17,517		31,831		8,412		(355)		-		118,073
Income tax (provision) benefit		(20,115)		(6,894)		(12,775)		(2,836)		107		-		(42,513)
Net income (loss)	$	40,553	$	10,623	$	19,056	$	5,576	$	(248)	$	-	$	75,560
Year Ended December 31, 2015
Operating revenues	$	412,528	$	143,737	$	7,763	$	-	$	-	$	-	$	564,028
Interdepartmental revenues		513		11,780		39,435		-		-		(51,728)		-
Total operating revenues		413,041		155,517		47,198		-		-		(51,728)		564,028
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		(47)		-		(44,225)
Other operating expenses		(318,001)		(128,241)		(158)		(19)		(857)		51,728		(395,548)
Operating income (loss)		65,095		20,518		39,565		(19)		(904)		-		124,255
Other (deductions) income, net		400		(33)		-		7,728		518		-		8,613
Interest (expense) income, net		(11,187)		(3,203)		(5,993)		-		221		-		(20,162)
Income (loss) before taxes		54,308		17,282		33,572		7,709		(165)		-		112,706
Income tax (provision) benefit		(17,915)		(6,915)		(13,474)		(3,102)		43		-		(41,363)
Net income (loss)	$	36,393	$	10,367	$	20,098	$	4,607	$	(122)	$	-	$	71,343
Year Ended December 31, 2014
Operating revenues	$	394,849	$	221,720	$	3,283	$	-	$	-	$	-	$	619,852
Interdepartmental revenues		509		8,366		42,692		-		-		(51,567)		-
Total operating revenues		395,358		230,086		45,975		-		-		(51,567)		619,852
Depreciation and amortization		(26,933)		(6,308)		(7,407)		-		(47)		-		(40,695)
Other operating expenses		(297,409)		(194,203)		(139)		-		(875)		51,567		(441,059)
Operating income (loss)		71,016		29,575		38,429		-		(922)		-		138,098
Other (deductions) income, net		2,847		(86)		-		9,150		(1,832)		-		10,079
Interest (expense) income, net		(10,410)		(3,229)		(6,208)		-		174		-		(19,673)
Income (loss) before taxes		63,453		26,260		32,221		9,150		(2,580)		-		128,504
Income tax (provision) benefit		(22,070)		(10,480)		(12,932)		(3,664)		961		-		(48,185)
Net income (loss)	$	41,383	$	15,780	$	19,289	$	5,486	$	(1,619)	$	-	$	80,319

(In thousands)MGE		Electric		Gas		Non-Regulated Energy		Transmission Investment(b)		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2016
Operating revenues	$	409,030	$	134,572	$	1,196	$	-	$	-	$	544,798
Interdepartmental revenues		1,888		21,349		43,930		-		(67,167)		-
Total operating revenues		410,918		155,921		45,126		-		(67,167)		544,798
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		-		(44,622)
Other operating expenses(a)		(330,924)		(133,940)		(12,930)		-		67,167		(410,627)
Operating income(a)		50,872		13,853		24,824		-		-		89,549
Other (deductions) income, net(a)		828		(7)		-		4,360		-		5,181
Interest expense, net		(11,147)		(3,223)		(5,768)		-		-		(20,138)
Net income		40,553		10,623		19,056		4,360		-		74,592
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(23,358)		(23,358)
Net income attributable to MGE	$	40,553	$	10,623	$	19,056	$	4,360	$	(23,358)	$	51,234
Year Ended December 31, 2015
Operating revenues	$	412,550	$	143,752	$	7,763	$	-	$	-	$	564,065
Interdepartmental revenues		491		11,765		39,435		-		(51,691)		-
Total operating revenues		413,041		155,517		47,198		-		(51,691)		564,065
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		-		(44,178)
Other operating expenses(a)		(335,803)		(135,124)		(13,632)		(19)		51,691		(432,887)
Operating income (loss)(a)		47,293		13,635		26,091		(19)		-		87,000
Other (deductions) income, net(a)		287		(65)		-		4,626		-		4,848
Interest expense, net		(11,187)		(3,203)		(5,993)		-		-		(20,383)
Net income		36,393		10,367		20,098		4,607		-		71,465
Less: net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,097)		(26,097)
Net income attributable to MGE	$	36,393	$	10,367	$	20,098	$	4,607	$	(26,097)	$	45,368
Year Ended December 31, 2014
Operating revenues	$	394,871	$	221,741	$	3,283	$	-	$	-	$	619,895
Interdepartmental revenues		487		8,345		42,692		-		(51,524)		-
Total operating revenues		395,358		230,086		45,975		-		(51,524)		619,895
Depreciation and amortization		(26,933)		(6,308)		(7,407)		-		-		(40,648)
Other operating expenses(a)		(319,175)		(204,597)		(13,071)		-		51,524		(485,319)
Operating income(a)		49,250		19,181		25,497		-		-		93,928
Other (deductions) income, net(a)		2,543		(172)		-		5,486		-		7,857
Interest expense, net		(10,410)		(3,229)		(6,208)		-		-		(19,847)
Net income		41,383		15,780		19,289		5,486		-		81,938
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,310)		(26,310)
Net income attributable to MGE	$	41,383	$	15,780	$	19,289	$	5,486	$	(26,310)	$	55,628
(a) Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statements of Income.
(b) As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco.
See Footnote 4 for additional information.

The following table shows segment information for MGE Energy's and MGE's assets and capital expenditures:
		Utility						Consolidated
(In thousands) MGE Energy		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2016	$	1,021,905	$	318,603	$	27,338	$	271,277	$	74,535	$	465,202	$	(377,800)	$	1,801,060
December 31, 2015(c)		974,235		298,435		49,753		277,858		69,470		434,868		(378,216)		1,726,403
December 31, 2014(c)		945,790		306,106		41,124		280,542		67,697		438,898		(390,636)		1,689,521
Capital Expenditures:
Year ended Dec. 31, 2016	$	50,699	$	29,136	$	-	$	3,824	$	-	$	-	$	-	$	83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		-		72,030
Year ended Dec. 31, 2014		68,067		22,104		-		2,505		-		-		-		92,676

		Utility						Consolidated
(In thousands)MGE		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment(d)		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2016	$	1,021,905	$	318,603	$	27,338	$	271,227	$	-	$	(221)	$	1,638,852
December 31, 2015(c)		974,235		298,435		49,753		277,808		69,470		(187)		1,669,514
December 31, 2014(c)		945,790		306,106		41,124		280,492		67,697		(6,521)		1,634,688
Capital Expenditures:
Year ended Dec. 31, 2016	$	50,699	$	29,136	$	-	$	3,824	$	-	$	-	$	83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		72,030
Year ended Dec. 31, 2014		68,067		22,104		-		2,505		-		-		92,676
(c) Reflects retrospective application of new accounting pronouncement related to debt issuance costs, see Footnote 19 for additional information.
(d) In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see Footnote 4 for additional information.

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Quarterly Summary of Operations (Tables)

12 Months Ended

Dec. 31, 2016

Quarterly Financial Information Disclosure [Abstract]

Quarterly Summary of Operations

(In thousands, except per share amounts)		Quarters Ended
2016		March 31		June 30		September 30		December 31
Operating revenues:
Electric revenues	$	93,690	$	100,615	$	119,147	$	96,750
Gas revenues		53,837		20,961		17,570		42,175
Total Operating Revenues		147,527		121,576		136,717		138,925
Operating expenses		117,996		93,364		90,190		114,967
Operating income		29,531		28,212		46,527		23,958
Interest and other income, net		(2,558)		(2,778)		(2,933)		(1,886)
Income tax provision		(9,945)		(9,284)		(15,714)		(7,570)
Earnings on common stock	$	17,028	$	16,150	$	27,880	$	14,502
Earnings per common share	$	0.49	$	0.47	$	0.80	$	0.42
Dividends per share	$	0.295	$	0.295	$	0.308	$	0.308
2015
Operating revenues:
Electric revenues	$	100,206	$	101,457	$	123,364	$	95,264
Gas revenues		69,928		20,669		17,431		35,709
Total Operating Revenues		170,134		122,126		140,795		130,973
Operating expenses		138,283		98,077		94,618		108,795
Operating income		31,851		24,049		46,177		22,178
Interest and other income, net		(2,986)		(2,562)		(2,472)		(3,529)
Income tax provision		(10,587)		(8,008)		(15,351)		(7,417)
Earnings on common stock	$	18,278	$	13,479	$	28,354	$	11,232
Earnings per common share	$	0.53	$	0.39	$	0.82	$	0.32
Dividends per share	$	0.283	$	0.283	$	0.295	$	0.295

Notes:

• The quarterly results of operations within a year may not be comparable because of seasonal and other factors.

• The sum of earnings per share of common stock for any four quarters may vary slightly from the earnings per share of common stock for the equivalent twelve-month period due to rounding.

• MGE Energy's operations are based primarily on its utility subsidiary MGE.

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Summary of Significant Accounting Policies (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Restricted Cash [Abstract]
Restricted cash	$ 3,700,000		$ 2,900,000
Receivable - Margin Account [Abstract]
Receivable, margin account balance, net of collateral posted against derivative positions	1,300,000		2,300,000
Derivative liability, collateral offset	$ 0		1,000,000
Trade Receivables, Allowance for Doubtful Accounts, and Concentration Risk
Late payment charge on upaid receivables	1.00%
Inventories
Renewable energy credit allowance included in inventory	$ 300,000		300,000
Purchased Gas Adjustment Clause
Purchased gas adjustment, over (under) collected	900,000		800,000
Regional Transmission Organizations
Reduction to sales and purchased power expense from reporting RTO transactions from net basis reporting	77,200,000		68,600,000	$ 91,100,000
Capitalized Software Costs
Capitalized software	12,300,000		12,000,000
Capitalized software amortization	3,000,000		2,200,000	1,600,000
Impairment of Long-Lived Assets
Impairment of long-lived assets	$ 0		0	0
Excise taxes
License fee tax rate, electric, retail sales	3.19%
License fee tax rate, electric, resale by purchaser	1.59%
License fee tax rate, natural gas	0.97%
License fee tax expense	$ 14,500,000		$ 14,700,000	$ 14,600,000
Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase agreement, maximum exposure	10,000,000
2017 [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase-to-Maturity Transactions, loans due	559,000
2018 [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase-to-Maturity Transactions, loans due	620,000
2019 [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase-to-Maturity Transactions, loans due	595,000
2020 [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase-to-Maturity Transactions, loans due	568,000
2021 [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase-to-Maturity Transactions, loans due	432,000
Thereafter [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
Repurchase-to-Maturity Transactions, loans due	$ 1,121,000
Minimum [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
MGE guarantee to the financial institution, term	1 year
Minimum [Member] | Capitalized Software [Member]
Capitalized Software Costs
Property, plant, and equipment, useful life	5 years
Maximum [Member] | Chattel Paper Agreements [Member]
Transfers and Servicing
MGE guarantee to the financial institution, term	10 years
Maximum [Member] | Capitalized Software [Member]
Capitalized Software Costs
Property, plant, and equipment, useful life	10 years
PSCW [Member]
Allowance for Funds Used During Construction
Authorized AFUDC rate	50.00%		50.00%	50.00%
Rate at which AFUDC was capitalized	7.93%		7.93%	8.21%
Columbia Environmental Project, SCR [Member] | PSCW [Member]
Allowance for Funds Used During Construction
Authorized AFUDC rate	100.00%		100.00%	100.00%
Electric [Member]
Property, Plant, and Equiptment
Composite straight-line depreciation rates	2.50%	[1]	2.60%	2.60%
Gas [Member]
Property, Plant, and Equiptment
Composite straight-line depreciation rates	2.10%	[1]	1.70%	1.70%
Non Regulated Energy [Member]
Property, Plant, and Equiptment
Composite straight-line depreciation rates	2.30%		2.40%	2.40%
MGE Power Elm Road [Member]
Principles of Consolidation
Ownership percentage by parent	100.00%
MGE Power West Campus [Member]
Principles of Consolidation
Ownership percentage by parent	100.00%

[1] In December 2015, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2016.

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Variable Interest Entities (Details) $ in Thousands		12 Months Ended
		Dec. 31, 2016 USD ($) MW	Dec. 31, 2015 USD ($) MW
Significant Balance Sheet Accounts Related to Interests in Variable Interest Entities
Property, plant, and equipment, net		$ 1,245,269	$ 1,217,094
Construction work in progress		36,790	26,351
Accrued interest and taxes		5,495	5,067
Deferred income taxes		383,813	$ 360,785
Long-term debt, gross, current and noncurrent		$ 391,242
Other Variable Interest Entities
Other variable interest entities, purchase power agreement, plant capacity (in MW) | MW		51	61
MGE Power Elm Road [Member]
Significant Balance Sheet Accounts Related to Interests in Variable Interest Entities
Property, plant, and equipment, net		$ 175,502	$ 177,904
Construction work in progress		3,241	2,400
Deferred income taxes		42,525	40,865
Long-term debt		62,021	64,622
Noncontrolling interest	[1]	80,362	79,113
Long-term debt, gross, current and noncurrent		62,600
Total carrying costs		62,500
Total capitalized interest		17,000
Total capitalized cost of equity		$ 45,500
Carrying cost rate recovery period		6 years
MGE Power Elm Road [Member] | Minimum [Member]
Significant Balance Sheet Accounts Related to Interests in Variable Interest Entities
Debt service coverage ratio		1.25
MGE Power West Campus [Member]
Significant Balance Sheet Accounts Related to Interests in Variable Interest Entities
Property, plant, and equipment, net		$ 81,588	84,403
Affiliate receivables, current and noncurrent		4,769	5,295
Deferred income taxes		19,912	19,612
Long-term debt		44,932	46,510
Noncontrolling interest	[1]	35,303	$ 37,603
Long-term debt, gross, current and noncurrent		45,100
Carrying costs recovered		$ 12,100
Carrying cost rate recovery period		10 years
MGE Power West Campus [Member] | Minimum [Member]
Significant Balance Sheet Accounts Related to Interests in Variable Interest Entities
Debt service coverage ratio		1.25
MGE Power West Campus [Member] | Maximum [Member]
Significant Balance Sheet Accounts Related to Interests in Variable Interest Entities
Debt to total capitalization ratio		0.65

[1] MGE Power Elm Road and MGE Power West Campus are not su bsidiaries of MGE; however, they have been consolidated in the consolidated financial statements of MGE (see Footnote 2). MGE Power Elm Road and MGE Power West Campus are 100 % owned by MGE Power, and MGE Power is 100 % o wned by MGE Energy. MGE Energy's proportionate share of the equity and net income (through its wholly owned subsidiary MGE Power) of MGE Power Elm Road and MGE Power West Campus is classified within the MGE consolidated financial statements as noncontrolling interest.

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Property, Plant, and Equipment (Details) - USD ($) $ in Thousands		Dec. 31, 2016		Dec. 31, 2015
Property, Plant and Equipment [Line Items]
In-service utility plant, net		$ 1,245,269		$ 1,217,094
Construction work in progress		36,790		26,351
Total property, plant, and equipment		1,282,059		1,243,445
Assets held for sale		14,813		0
Plant related debt items
Long-term debt, gross		391,242
First Mortgage Bonds [Member] | 7.70%, 2028 Series
Plant related debt items
Long-term debt, gross	[1]	1,200		1,200
Regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		1,566,794		1,531,864
Less: Accumulated depreciation and amortization		579,965	[2]	578,410
In-service utility plant, net		986,829		953,454
Construction work in progress		31,356	[2]	23,837
Electric [Member] | Regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		1,171,004	[2]	1,147,701
Gas [Member] | Regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		395,790		384,163
Non Regulated Energy [Member] | Non-regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		317,810		315,589
Less: Accumulated depreciation and amortization		59,370		51,949
In-service utility plant, net		258,440		263,640
Construction work in progress		5,434		2,514
MGE [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, net		1,244,648		1,216,415
Construction work in progress		36,790		26,351
Total property, plant, and equipment		1,281,438		1,242,766
Assets held for sale		14,813		0
Plant related debt items
Long-term debt, gross	[3]	391,242
MGE [Member] | First Mortgage Bonds [Member] | 7.70%, 2028 Series
Plant related debt items
Long-term debt, gross	[1]	1,200		1,200
MGE [Member] | Regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		1,566,822		1,531,893
Less: Accumulated depreciation and amortization		579,965	[2]	578,410
In-service utility plant, net		986,857		953,483
Construction work in progress		31,356	[2]	23,837
MGE [Member] | Electric [Member] | Regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		1,171,021	[2]	1,147,718
MGE [Member] | Gas [Member] | Regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		395,801		384,175
MGE [Member] | Non Regulated Energy [Member] | Non-regulated [Member]
Property, Plant and Equipment [Line Items]
In-service utility plant, gross		317,014		314,750
Less: Accumulated depreciation and amortization		59,223		51,818
In-service utility plant, net		257,791		262,932
Construction work in progress		$ 5,434		$ 2,514

[1] MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust, under which its first mortgage bonds are issued. The Mortgage Indenture provides that dividends or any other distribution or purchase of shares may not be made if the aggregate amount thereof since December 31, 1945 would exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2016 , approximately $ 338.5 m illion was available for the payment of dividends under this covenant.

[2] As of December 31, 2016 , MGE has classified $ 14.8 million of Columbia assets as held-for-sale on the consolidated balance sheets related to the partial sale of plant assets to WPL . See Footnote 5.a. for further discussion.

[3] *Includes $ 45.1 million for MGE Power West Campus and $ 62.6 million for MGE Power Elm Road, all of which are consolidated wi th MGE's debt (see Footnote 2 for further information) .

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Investments (Details-1) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Available-for-sale securities:
Cost basis		$ 2,216	$ 2,225
Gross unrealized gains		346	599
Gross unrealized losses		(8)	(2)
Fair Value		2,554	2,822
Equity method investments:
Equity method investments		73,616	70,650
Other Investments		120	159
Total investments		76,290	73,631
Results of Investment Liquidation [Abstract]
Proceeds from sale of investments		408	19	$ 38
Gain (loss) on sale of investments		121	10	21
ATC and ATC Holdco [Member]
Equity method investments:
Equity method investments	[1]	72,458	69,466
Other Equity Method Investments [Member]
Equity method investments:
Equity method investments		1,158	1,184
MGE [Member]
Available-for-sale securities:
Cost basis		455	480
Gross unrealized gains		40	40
Gross unrealized losses		(8)	(2)
Fair Value		487	518
Equity method investments:
Equity method investments		0	69,466
Other Investments		0	0
Total investments		487	69,984
Results of Investment Liquidation [Abstract]
Proceeds from sale of investments		16	19	0
Gain (loss) on sale of investments		(8)	10	$ 0
MGE [Member] | ATC and ATC Holdco [Member]
Equity method investments:
Equity method investments	[1]	0	69,466
MGE [Member] | Other Equity Method Investments [Member]
Equity method investments:
Equity method investments		$ 0	$ 0

[1] MGE Transco holds an ownership interest in ATC, and MGEE Transco holds an ownership interest in ATC Holdco. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. See Footnote 8 for further discussion of noncontrolling interest. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy, see "ATC and ATC Holdco" below f or additional information.

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Investments (Details-2) - USD ($) $ in Thousands				12 Months Ended
	Jan. 31, 2017	Jan. 10, 2017	Dec. 01, 2016	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Schedule Of Equity Method Investments [Line Items]
Equity earnings from investment in ATC				$ 8,428		$ 7,728	$ 9,150
Dividend income from ATC				7,926		6,645	7,740
Capital contributions to investments				2,958		1,053	2,185
MGE Transco [Member] | ATC [Member]
Schedule Of Equity Method Investments [Line Items]
Equity earnings from investment in ATC				8,670		7,728	9,150
Dividend income from ATC				7,926	[1]	6,645	7,740
Capital contributions to investments				$ 2,486		$ 710	1,775
Ownership interest in equity-method investee				3.60%		3.60%
Dividend receivable from ATC				$ 2,100
MGE Transco [Member] | ATC [Member] | Subsequent Event [Member]
Schedule Of Equity Method Investments [Line Items]
Capital contributions to investments	$ 1,400
MGEE Transco [Member] | ATC Holdco [Member]
Schedule Of Equity Method Investments [Line Items]
Ownership interest in equity-method investee				4.00%
MGEE Transco [Member] | ATC Holdco [Member] | Subsequent Event [Member]
Schedule Of Equity Method Investments [Line Items]
Capital contributions to investments		$ 200
MGE [Member]
Schedule Of Equity Method Investments [Line Items]
Equity earnings from investment in ATC				$ 6,366		$ 7,728	9,150
Dividend income from ATC				5,032		6,645	7,740
Capital contributions to investments				1,598		710	1,775
Dividend in kind to parent			$ 15,800	15,822		0	0
MGE Energy [Member]
Schedule Of Equity Method Investments [Line Items]
Equity earnings from investment in ATC				$ 75,581		$ 71,306	$ 81,811
Dividend in kind to parent			$ (15,800)

[1] As of December 31, 2016, MGE Transco recorded a $2.1 million receivable from ATC for a cash dividend received in January 2017.

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Investments (Details-3) - ATC [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Equity method investment summarized income statement [Abstract]
Operating revenues	$ 650,806	$ 615,836	$ 635,033
Operating expenses	(322,517)	(319,321)	(307,451)
Other income, net	3,225	1,176	117
Interest expense, net	(98,758)	(97,250)	(88,970)
Earnings before members' income taxes	232,756	200,441	$ 238,729
Equity method investment balance sheet assets [Abstract]
Current assets	75,790	80,520
Noncurrent assets	4,312,893	3,948,265
Total assets	4,388,683	4,028,785
Equity method investment balance sheet liabilities [Abstract]
Current liabilities	495,126	330,248
Long-term debt	1,865,302	1,790,718
Other noncurrent liabilities	271,495	244,991
Members' equity	1,756,760	1,662,828
Total members' equity and liabilities	$ 4,388,683	$ 4,028,785

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Joint Plant Ownership (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) operatingunit MW	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Jan. 01, 2017
Jointly Owned Utility Plant Interests [Line Items]
Assets held for sale	$ 14,813	$ 0
MGE [Member]
Jointly Owned Utility Plant Interests [Line Items]
Assets held for sale	14,813	0
Columbia Units [Member]
Jointly Owned Plants, Net Plant Ownership [Abstract]
Plant	270,898	273,762
Accumulated depreciation	(81,935)	(84,864)
Property, plant, and equipment, net	188,963	188,898
Construction work in progress	21,120	17,110
Total property, plant, and equipment	$ 210,083	206,008
Columbia Units [Member] | MGE [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, proportion of total net summer generating capability	30.00%
Jointly owned utility plant, plant capacity (in MW) | MW	225
Jointly owned utility plant, ownership interest	22.00%
Assets held for sale	$ 14,800
Jointly owned utility plant, fuel, operating, and maintenance expense	39,500	38,200	$ 28,100
Columbia Units [Member] | MGE [Member] | Subsequent Event [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, ownership interest				20.40%
Elm Road Units [Member] | MGE [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, fuel, operating, and maintenance expense	$ 21,200	20,900	20,300
Elm Road Units [Member] | MGE Power Elm Road [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, proportion of total net summer generating capability	14.00%
Jointly owned utility plant, proportion of total net summer generating capability, plant capacity (in MW) | MW	106
Jointly owned utility plant, number of operating units | operatingunit	2
Jointly Owned Plants, Net Plant Ownership [Abstract]
Plant	$ 204,292	202,326
Accumulated depreciation	(28,790)	(24,422)
Property, plant, and equipment, net	175,502	177,904
Construction work in progress	3,241	2,400
Total property, plant, and equipment	$ 178,743	180,304
Elm Road Unit 1 [Member] | MGE Power Elm Road [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, plant capacity (in MW) | MW	615
Jointly owned utility plant, ownership interest	8.33%
Elm Road Unit 2 [Member] | MGE Power Elm Road [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, plant capacity (in MW) | MW	615
Jointly owned utility plant, ownership interest	8.33%
West Campus [Member] | UW [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, ownership interest	45.00%
Jointly owned utility plant, fuel, operating, and maintenance expense	$ 5,500	3,700	$ 2,800
West Campus [Member] | MGE Power West Campus [Member]
Jointly Owned Utility Plant Interests [Line Items]
Jointly owned utility plant, ownership interest	55.00%
Jointly Owned Plants, Net Plant Ownership [Abstract]
Plant	$ 111,330	111,141
Accumulated depreciation	(29,742)	(26,738)
Property, plant, and equipment, net	81,588	84,403
Construction work in progress	1,009	113
Total property, plant, and equipment	$ 82,597	$ 84,516

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Regulatory Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Regulatory Assets [Line Items]
Regulatory Assets	$ 164,899	$ 157,737
Regulatory Liabilities [Line Items]
Regulatory Liabilities	29,083	30,300
Conservation Costs Regulatory Liability [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	0	231
Deferred Fuel Savings [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	6,016	9,515
Elm Road Regulatory Liability [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	3,473	643
Income Taxes [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	1,302	1,559
Non-ARO Removal Cost [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	16,415	17,137
Renewable Energy Credits [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	339	327
Other Regulatory Liability [Member]
Regulatory Liabilities [Line Items]
Regulatory Liabilities	1,538	888
Asset Retirement Obligation [Member]
Regulatory Assets [Line Items]
Regulatory Assets	5,563	4,849
Conservation Costs Regulatory Asset [Member]
Regulatory Assets [Line Items]
Regulatory Assets	444	0
Debt Related Costs [Member]
Regulatory Assets [Line Items]
Regulatory Assets	10,211	10,672
Derivatives [Member]
Regulatory Assets [Line Items]
Regulatory Assets	49,281	54,083
Environmental Costs [Member]
Regulatory Assets [Line Items]
Regulatory Assets	55	368
Tax Recovery AFUDC Equity [Member]
Regulatory Assets [Line Items]
Regulatory Assets	9,403	8,950
Unfunded Pension and Other Postretirement Plans Costs [Member]
Regulatory Assets [Line Items]
Regulatory Assets	86,475	78,181
Other Regulatory Asset [Member]
Regulatory Assets [Line Items]
Regulatory Assets	$ 3,467	$ 634

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Common Equity (Details) $ / shares in Units, $ in Thousands			3 Months Ended								12 Months Ended
	Dec. 01, 2016 USD ($)	Dec. 20, 2013	Dec. 31, 2016 $ / shares	Sep. 30, 2016 $ / shares	Jun. 30, 2016 $ / shares	Mar. 31, 2016 $ / shares	Dec. 31, 2015 $ / shares	Sep. 30, 2015 $ / shares	Jun. 30, 2015 $ / shares	Mar. 31, 2015 $ / shares	Dec. 31, 2016 USD ($) $ / shares	Dec. 31, 2015 USD ($) $ / shares	Dec. 31, 2014 USD ($) $ / shares
Class of Stock [Line Items]
Stock split declared December 20, 2013, ratio (3:2)		1.5
Common stock dividends declared											$ 41,775	$ 40,043	$ 38,429
Common stock dividends declared (in dollars per share) | $ / shares			$ 0.308	$ 0.308	$ 0.295	$ 0.295	$ 0.295	$ 0.295	$ 0.283	$ 0.283	$ 1.21	$ 1.16	$ 1.11
MGE [Member]
Class of Stock [Line Items]
Cash dividends paid to parent by MGE											$ 50,000	$ 30,000	$ 26,500
Dividend in kind to parent	$ 15,800										$ 15,822	$ 0	$ 0
MGE [Member] | Minimum [Member]
Class of Stock [Line Items]
Dividend restrictions, common equity ratio											0.55
MGE Energy [Member]
Class of Stock [Line Items]
Dividend in kind to parent	$ (15,800)

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Noncontrolling Interest (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
MGE [Member]
Noncontrolling Interest [Line Items]
Noncontrolling interest on balance sheet		$ 115,665	$ 140,308
Net income attributable to noncontrolling interest, net of tax		23,358	26,097	$ 26,310
MGE Transco [Member]
Noncontrolling Interest [Line Items]
Noncontrolling interest on balance sheet	[1]	0	23,592
Net income attributable to noncontrolling interest, net of tax	[1]	$ 1,410	2,172	2,484
MGE Power [Member]
Noncontrolling Interest [Line Items]
Ownership percentage by parent		100.00%
MGE Power West Campus [Member]
Noncontrolling Interest [Line Items]
Ownership percentage by parent		100.00%
Noncontrolling interest on balance sheet	[2]	$ 35,303	37,603
Net income attributable to noncontrolling interest, net of tax	[2]	$ 7,200	7,348	7,666
MGE Power Elm Road [Member]
Noncontrolling Interest [Line Items]
Ownership percentage by parent		100.00%
Noncontrolling interest on balance sheet	[2]	$ 80,362	79,113
Net income attributable to noncontrolling interest, net of tax	[2]	$ 14,748	$ 16,577	$ 16,160

[1] At December 31, 2016 , MGE Energy is the owner of MGE Transco. In July 2016, MGE's ownership interest in MGE Transco declined bel ow a majority as a result of continued funding of ATC capital contributions by MGE Energy. As a result of the change in majority owner ship in MGE Transco , MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. The change in conso lidation was applied prospectively by reducing its investment and noncontrolling interest on MGE's consolidated financial statements. The change had no effect on MGE Energy's consolidated financial statements; however, MGE Energy's proportionate share of t he equity and net income of MGE Transco classified as noncontrolling interest was deconsolidated from MGE ' s financial statements. No gain or loss was recognized in July 2016 due to MGE ceasing to have a controlling financial interest .

[2] MGE Power Elm Road and MGE Power West Campus are not su bsidiaries of MGE; however, they have been consolidated in the consolidated financial statements of MGE (see Footnote 2). MGE Power Elm Road and MGE Power West Campus are 100 % owned by MGE Power, and MGE Power is 100 % o wned by MGE Energy. MGE Energy's proportionate share of the equity and net income (through its wholly owned subsidiary MGE Power) of MGE Power Elm Road and MGE Power West Campus is classified within the MGE consolidated financial statements as noncontrolling interest.

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Long-Term Debt (Details) - USD ($) $ in Thousands			12 Months Ended
		Jan. 13, 2017	Dec. 31, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Long-term debt, gross			$ 391,242
Long-term debt due within one year			(4,333)	$ (4,266)
Unamortized discount and debt issuance costs			(4,118)	(4,498)
Total Long-Term Debt			382,791	386,744	[1]
Long-Term Debt Maturities [Abstract]
Long term debt maturities in 2017			4,358
Long term debt maturities in 2018			24,452
Long term debt maturities in 2019			4,553
Long term debt maturities in 2020			19,659
Long term debt maturities in 2021			4,771
Long term debt maturities in future years			333,449
Total			391,242
First Mortgage Bonds [Member] | 7.70%, 2028 Series
Debt Instrument [Line Items]
Long-term debt, gross	[2]		$ 1,200	$ 1,200
Interest rate			7.70%	7.70%
Debt covenant, allowable amount available for payment of dividends			$ 338,500
Long-Term Debt Maturities [Abstract]
Total	[2]		1,200	$ 1,200
Tax Exempt Debt [Member] | 3.45%, 2027 Series, Industrial Development Revenue Bonds
Debt Instrument [Line Items]
Long-term debt, gross			$ 19,300	$ 19,300
Interest rate			3.45%	3.45%
Long-Term Debt Maturities [Abstract]
Total			$ 19,300	$ 19,300
Medium-Term Notes [Member]
Debt Instrument [Line Items]
Long-term debt, gross			100,000	100,000
Long-Term Debt Maturities [Abstract]
Total			100,000	100,000
Medium-Term Notes [Member] | 5.25%, due 2017
Debt Instrument [Line Items]
Long-term debt, gross	[3],[4]		$ 30,000	$ 30,000
Interest rate			5.25%	5.25%
Long-Term Debt Maturities [Abstract]
Total	[3],[4]		$ 30,000	$ 30,000
Medium-Term Notes [Member] | 6.12%, due 2028
Debt Instrument [Line Items]
Long-term debt, gross	[4]		$ 20,000	$ 20,000
Interest rate			6.12%	6.12%
Long-Term Debt Maturities [Abstract]
Total	[4]		$ 20,000	$ 20,000
Medium-Term Notes [Member] | 7.12%, due 2032
Debt Instrument [Line Items]
Long-term debt, gross	[4]		$ 25,000	$ 25,000
Interest rate			7.12%	7.12%
Long-Term Debt Maturities [Abstract]
Total	[4]		$ 25,000	$ 25,000
Medium-Term Notes [Member] | 6.247%, due 2037
Debt Instrument [Line Items]
Long-term debt, gross	[4]		$ 25,000	$ 25,000
Interest rate			6.247%	6.247%
Long-Term Debt Maturities [Abstract]
Total	[4]		$ 25,000	$ 25,000
Other Long-Term Debt [Member]
Debt Instrument [Line Items]
Long-term debt, gross			270,742	275,008
Long-Term Debt Maturities [Abstract]
Total			270,742	275,008
Other Long-Term Debt [Member] | 5.59%, due 2018
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 20,000	$ 20,000
Interest rate			5.59%	5.59%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 20,000	$ 20,000
Other Long-Term Debt [Member] | 5.59%, due 2018 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 5.59%, due 2018 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 3.38%, due 2020
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 15,000	$ 15,000
Interest rate			3.38%	3.38%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 15,000	$ 15,000
Other Long-Term Debt [Member] | 3.38%, due 2020 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 3.38%, due 2020 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 3.09%, due 2023
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 30,000	$ 30,000
Interest rate			3.09%	3.09%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 30,000	$ 30,000
Other Long-Term Debt [Member] | 3.09%, due 2023 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 3.09%, due 2023 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 3.29%, due 2026
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 15,000	$ 15,000
Interest rate			3.29%	3.29%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 15,000	$ 15,000
Other Long-Term Debt [Member] | 3.29%, due 2026 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 3.29%, due 2026 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 5.68%, due 2033
Debt Instrument [Line Items]
Long-term debt, gross	[5],[7]		$ 27,120	$ 28,063
Interest rate			5.68%	5.68%
Long-Term Debt Maturities [Abstract]
Total	[5],[7]		$ 27,120	$ 28,063
Other Long-Term Debt [Member] | 5.19%, due 2033
Debt Instrument [Line Items]
Long-term debt, gross	[5],[7]		$ 17,983	$ 18,640
Interest rate			5.19%	5.19%
Long-Term Debt Maturities [Abstract]
Total	[5],[7]		$ 17,983	$ 18,640
Other Long-Term Debt [Member] | 5.26%, due 2040
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 15,000	$ 15,000
Interest rate			5.26%	5.26%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 15,000	$ 15,000
Other Long-Term Debt [Member] | 5.26%, due 2040 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 5.26%, due 2040 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 5.04%, due 2040
Debt Instrument [Line Items]
Long-term debt, gross	[5],[8]		$ 38,472	$ 40,138
Interest rate			5.04%	5.04%
Long-Term Debt Maturities [Abstract]
Total	[5],[8]		$ 38,472	$ 40,138
Other Long-Term Debt [Member] | 4.74%, due 2041
Debt Instrument [Line Items]
Long-term debt, gross	[5],[8]		$ 24,167	$ 25,167
Interest rate			4.74%	4.74%
Long-Term Debt Maturities [Abstract]
Total	[5],[8]		$ 24,167	$ 25,167
Other Long-Term Debt [Member] | 4.38%, due 2042
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 28,000	$ 28,000
Interest rate			4.38%	4.38%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 28,000	$ 28,000
Other Long-Term Debt [Member] | 4.38%, due 2042 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 4.38%, due 2042 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 4.42%, due 2043
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 20,000	$ 20,000
Interest rate			4.42%	4.42%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 20,000	$ 20,000
Other Long-Term Debt [Member] | 4.42%, due 2043 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 4.42%, due 2043 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | 4.47%, due 2048
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 20,000	$ 20,000
Interest rate			4.47%	4.47%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 20,000	$ 20,000
Other Long-Term Debt [Member] | 4.47%, due 2048 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
Other Long-Term Debt [Member] | 4.47%, due 2048 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
Other Long-Term Debt [Member] | Future Debt Issuance, 3.76% due 2052 | Subsequent Event [Member]
Debt Instrument [Line Items]
Long-term debt, gross		$ 40,000
Interest rate		3.76%
Term		35 years
Long-Term Debt Maturities [Abstract]
Total		$ 40,000
MGE [Member]
Debt Instrument [Line Items]
Long-term debt, gross	[9]		$ 391,242
Long-term debt due within one year			(4,333)	(4,266)
Unamortized discount and debt issuance costs			(4,118)	(4,498)
Total Long-Term Debt			382,791	386,744	[1]
Long-Term Debt Maturities [Abstract]
Long term debt maturities in 2017	[9]		4,358
Long term debt maturities in 2018	[9]		24,452
Long term debt maturities in 2019	[9]		4,553
Long term debt maturities in 2020	[9]		19,659
Long term debt maturities in 2021	[9]		4,771
Long term debt maturities in future years	[9]		333,449
Total	[9]		391,242
MGE [Member] | First Mortgage Bonds [Member] | 7.70%, 2028 Series
Debt Instrument [Line Items]
Long-term debt, gross	[2]		$ 1,200	$ 1,200
Interest rate			7.70%	7.70%
Debt covenant, allowable amount available for payment of dividends			$ 338,500
Long-Term Debt Maturities [Abstract]
Total	[2]		1,200	$ 1,200
MGE [Member] | Tax Exempt Debt [Member] | 3.45%, 2027 Series, Industrial Development Revenue Bonds
Debt Instrument [Line Items]
Long-term debt, gross			$ 19,300	$ 19,300
Interest rate			3.45%	3.45%
Long-Term Debt Maturities [Abstract]
Total			$ 19,300	$ 19,300
MGE [Member] | Medium-Term Notes [Member]
Debt Instrument [Line Items]
Long-term debt, gross			100,000	100,000
Long-Term Debt Maturities [Abstract]
Total			100,000	100,000
MGE [Member] | Medium-Term Notes [Member] | 5.25%, due 2017
Debt Instrument [Line Items]
Long-term debt, gross	[3],[4]		$ 30,000	$ 30,000
Interest rate			5.25%	5.25%
Long-Term Debt Maturities [Abstract]
Total	[3],[4]		$ 30,000	$ 30,000
MGE [Member] | Medium-Term Notes [Member] | 6.12%, due 2028
Debt Instrument [Line Items]
Long-term debt, gross	[4]		$ 20,000	$ 20,000
Interest rate			6.12%	6.12%
Long-Term Debt Maturities [Abstract]
Total	[4]		$ 20,000	$ 20,000
MGE [Member] | Medium-Term Notes [Member] | 7.12%, due 2032
Debt Instrument [Line Items]
Long-term debt, gross	[4]		$ 25,000	$ 25,000
Interest rate			7.12%	7.12%
Long-Term Debt Maturities [Abstract]
Total	[4]		$ 25,000	$ 25,000
MGE [Member] | Medium-Term Notes [Member] | 6.247%, due 2037
Debt Instrument [Line Items]
Long-term debt, gross	[4]		$ 25,000	$ 25,000
Interest rate			6.247%	6.247%
Long-Term Debt Maturities [Abstract]
Total	[4]		$ 25,000	$ 25,000
MGE [Member] | Other Long-Term Debt [Member]
Debt Instrument [Line Items]
Long-term debt, gross			270,742	275,008
Long-Term Debt Maturities [Abstract]
Total			270,742	275,008
MGE [Member] | Other Long-Term Debt [Member] | 5.59%, due 2018
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 20,000	$ 20,000
Interest rate			5.59%	5.59%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 20,000	$ 20,000
MGE [Member] | Other Long-Term Debt [Member] | 5.59%, due 2018 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 5.59%, due 2018 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 3.38%, due 2020
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 15,000	$ 15,000
Interest rate			3.38%	3.38%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 15,000	$ 15,000
MGE [Member] | Other Long-Term Debt [Member] | 3.38%, due 2020 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 3.38%, due 2020 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 3.09%, due 2023
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 30,000	$ 30,000
Interest rate			3.09%	3.09%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 30,000	$ 30,000
MGE [Member] | Other Long-Term Debt [Member] | 3.09%, due 2023 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 3.09%, due 2023 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 3.29%, due 2026
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 15,000	$ 15,000
Interest rate			3.29%	3.29%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 15,000	$ 15,000
MGE [Member] | Other Long-Term Debt [Member] | 3.29%, due 2026 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 3.29%, due 2026 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 5.68%, due 2033
Debt Instrument [Line Items]
Long-term debt, gross	[5],[7]		$ 27,120	$ 28,063
Interest rate			5.68%	5.68%
Long-Term Debt Maturities [Abstract]
Total	[5],[7]		$ 27,120	$ 28,063
MGE [Member] | Other Long-Term Debt [Member] | 5.19%, due 2033
Debt Instrument [Line Items]
Long-term debt, gross	[5],[7]		$ 17,983	$ 18,640
Interest rate			5.19%	5.19%
Long-Term Debt Maturities [Abstract]
Total	[5],[7]		$ 17,983	$ 18,640
MGE [Member] | Other Long-Term Debt [Member] | 5.26%, due 2040
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 15,000	$ 15,000
Interest rate			5.26%	5.26%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 15,000	$ 15,000
MGE [Member] | Other Long-Term Debt [Member] | 5.26%, due 2040 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 5.26%, due 2040 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 5.04%, due 2040
Debt Instrument [Line Items]
Long-term debt, gross	[5],[8]		$ 38,472	$ 40,138
Interest rate			5.04%	5.04%
Long-Term Debt Maturities [Abstract]
Total	[5],[8]		$ 38,472	$ 40,138
MGE [Member] | Other Long-Term Debt [Member] | 4.74%, due 2041
Debt Instrument [Line Items]
Long-term debt, gross	[5],[8]		$ 24,167	$ 25,167
Interest rate			4.74%	4.74%
Long-Term Debt Maturities [Abstract]
Total	[5],[8]		$ 24,167	$ 25,167
MGE [Member] | Other Long-Term Debt [Member] | 4.38%, due 2042
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 28,000	$ 28,000
Interest rate			4.38%	4.38%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 28,000	$ 28,000
MGE [Member] | Other Long-Term Debt [Member] | 4.38%, due 2042 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 4.38%, due 2042 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 4.42%, due 2043
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 20,000	$ 20,000
Interest rate			4.42%	4.42%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 20,000	$ 20,000
MGE [Member] | Other Long-Term Debt [Member] | 4.42%, due 2043 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 4.42%, due 2043 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | 4.47%, due 2048
Debt Instrument [Line Items]
Long-term debt, gross	[5],[6]		$ 20,000	$ 20,000
Interest rate			4.47%	4.47%
Long-Term Debt Maturities [Abstract]
Total	[5],[6]		$ 20,000	$ 20,000
MGE [Member] | Other Long-Term Debt [Member] | 4.47%, due 2048 | Minimum [Member]
Debt Instrument [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value			30.00%
MGE [Member] | Other Long-Term Debt [Member] | 4.47%, due 2048 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
Priority debt to assets ratio			0.2
MGE [Member] | Other Long-Term Debt [Member] | Future Debt Issuance, 3.76% due 2052 | Subsequent Event [Member]
Debt Instrument [Line Items]
Long-term debt, gross		$ 40,000
Interest rate		3.76%
Term		35 years
Long-Term Debt Maturities [Abstract]
Total		$ 40,000
MGE Power Elm Road [Member]
Debt Instrument [Line Items]
Long-term debt, gross			$ 62,600
Long-Term Debt Maturities [Abstract]
Total			$ 62,600
MGE Power Elm Road [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt service coverage ratio			1.25
MGE Power Elm Road [Member] | Other Long-Term Debt [Member] | 5.04%, due 2040 | Minimum [Member]
Debt Instrument [Line Items]
Debt service coverage ratio			1.25
MGE Power Elm Road [Member] | Other Long-Term Debt [Member] | 4.74%, due 2041 | Minimum [Member]
Debt Instrument [Line Items]
Debt service coverage ratio			1.25
MGE Power West Campus [Member]
Debt Instrument [Line Items]
Long-term debt, gross			$ 45,100
Long-Term Debt Maturities [Abstract]
Total			$ 45,100
MGE Power West Campus [Member] | Minimum [Member]
Debt Instrument [Line Items]
Debt service coverage ratio			1.25
MGE Power West Campus [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
MGE Power West Campus [Member] | Other Long-Term Debt [Member] | 5.68%, due 2033 | Minimum [Member]
Debt Instrument [Line Items]
Debt service coverage ratio			1.25
MGE Power West Campus [Member] | Other Long-Term Debt [Member] | 5.68%, due 2033 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65
MGE Power West Campus [Member] | Other Long-Term Debt [Member] | 5.19%, due 2033 | Minimum [Member]
Debt Instrument [Line Items]
Debt service coverage ratio			1.25
MGE Power West Campus [Member] | Other Long-Term Debt [Member] | 5.19%, due 2033 | Maximum [Member]
Debt Instrument [Line Items]
Debt to total capitalization ratio			0.65

[1] Reflects retrospective application of new accounting pronouncement. See Footnote 19 for additional information.

[2] MGE's utility plant is subject to the lien of its Indenture of Mortgage and Deed of Trust, under which its first mortgage bonds are issued. The Mortgage Indenture provides that dividends or any other distribution or purchase of shares may not be made if the aggregate amount thereof since December 31, 1945 would exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2016 , approximately $ 338.5 m illion was available for the payment of dividends under this covenant.

[3] MGE had $30 million of medium-term no tes mature in January 2017. MGE issued $40 million of new long-term unsecured debt on January 13, 2017, to refinance the maturing $30 million medium-term notes and assist with the financing of addi tional capital expenditures. The new debt carr ies an interest rate of 3.76% per annum over its 35-year term. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt. In accordance with applicable accounting guid ance, MGE has classified the $30 million of maturing medium-term notes as long-term debt on the consolidated balance sheets for the year ended December 3 1 , 2016.

[4] T he indenture under which MGE's Medium-T erm notes are issued provides that those notes will be entitled to be equally and ratably secured in the event that MGE issues any additional first mortgage bonds.

[5] Unsecured notes issued pursuant to various Note Purchase Agreements with one or more purc hasers. The notes are not issued under, or governed by, MGE ' s Indenture dated as of September 1, 1998, which governs MGE ' s Medium-Term Notes.

[6] Issued by MGE. Under that Note Purchase Agreement: (i) note holders have the right to require MGE to repu rchase their notes at par in the event of an acquisition of beneficial ownership of 30 % or more of the outstanding voting stock of MGE Energy, (ii) MGE must maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65 % , and (iii) MGE cannot issue "Priority Debt" in an amount exceeding 20 % of its consolidated assets. Priority Debt is defined as any indebtedness of MGE secured by liens other than specified liens permitted by the Note Purchase Agreement and certain unsecured indebtedness of certain subsidiaries. As of December 31, 2016 , MGE was in compliance with the covenant requirements.

[7] Issued by MGE Power West Campus. The Note Purchase Agreements require it to maintain a projected debt service coverage ratio of not less than 1.25 to 1.00 , and debt to total capitalization rati o of not more tha n 0.65 to 1.00 . The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power West Campus for use of its ownership interest in the WCCF p ursuant to a long-term lease. As of December 31, 2016 , MGE Power West Campus was in compliance with the covenant requirements.

[8] Issued by MGE Power Elm Road. The Note Purchase Agreement requires MGE Power Elm Road to maintain a projected and actual debt service coverage ratio at the end of any calendar quarter of not less than 1.25 to 1.00 for the trailing 12-month period. The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of its ownership interest in the Elm Road Units pursuant to long-term lease s . As of December 31, 2016 , MGE Power Elm Road was in compliance with the covenant requirements.

[9] *Includes $ 45.1 million for MGE Power West Campus and $ 62.6 million for MGE Power Elm Road, all of which are consolidated wi th MGE's debt (see Footnote 2 for further information) .

XML

Notes Payable to Banks, Commercial Paper, and Lines of Credit (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
Short-term Debt [Line Items]
Short-term debt outstanding	[1]	$ 0	$ 0
Weighted-average interest rate	[1]	0.00%	0.00%
Maximum short-term borrowings	[1]	$ 0	$ 17,500
Average short-term borrowings	[1]	$ 0	$ 1,511
Weighted-average interest rate during the year	[1]	0.00%	0.17%
Line of Credit [Member]
Short-term Debt [Line Items]
Available lines of credit	[1]	$ 150,000	$ 150,000
MGE [Member]
Short-term Debt [Line Items]
Short-term debt outstanding		$ 0	$ 0
Weighted-average interest rate		0.00%	0.00%
Maximum short-term borrowings		$ 0	$ 17,500
Average short-term borrowings		$ 0	$ 1,511
Weighted-average interest rate during the year		0.00%	0.17%
MGE [Member] | Line of Credit [Member]
Short-term Debt [Line Items]
Available lines of credit		$ 100,000	$ 100,000
MGE [Member] | Line of Credit [Member] | MGE unsecured committed revolving lines of credit totaling $100 million
Short-term Debt [Line Items]
Available lines of credit		100,000
Line of credit, borrowings outstanding		$ 0
Debt covenant, required parent company ownership of MGE		100.00%
MGE [Member] | Line of Credit [Member] | MGE unsecured committed revolving lines of credit totaling $100 million | Minimum [Member]
Short-term Debt [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value		30.00%
MGE [Member] | Line of Credit [Member] | MGE unsecured committed revolving lines of credit totaling $100 million | Maximum [Member]
Short-term Debt [Line Items]
Debt to total capitalization ratio		0.65
MGE Energy [Member] | Line of Credit [Member] | MGE Energy unsecured committed revolving line of credit totaling $50 million
Short-term Debt [Line Items]
Available lines of credit		$ 50,000
Line of credit, borrowings outstanding		$ 0
Debt covenant, required parent company ownership of MGE		100.00%
MGE Energy [Member] | Line of Credit [Member] | MGE Energy unsecured committed revolving line of credit totaling $50 million | Minimum [Member]
Short-term Debt [Line Items]
Debt covenant, ownership interest by outside party resulting in repurchase of notes at par value		30.00%
MGE Energy [Member] | Line of Credit [Member] | MGE Energy unsecured committed revolving line of credit totaling $50 million | Maximum [Member]
Short-term Debt [Line Items]
Debt to total capitalization ratio		0.65

[1] MGE Energy short-term borrowings include MGE Energy and MGE lines of credit and MGE commercial paper.

XML

Fair Value of Financial Instruments (Details-1) - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
Liabilities:
Unamortized discount and debt issuance costs, net		$ 4,118	$ 4,498
Carrying Amount [Member]
Assets:
Cash and cash equivalents		95,959	81,384
Liabilities:
Long-Term debt	[1]	391,242	395,508
Fair Value [Member]
Assets:
Cash and cash equivalents		95,959	81,384
Liabilities:
Long-Term debt	[1]	430,122	435,767
MGE [Member]
Liabilities:
Unamortized discount and debt issuance costs, net		4,118	4,498
MGE [Member] | Carrying Amount [Member]
Assets:
Cash and cash equivalents		10,768	26,760
Liabilities:
Long-Term debt	[1]	391,242	395,508
MGE [Member] | Fair Value [Member]
Assets:
Cash and cash equivalents		10,768	26,760
Liabilities:
Long-Term debt	[1]	$ 430,122	$ 435,767

[1] Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.1 million and $4.5 million at December 31, 2016 and 2015, respectively.

XML

Fair Value of Financial Instruments (Details-2) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets:
Available-for-sale securities	$ 2,554	$ 2,822
Liabilities:
Derivative liability, collateral offset	0	1,000
Recurring [Member]
Assets:
Derivative assets, net	1,527	234
Total Assets	2,027	993
Liabilities:
Derivative liabilities, net	50,808	54,316	[1]
Deferred compensation	3,039	3,145
Total Liabilities	53,847	57,461
Recurring [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	500	759
Recurring [Member] | Level 1 [Member]
Assets:
Derivative assets, net	1,041	0
Total Assets	1,541	759
Liabilities:
Derivative liabilities, net	16	581	[1]
Deferred compensation	0	0
Total Liabilities	16	581
Recurring [Member] | Level 1 [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	500	759
Recurring [Member] | Level 2 [Member]
Assets:
Derivative assets, net	0	0
Total Assets	0	0
Liabilities:
Derivative liabilities, net	0	0	[1]
Deferred compensation	3,039	3,145
Total Liabilities	3,039	3,145
Recurring [Member] | Level 2 [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	0	0
Recurring [Member] | Level 3 [Member]
Assets:
Derivative assets, net	486	234
Total Assets	486	234
Liabilities:
Derivative liabilities, net	50,792	53,735	[1]
Deferred compensation	0	0
Total Liabilities	50,792	53,735
Recurring [Member] | Level 3 [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	0	0
MGE [Member]
Assets:
Available-for-sale securities	487	518
Liabilities:
Derivative liability, collateral offset	0	1,000
MGE [Member] | Recurring [Member]
Assets:
Derivative assets, net	1,527	234
Total Assets	1,670	382
Liabilities:
Derivative liabilities, net	50,808	54,316	[1]
Deferred compensation	3,039	3,145
Total Liabilities	53,847	57,461
MGE [Member] | Recurring [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	143	148
MGE [Member] | Recurring [Member] | Level 1 [Member]
Assets:
Derivative assets, net	1,041	0
Total Assets	1,184	148
Liabilities:
Derivative liabilities, net	16	581	[1]
Deferred compensation	0	0
Total Liabilities	16	581
MGE [Member] | Recurring [Member] | Level 1 [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	143	148
MGE [Member] | Recurring [Member] | Level 2 [Member]
Assets:
Derivative assets, net	0	0
Total Assets	0	0
Liabilities:
Derivative liabilities, net	0	0	[1]
Deferred compensation	3,039	3,145
Total Liabilities	3,039	3,145
MGE [Member] | Recurring [Member] | Level 2 [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	0	0
MGE [Member] | Recurring [Member] | Level 3 [Member]
Assets:
Derivative assets, net	486	234
Total Assets	486	234
Liabilities:
Derivative liabilities, net	50,792	53,735	[1]
Deferred compensation	0	0
Total Liabilities	50,792	53,735
MGE [Member] | Recurring [Member] | Level 3 [Member] | Exchange-traded investments
Assets:
Available-for-sale securities	$ 0	$ 0

[1] These amounts are shown gross and exclude $1.0 million of collateral that was posted against derivative positions with counterparties as of December 31, 2015.

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Fair Value of Financial Instruments (Details-3)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Basis adjustment:
Basis adjustment - on peak	91.90%	96.90%
Basis adjustment - off peak	93.40%	95.10%
US Treasury Bills [Member]
Deferred compensation plan
Investment interest calculation, investment maturity period (26 weeks)	182 days
Investment interest calculation, monthly compounding rate	1.00%
Investment interest calculation, minimum annual rate compounded monthly	7.00%
Minimum [Member]
Counterparty fuel mix:
Internal generation	55.00%	60.00%
Purchased power	25.00%	25.00%
Maximum [Member]
Counterparty fuel mix:
Internal generation	75.00%	75.00%
Purchased power	45.00%	40.00%

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Fair Value of Financial Instruments (Details-4) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Beginning balance		$ (53,501)	$ (53,986)	$ (64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities		3,195	484	10,642
Included in other comprehensive income		0	0	0
Included in earnings	[1]	(5,347)	(6,635)	5,129
Included in current assets		(142)	0	0
Purchases		23,346	23,052	26,382
Sales		0	0	0
Issuances		0	0	0
Settlements		(17,857)	(16,416)	(31,511)
Transfers in and/or out of Level 3		0	0	0
Ending balance		(50,306)	(53,501)	(53,986)
Total gains (losses) included in earnings attributed to the change in unrealized gains (losses) related to assets and liabilities	[1]	0	0	0
Purchased Power Expense [Member]
Realized and unrealized gains (losses):
Included in earnings	[1]	(5,262)	(6,663)	5,137
Cost Of Gas Sold Expense [Member]
Realized and unrealized gains (losses):
Included in earnings	[1]	$ (85)	$ 28	$ (8)

[1] MGE's exchange-traded derivative contracts, over-the-count er party transactions, purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability.

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Income Taxes (Details) - USD ($) $ in Thousands		3 Months Ended								12 Months Ended
		Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income tax provision components [Abstract]
Current payable: Federal										$ 16,908	$ 16,837	$ (891)
Current payable: State										3,287	2,774	(589)
Net-deferred: Federal										17,571	15,951	39,284
Net-deferred: State										4,850	5,976	10,600
Amortized investment tax credits										(103)	(175)	(219)
Total income tax provision		$ 7,570	$ 15,714	$ 9,284	$ 9,945	$ 7,417	$ 15,351	$ 8,008	$ 10,587	$ 42,513	$ 41,363	$ 48,185
Reconciliation of tax provision to statutory federal income tax rate [Abstract]
Statutory federal income tax rate										35.00%	35.00%	35.00%
State income taxes, net of federal benefit										5.10%	5.20%	5.10%
Amortized investment tax credits										(0.10%)	(0.20%)	(0.20%)
Credit for electricity from wind energy										(1.60%)	(1.80%)	(1.70%)
Domestic manufacturing deduction										(1.30%)	(1.40%)	0.00%
AFUDC equity, net										(0.20%)	(0.10%)	(0.80%)
Other, net, individually significant										(0.90%)	0.00%	0.10%
Effective income tax rate										36.00%	36.70%	37.50%
Deferred tax liabilities (assets) on balance sheet [Abstract]
Property-related													$ 344,721	$ 327,918
Investment in ATC	[1]												71,898	38,213
Bond transactions													1,324	1,422
Pension and other postretirement benefits													63,516	57,697
Derivatives													20,304	21,660
Tax deductible prepayments													8,404	8,011
Other deferred tax liabilities													16,606	14,997
Gross deferred income tax liabilities													526,773	469,918
Investment in ATC	[1]												(31,212)	0
Accrued expenses													(22,410)	(21,391)
Pension and other postretirement benefits													(48,860)	(46,582)
Deferred tax regulatory account													(903)	(1,047)
Derivatives													(20,304)	(21,660)
Other deferred tax assets													(19,340)	(18,523)
Gross deferred income tax assets													(143,029)	(109,203)
Less valuation allowance													69	70
Net deferred income tax assets													(142,960)	(109,133)
Deferred income taxes													383,813	360,785
Operating loss deductions and tax credit carryforwards [Abstract]
State net tax operating loss deductions													1,400
Unrecognized tax benefits [Roll Forward]
Unrecognized tax benefits, beginning balance					2,528				2,365	$ 2,528	$ 2,365	$ 2,363
Additions based on tax positions related to current year										452	488	610
Additions based on tax positions related to prior year										39	520	618
Reductions based on tax positions related to prior years										(532)	(845)	(1,226)
Unrecognized tax benefits, ending balance		2,487				2,528				2,487	2,528	2,365
Interest on unrecognized tax benefits [Roll Forward]
Accrued interest on unrecognized tax benefits, beginning balance					311				92	311	92	101
Reduction in interest expense on uncertain tax positions										(27)	(102)	(97)
Interest expense on uncertain tax positions										104	321	88
Accrued interest on unrecognized tax benefits, ending balance		388				311				388	311	92
Unrecognized Tax Benefits
Unrecognized tax benefits		$ 2,487			$ 2,528	$ 2,528			$ 2,365	2,528	2,528	2,365	2,487	2,528	$ 2,365
Unrecognized tax benefits permanent differences													100	0	$ 0
MGE [Member]
Income tax provision components [Abstract]
Current payable: Federal										17,521	19,295	637
Current payable: State										3,497	3,443	(451)
Net-deferred: Federal										16,391	13,538	38,553
Net-deferred: State										4,485	5,305	10,625
Amortized investment tax credits										(103)	(175)	(219)
Total income tax provision										$ 41,791	$ 41,406	$ 49,145
Reconciliation of tax provision to statutory federal income tax rate [Abstract]
Statutory federal income tax rate										35.00%	35.00%	35.00%
State income taxes, net of federal benefit										5.10%	5.20%	5.10%
Amortized investment tax credits										(0.10%)	(0.20%)	(0.20%)
Credit for electricity from wind energy										(1.70%)	(1.80%)	(1.70%)
Domestic manufacturing deduction										(1.30%)	(1.40%)	0.00%
AFUDC equity, net										(0.20%)	(0.10%)	(0.80%)
Other, net, individually significant										(0.90%)	0.00%	0.10%
Effective income tax rate										35.90%	36.70%	37.50%
Deferred tax liabilities (assets) on balance sheet [Abstract]
Property-related													344,630	327,822
Investment in ATC	[1]												0	30,382
Bond transactions													1,324	1,422
Pension and other postretirement benefits													63,516	57,697
Derivatives													20,304	21,660
Tax deductible prepayments													8,404	8,011
Other deferred tax liabilities													16,571	14,831
Gross deferred income tax liabilities													454,749	461,825
Investment in ATC	[1]												0	0
Accrued expenses													(22,410)	(21,391)
Pension and other postretirement benefits													(48,860)	(46,582)
Deferred tax regulatory account													(903)	(1,047)
Derivatives													(20,304)	(21,660)
Other deferred tax assets													(19,224)	(18,589)
Gross deferred income tax assets													(111,701)	(109,269)
Less valuation allowance													69	70
Net deferred income tax assets													(111,632)	(109,199)
Deferred income taxes													343,117	$ 352,626
Operating loss deductions and tax credit carryforwards [Abstract]
State net tax operating loss deductions													$ 1,400

[1] As of December 1, 2016, MGE transferred its ownership interest in ATC to MGE Energy, resulting in a deferred intercompany gain and a corresponding step-up in tax basis.

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Pension Plans and Other Postretirement Benefits (Details-1) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Defined contribution plans [Abstract]
Defined contribution costs		$ 3,100		$ 2,800	$ 2,500
Change in plan assets [Roll Forward]
Fair value of plan assets at beginning of year		330,886
Fair value of plan assets at end of year		355,110		330,886
Amounts recognized in the consolidated balance sheets to reflect funded status of plans [Abstract]
Long-term asset		2,020		0
Long-term liability		(74,347)		(75,680)
Pension Benefits [Member]
Change in benefit obligations [Roll Forward]
Net benefit obligation at beginning of year		332,565		340,233
Service cost		5,365		7,263	6,179
Interest cost		12,393		13,766	13,574
Plan participants' contributions		0		0
Actuarial loss (gain)		11,412	[1]	(17,576)
Gross benefits paid		(12,179)		(11,121)
Less: federal subsidy on benefits paid		0		0
Benefit obligation at end of year		349,556		332,565	340,233
Change in plan assets [Roll Forward]
Fair value of plan assets at beginning of year		290,716		288,548
Actual return on plan assets		24,181		4,153
Employer contributions		9,215		9,136
Plan participants' contributions		0		0
Gross benefits paid		(12,179)		(11,121)
Fair value of plan assets at end of year		311,933		290,716	288,548
Funded Status at December 31		(37,623)		(41,849)
Accumulated benefit obligation		319,900		302,500
Amounts recognized in the consolidated balance sheets to reflect funded status of plans [Abstract]
Long-term asset		2,020		0
Current liability		(972)		(966)
Long-term liability		(38,671)		(40,883)
Net liability		(37,623)		(41,849)
Amounts recognized in the consolidated balance sheets as regulatory asset [Abstract]
Net actuarial loss		84,656		80,660
Prior service (credit) cost		(446)		(436)
Transition obligation		0		0
Total		84,210		80,224
Projected benefit obligation in excess of plan assets [Abstract]
Projected benefit obligation with projected benefit obligation in excess of plan assets, end of year		227,739		332,565
Fair value of plan assets with projected benefit obligation in excess of plan assets, end of year		188,096		290,716
Accumulated benefit obligation in excess of plan assets [Abstract]
Accumulated benefit obligation with accumulated benefit obligation in excess of plan assets, end of year		26,927		24,606
Fair value of plan assets with accumulated benefit obligation in excess of plan assets, end of year		0		0
Postretirement Benefits [Member]
Change in benefit obligations [Roll Forward]
Net benefit obligation at beginning of year		74,935		78,478
Service cost		1,271		1,559	1,339
Interest cost		2,681		3,075	3,166
Plan participants' contributions		767		741
Actuarial loss (gain)		2,638	[1]	(5,828)
Gross benefits paid		(3,637)		(3,280)
Less: federal subsidy on benefits paid	[2]	187		190
Benefit obligation at end of year		78,842		74,935	78,478
Change in plan assets [Roll Forward]
Fair value of plan assets at beginning of year		40,170		38,952
Actual return on plan assets		3,236		603
Employer contributions		2,641		3,154
Plan participants' contributions		767		741
Gross benefits paid		(3,637)		(3,280)
Fair value of plan assets at end of year		43,177		40,170	$ 38,952
Funded Status at December 31		(35,665)		(34,765)
Medicare subsidy due to MGE		200		200
Amounts recognized in the consolidated balance sheets to reflect funded status of plans [Abstract]
Long-term asset		0		0
Current liability		0		(52)
Long-term liability		(35,665)		(34,713)
Net liability		(35,665)		(34,765)
Amounts recognized in the consolidated balance sheets as regulatory asset [Abstract]
Net actuarial loss		14,728		13,086
Prior service (credit) cost		(12,489)		(15,158)
Transition obligation		26		29
Total		$ 2,265		$ (2,043)

[1] In 2016, lower discount rates were the main driver of the actuarial loss.

[2] In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For the years ended December 31, 2016 and 2015 , the subsidy due to MGE was $ 0.2 million.

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Pension Plans and Other Postretirement Benefits (Details-2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Benefits [Member]
Components of Net Periodic Cost (Benefit)
Service cost	$ 5,365	$ 7,263	$ 6,179
Interest cost	12,393	13,766	13,574
Expected return on assets	(22,365)	(22,682)	(22,051)
Amortization of:
Transition obligation	0	0	0
Prior service cost (benefit)	10	23	204
Actuarial loss	5,600	5,395	703
Net periodic cost (benefit)	1,003	3,765	(1,391)
Postretirement Benefits [Member]
Components of Net Periodic Cost (Benefit)
Service cost	1,271	1,559	1,339
Interest cost	2,681	3,075	3,166
Expected return on assets	(2,829)	(2,812)	(2,615)
Amortization of:
Transition obligation	3	3	3
Prior service cost (benefit)	(2,669)	(2,669)	(2,669)
Actuarial loss	589	953	252
Net periodic cost (benefit)	$ (954)	$ 109	$ (524)

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Pension Plans and Other Postretirement Benefits (Details-3) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Benefits [Member]
Weighted-average assumptions used to determine benefit obligations:
Discount rate	[1]	4.29%	4.51%
Rate of compensation increase		3.71%	3.78%
Weighted-average assumptions used to determine net periodic cost:
Discount rate		4.51%	4.11%	4.88%
Long-term rate of return		7.65%	7.80%	8.10%
Rate of compensation increase		3.76%	3.84%	3.93%
Postretirement Benefits [Member]
Weighted-average assumptions used to determine benefit obligations:
Discount rate	[1]	4.11%	4.32%
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year		6.25%	6.50%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00%	5.00%
Year that the rate reaches the ultimate trend rate		2022	2022
Weighted-average assumptions used to determine net periodic cost:
Discount rate		4.32%	3.96%	4.69%
Long-term rate of return		6.96%	7.06%	7.07%
How assumed 1% increase or decrease in health care cost trends could impact postretirement benefits [Abstract]
Effect on other postretirement benefit obligation - 1% increase		$ 1,175
Effect on other postretirement benefit obligation - 1% decrease		(1,479)
Effect on total service and interest cost components - 1% increase		54
Effect on total service and interest cost components - 1% decrease		$ (67)

[1] In 2015, MGE refined its methodology for using discount rates to measure the components of net periodic benefit cost. The refined methodology uses individual spot rates, instead of a weighted average of the yield curve spot rates, for measuring the service cost and interest cost components. The change in methodology does not alter the measurement of the related benefit obligation as of December 31, 2015.

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Pension Plans and Other Postretirement Benefits (Details-4) $ in Thousands		12 Months Ended
		Dec. 31, 2016 USD ($) concentration	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Other postretirement benefits [Abstract]
Fair value of plan assets		$ 355,110	$ 330,886
Real Estate [Member]
Other postretirement benefits [Abstract]
Fair value of plan assets		$ 29,441	$ 27,231
Pension Benefits [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Target Plan Asset Allocation		100.00%
Actual Plan Asset Allocation		100.00%	100.00%
Other postretirement benefits [Abstract]
Fair value of plan assets		$ 311,933	$ 290,716	$ 288,548
Pension Benefits [Member] | Plan Assets [Member]
Concentration of Credit Risk [Abstract]
Concentration risk, percentage		10.00%
Concentration risk, number of significant concentrations | concentration		0
Pension Benefits [Member] | Equity Securities [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Target Plan Asset Allocation	[1]	63.00%
Actual Plan Asset Allocation		65.00%	63.00%
Pension Benefits [Member] | United States Equity Securities [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Target Plan Asset Allocation		45.50%
Pension Benefits [Member] | Non-United States Equity Securities [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Target Plan Asset Allocation		17.50%
Pension Benefits [Member] | Fixed Income Securities [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Target Plan Asset Allocation		30.00%
Actual Plan Asset Allocation		27.00%	29.00%
Pension Benefits [Member] | Real Estate [Member]
Defined Benefit Plan, Information about Plan Assets [Abstract]
Target Plan Asset Allocation		7.00%
Actual Plan Asset Allocation		8.00%	8.00%
Postretirement Benefits [Member]
Other postretirement benefits [Abstract]
Fair value of plan assets		$ 43,177	$ 40,170	$ 38,952
Postretirement Benefits [Member] | Plan Assets [Member]
Concentration of Credit Risk [Abstract]
Concentration risk, percentage		10.00%
Concentration risk, number of significant concentrations | concentration		0
Master Pension Trust [Member]
Other postretirement benefits [Abstract]
Fair value of plan assets		$ 37,000	$ 34,100

[1] Target allocations for equity securities are broken out as follows: 45.5 % United States equity, 17.5 % non- United States equity .

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Pension Plans and Other Postretirement Benefits (Details-5) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 355,110	$ 330,886
Cash and Cash Equivalents [Member] | Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	284	300
Equity Securities [Member] | U.S. Large Cap [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	107,406	98,949
Equity Securities [Member] | U.S. Mid Cap [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	25,966	22,446
Equity Securities [Member] | U.S. Small Cap [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	33,836	27,561
Equity Securities [Member] | International Blend [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	59,054	55,948
Fixed Income Securities [Member] | Short-Term Fund [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	4,318	3,388
Fixed Income Securities [Member] | High Yield Bond [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	17,978	16,225
Fixed Income Securities [Member] | Long Duration Bond [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	71,512	73,112
Real Estate [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	29,441	27,231
Insurance Continuance Fund [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	1,514	1,518
Fixed Rate Fund [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 3,801	$ 4,208

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Pension Plans and Other Postretirement Benefits (Details-6) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Expected Cash Flows
Expected employer contributions, 2017	$ 6,000
Expected employer contributions, 2018	0
Cash contributions to pension and other postretirement plans	14,452	$ 13,676	$ 3,321
Pension Benefits [Member]
Benefit Payments, Gross
Defined benefit plan expected gross future benefit payments, 2017	13,468
Defined benefit plan expected gross future benefit payments, 2018	14,618
Defined benefit plan expected gross future benefit payments, 2019	15,632
Defined benefit plan expected gross future benefit payments, 2020	16,429
Defined benefit plan expected gross future benefit payments, 2021	17,263
Defined benefit plan expected gross future benefit payments, 2022-2026	99,725
Postretirement Benefits [Member]
Benefit Payments, Gross
Defined benefit plan expected gross future benefit payments, 2017	3,623
Defined benefit plan expected gross future benefit payments, 2018	3,998
Defined benefit plan expected gross future benefit payments, 2019	4,442
Defined benefit plan expected gross future benefit payments, 2020	4,932
Defined benefit plan expected gross future benefit payments, 2021	5,442
Defined benefit plan expected gross future benefit payments, 2022-2026	31,065
Medicare Part D Subsidies
Expected Medicare Part D Subsidies, 2017	(232)
Expected Medicare Part D Subsidies, 2018	(252)
Expected Medicare Part D Subsidies, 2019	(274)
Expected Medicare Part D Subsidies, 2020	(302)
Expected Medicare Part D Subsidies, 2021	(326)
Expected Medicare Part D Subsidies, 2022-2026	(2,122)
Benefit Payments, Net
Defined benefit plan expected net future benefit payments, 2017	3,391
Defined benefit plan expected net future benefit payments, 2018	3,746
Defined benefit plan expected net future benefit payments, 2019	4,168
Defined benefit plan expected net future benefit payments, 2020	4,630
Defined benefit plan expected net future benefit payments, 2021	5,116
Defined benefit plan expected net future benefit payments, 2022-2026	$ 28,943

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Share-Based Compensation (Details) - USD ($) $ in Millions								1 Months Ended	12 Months Ended
	Jan. 20, 2017	Feb. 19, 2016	Jan. 15, 2016	Feb. 20, 2015	Jan. 16, 2015	Feb. 21, 2014	Feb. 15, 2013	Jan. 31, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation expense									$ 3.1	$ 1.0	$ 2.0
Awards forfeited during period, value									$ 0.0	$ 0.2	$ 0.0
Awards forfeited during period, units									0	4,676	0
Outstanding awards vested during period									$ 6.9
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Cash payments distributed related to awards previously granted and now payable								$ 1.2
Performance Unit Plan [Member] | Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period									5 years
Awards granted (in units)		19,055		18,948		21,991	22,884
Director Incentive Agreement [Member] | Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period									3 years
Awards granted (in units)			3,773		3,794
Director Incentive Agreement [Member] | Performance Units [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted (in units)	4,032

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Derivative and Hedging Instruments (Details-1) $ in Thousands		12 Months Ended
		Dec. 31, 2016 USD ($) Dth MWh MW	Dec. 31, 2015 USD ($) Dth MWh MW	Dec. 31, 2014 USD ($)
Derivative Fair Values [Abstract]
Derivative, right to reclaim collateral (receivable)		$ 0	$ 1,000
Other Current Assets [Member]
Derivative Fair Values [Abstract]
Derivative fair value, net		230	1,208	$ 1,001
Commodity Contracts and Financial Transimission Rights [Member]
Derivative Fair Values [Abstract]
Derivative fair value, net		$ 1,300	$ (800)
Commodity Derivative Contracts [Member]
Gross Notional Volume of Open Derivatives
Notional amount, energy measure (in MWh) | MWh		393,395	355,580
Notional amount, decatherm measure (in Dth) | Dth		4,195,000	5,037,500
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis		$ 1,384	$ 290
Liability Derivatives, fair value, gross basis		218	1,336
Commodity Derivative Contracts [Member] | Other Current Assets [Member]
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis	[1]	1,227
Liability Derivatives, fair value, gross basis	[1]	164
Commodity Derivative Contracts [Member] | Other Deferred Charges [Member]
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis	[1]	157
Liability Derivatives, fair value, gross basis	[1]	$ 54
Commodity Derivative Contracts [Member] | Derivative Liability (Current) [Member]
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis	[1]		146
Liability Derivatives, fair value, gross basis	[1]		1,266
Commodity Derivative Contracts [Member] | Derivative Liability (Long-term) [Member]
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis	[1]		144
Liability Derivatives, fair value, gross basis	[1]		$ 70
Energy Related Commodity Contract [Member] | Cash Flow Hedging [Member]
Derivatives Fair Value [Line Items]
Maximum term of derivative hedging contract		4 years
Financial Transmission Rights [Member]
Gross Notional Volume of Open Derivatives
Notional amount, power measure (in MW) | MW		2,251	2,000
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis		$ 143	$ 234
Financial Transmission Rights [Member] | Other Current Assets [Member]
Derivative Fair Values [Abstract]
Asset Derivatives, fair value, gross basis		143	234
Liability Derivatives, fair value, gross basis		$ 0	$ 0
PPA [Member]
Gross Notional Volume of Open Derivatives
Notional amount, power measure (in MW) | MW		3,250	3,850
Derivative Fair Values [Abstract]
Derivative fair value, net		$ (50,600)	$ (53,300)
Liability Derivatives, fair value, gross basis		50,590	53,270
PPA [Member] | Derivative Liability (Current) [Member]
Derivative Fair Values [Abstract]
Liability Derivatives, fair value, gross basis		7,620	8,340
PPA [Member] | Derivative Liability (Long-term) [Member]
Derivative Fair Values [Abstract]
Liability Derivatives, fair value, gross basis		$ 42,970	$ 44,930

[1] As of December 31 , 2015 , collateral of $ 1.0 million was posted against and netted with derivative liability positions on the consolidated balance sheets. No collateral was posted against derivative positions as of December 31, 2016 .

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Derivative and Hedging Instruments (Details-2) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Commodity Derivative Contracts [Member]
Offsetting Assets [Line Items]
Gross amounts	$ 1,384	$ 290
Gross amounts offset in balance sheet	(218)	(290)
Collateral posted against derivative positions	0	0
Net amount presented in balance sheet	1,166	0
Financial Transmission Rights [Member]
Offsetting Assets [Line Items]
Gross amounts	143	234
Gross amounts offset in balance sheet	0	0
Collateral posted against derivative positions	0	0
Net amount presented in balance sheet	$ 143	$ 234

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Derivative and Hedging Instruments (Details-3) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Offsetting Liabilities [Line Items]
Collateral posted against derivative positions	$ 0	$ (1,000)
Commodity Derivative Contracts [Member]
Offsetting Liabilities [Line Items]
Gross amounts	218	1,336
Gross amounts offset in balance sheet	(218)	(290)
Collateral posted against derivative positions	0	(1,038)
Net amount presented in the balance sheet	0	8
PPA [Member]
Offsetting Liabilities [Line Items]
Gross amounts	50,590	53,270
Gross amounts offset in balance sheet	0	0
Collateral posted against derivative positions	0	0
Net amount presented in the balance sheet	$ 50,590	$ 53,270

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Derivative and Hedging Instruments (Details-4) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Current and Long-Term Regulatory Asset [Member]
Change in Derivative Fair Value [Roll Forward]
Beginning balance	$ 54,082	$ 54,998
Unrealized loss	1,575	8,586
Realized (loss) gain reclassified to a deferred account	(1,060)	(2,953)
Realized loss reclassified to income statement	(5,316)	(6,549)
Ending balance	49,281	54,082
Other Current Assets [Member]
Change in Derivative Fair Value [Roll Forward]
Beginning balance	1,208	1,001
Unrealized loss	0	0
Realized (loss) gain reclassified to a deferred account	1,060	2,953
Realized loss reclassified to income statement	(2,038)	(2,746)
Ending balance	$ 230	$ 1,208

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Derivative and Hedging Instruments (Details-5) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) counterparty	Dec. 31, 2015 USD ($)
Counterparties in net liability position or default [Abstract]
Derivative, net liability position of counterparties	$ 0	$ 100
Number of counterparties in default | counterparty	0
Commodity Derivative Contracts [Member] | Fuel For Electric Generation Purchased Power [Member]
Realized losses (gains) on income statement [Line Items]
Realized losses (gains) on income statement	$ 1,154	2,236
Commodity Derivative Contracts [Member] | Cost Of Gas Sold Expense [Member]
Realized losses (gains) on income statement [Line Items]
Realized losses (gains) on income statement	2,064	2,548
Financial Transmission Rights [Member] | Fuel For Electric Generation Purchased Power [Member]
Realized losses (gains) on income statement [Line Items]
Realized losses (gains) on income statement	(445)	(309)
Financial Transmission Rights [Member] | Cost Of Gas Sold Expense [Member]
Realized losses (gains) on income statement [Line Items]
Realized losses (gains) on income statement	0	0
PPA [Member]
Derivative collateral required to be posted for ten-year PPA [Abstract]
Minimum collateral that may be required to be posted	20,000
Maximum collateral that may be required to be posted	40,000
Collateral posted	0
PPA [Member] | Fuel For Electric Generation Purchased Power [Member]
Realized losses (gains) on income statement [Line Items]
Realized losses (gains) on income statement	4,581	4,820
PPA [Member] | Cost Of Gas Sold Expense [Member]
Realized losses (gains) on income statement [Line Items]
Realized losses (gains) on income statement	$ 0	$ 0

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Rate Matters (Details) - PSCW [Member] - MGE [Member] - USD ($)	1 Months Ended	4 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jul. 31, 2016	Jan. 31, 2016	Aug. 31, 2015
Rate Proceedings [Abstract]
Authorized return on equity, percentage					10.20%	10.30%
Fuel Rules [Abstract]
Fuel rules, bandwidth				2.00%
Fuel rules, electric fuel costs, deferral, upper threshold				102.00%
Fuel rules, electric fuel costs, deferral, lower threshold				98.00%
Electric Fuel Monitored Costs, 2016 [Member]
Fuel Rules [Abstract]
Change in fuel rules monitored costs								$ (14,800,000)
Deferred fuel rules monitored costs				$ 5,600,000
Fuel Rules Credit ($0.00256/kWh), 2015/2016 [Member]
Fuel Rules [Abstract]
Electric fuel credit (per kWh)		$ 0.00256		0.00256
Electric fuel credit ($)									$ 10,900,000
Return of electric fuel credit, total		$ 2,600,000		$ 8,300,000
Fuel Rules Refund, 2015/2016 [Member] | Electric Fuel Monitored Costs, 2016 [Member]
Fuel Rules [Abstract]
Electric fuel credit ($)							$ 15,700,000
Return of electric fuel credit, total	$ 15,500,000
Fuel Rules Credit, 2012 [Member]
Fuel Rules [Abstract]
Return of electric fuel credit, total						$ 6,300,000
Approved Future Rate Matters [Member]
Rate Proceedings [Abstract]
Approved equity capital structure, percentage			57.20%
Authorized return on equity, percentage			9.80%
Columbia Environmental Projects [Member]
Rate Proceedings [Abstract]
Authorized AFUDC rate					100.00%	100.00%
Electric Rate Proceeding [Member]
Rate Proceedings [Abstract]
Authorized rate increase (decrease), percentage				0.00%	3.80%	0.00%
Authorized rate increase (decrease), amount				$ 0	$ 15,400,000	$ 0
Electric Rate Proceeding [Member] | Approved Future Rate Matters [Member]
Rate Proceedings [Abstract]
Authorized rate increase (decrease), percentage			(0.80%)
Authorized rate increase (decrease), amount			$ (3,300,000)
Gas Rate Proceeding [Member]
Rate Proceedings [Abstract]
Authorized rate increase (decrease), percentage				0.00%	(2.00%)	0.00%
Authorized rate increase (decrease), amount				$ 0	$ (3,800,000)	$ 0
Gas Rate Proceeding [Member] | Approved Future Rate Matters [Member]
Rate Proceedings [Abstract]
Authorized rate increase (decrease), percentage			1.90%
Authorized rate increase (decrease), amount			$ 3,100,000

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Commitments and Contingencies (Details-1) $ in Thousands	Dec. 31, 2016 USD ($) MW
Purchase Obligation, Fiscal Year Maturity [Abstract]
Purchase obligation due in next twelve months	$ 122,846
Purchase obligation due in second year	82,295
Purchase obligation due in third year	60,577
Purchase obligation due in fourth year	47,803
Purchase obligation due in fifth year	41,709
Purchase obligation due thereafter	89,562
Coal [Member]
Purchase Obligation, Fiscal Year Maturity [Abstract]
Purchase obligation due in next twelve months	21,246	[1]
Purchase obligation due in second year	14,763	[1]
Purchase obligation due in third year	7,281	[1]
Purchase obligation due in fourth year	0	[1]
Purchase obligation due in fifth year	0	[1]
Purchase obligation due thereafter	0	[1]
Natural Gas, Transportation and Storage [Member]
Purchase Obligation, Fiscal Year Maturity [Abstract]
Purchase obligation due in next twelve months	20,859	[2]
Purchase obligation due in second year	20,645	[2]
Purchase obligation due in third year	19,483	[2]
Purchase obligation due in fourth year	15,226	[2]
Purchase obligation due in fifth year	8,443	[2]
Purchase obligation due thereafter	23,331	[2]
Natural Gas, Supply [Member]
Purchase Obligation, Fiscal Year Maturity [Abstract]
Purchase obligation due in next twelve months	17,783	[3]
Purchase obligation due in second year	0	[3]
Purchase obligation due in third year	0	[3]
Purchase obligation due in fourth year	0	[3]
Purchase obligation due in fifth year	0	[3]
Purchase obligation due thereafter	0	[3]
Purchase Power [Member]
Purchase Obligation, Fiscal Year Maturity [Abstract]
Purchase obligation due in next twelve months	48,056	[4]
Purchase obligation due in second year	46,563	[4]
Purchase obligation due in third year	33,670	[4]
Purchase obligation due in fourth year	32,577	[4]
Purchase obligation due in fifth year	33,266	[4]
Purchase obligation due thereafter	$ 66,231	[4]
Purchase Power Agreement, Osceola Windpower II, LLC [Member]
Purchase Power Agreement [Abstract]
Long-term purchase commitment, minimum power required (in MW) | MW	50
Other [Member]
Purchase Obligation, Fiscal Year Maturity [Abstract]
Purchase obligation due in next twelve months	$ 14,902
Purchase obligation due in second year	324
Purchase obligation due in third year	143
Purchase obligation due in fourth year	0
Purchase obligation due in fifth year	0
Purchase obligation due thereafter	$ 0

[1] Total coal commitments for the Columbia and Elm Road Units , including transportation . Fuel procurement for MGE's jointly owned Columbia and Elm Road Units is handled by WPL and WEPCO, respectively, who are the operators of those facilities . If any minimum purchase obligations must be paid under these contracts, management believes these obligations would be considered costs of service and recoverable in rates.

[2] MGE's natural gas transportation and storage contracts require fixed monthly payments for firm supply pipeline transportation and storage capacity. The pricing components of the fixed monthly payments for the transportation and storage contracts are established by FERC but may be subject to change. Management expects to recover these costs in future customer rates.

[3] These commitments include market-based pricing. Management expects to recover these costs in future customer rates.

[4] MGE has several purchase power agreements to help meet future electric supply requirements. Management expects to recover these costs in future customer rates. In October 2008, MGE entered into a purchase power agreement to help meet future electric supply requirements. Under this agreement, MGE has agreed to purchase 50  M W of wind power from Osceola Windpower II, LLC, which is located in Iowa. This facility became operational in October 2008. MGE does not have any capacity payment commitments under this agreement. However, MGE is obligated to purchase its ratable share of the energy produced by the project. MGE's commitment related to its ratable share of energy produced by the project has been estimated and is included in the above numbers. Management expects to recover these costs in future customer rates.

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Commitments and Contingencies (Details-2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Leases, Future Minimum Rental Payments [Abstract]
Minimum lease payments, 2017	$ 1,331
Minimum lease payments, 2018	959
Minimum lease payments, 2019	441
Minimum lease payments, 2020	310
Minimum lease payments, 2021	278
Minimum lease payments, Thereafter	8,020
Rental expense under operating leases	$ 2,000	$ 2,100	$ 2,500
Operating leases, renewal option term (one year or less)	1 year

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Commitments and Contingencies (Details-3) $ in Millions	12 Months Ended
	Dec. 31, 2016 USD ($) ppb pollutant state MW
Columbia Environmental Project, SCR [Member] | MGE [Member] | Minimum [Member]
Columbia
Share of projected SCR project cost | $	$ 22
Columbia Environmental Project, SCR [Member] | MGE [Member] | Maximum [Member]
Columbia
Share of projected SCR project cost | $	$ 24
Wisconsin Energy Efficiency and Renewables Act [Member]
Energy Efficiency and Renewables
Minimum electricity generated from renewable resources	10.00%
EPA [Member]
Effluent Limitations Guidelines and Standards for Steam Electric Power Generating Source Category [Abstract]
Air pollution control and ash handling systems capacity at coal burning power plants, minimum (in MW) | MW	50
EPA's National Ambient Air Quality Standards
Number of pollutants monitored by the National Ambient Air Quality Standards | pollutant	6
EPA's Ozone NAAQS
Current primary regulated level of Ozone NAAQS (in parts per billion) | ppb	70
Current secondary regulated level of Ozone NAAQS (in parts per billion) | ppb	70
EPA's Cross State Air Pollution Rule
Number of states incorporating 2008 ozone NAAQS attainment levels | state	22

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Commitments and Contingencies (Details-4) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
MGE [Member]
Other Commitments [Line Items]
Other commitments, due in 2017	$ 1,317
Other commitments, due in 2018	1,175
Other commitments, due in 2019	511
Other commitments, due in 2020	497
Other commitments, due in 2021	440
Other commitment, due thereafter	5,646
MGE Energy [Member] | Investments in Non Public Entities, Capital Infusions [Member]
Other Commitments [Line Items]
Other commitment, initial agreed upon commitment total	$ 11,400
MGE Energy [Member] | Venture Debt Fund [Member]
Other Commitments [Line Items]
Other commitment, contract term, expiring in 2016	3 years
Other commitment, initial agreed upon commitment total	$ 1,500
Other commitments, total as of balance sheet date	$ 400

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Asset Retirement Obligations (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015
Asset Retirement Obligations [Roll Forward]
Asset retirement obligation, beginning balance		$ 24,360	$ 19,744
Liabilities incurred		1,303	2,380	[1]
Accretion expense		1,269	1,131
Liabilities settled		(110)	(124)
Revisions in estimated cash flows		64	1,229	[1]
Asset retirement obligation, ending balance		$ 26,886	24,360
Columbia Units [Member]
Asset Retirement Obligations [Roll Forward]
Liabilities incurred	[1]		2,300
Revisions in estimated cash flows	[1]		$ 1,300

[1] In the second quarter of 2015 , M GE recorded an obligation of $2.3 million for the fair value of its legal liability for AROs associated with the effect of the final Coal Combustion Residual Rule at Columbia. An additional $1.3 million was recorded in the fourth quarter, associated with this ARO, based on revised estimates.

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Adoption of Accounting Principles and Recently Issued Accounting Pronouncements (Details) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Restricted cash	$ 3.7	$ 2.9
Accounting Standards Update 2015-03 - Simplifying the Presentation of Debt Issuance Costs [Member] | Other Deferred Charges [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New accounting pronouncement, effect of adoption, decrease in assets and liabilities (debt issuance costs)	3.9	4.3
Accounting Standards Update 2015-03 - Simplifying the Presentation of Debt Issuance Costs [Member] | Long-term Debt [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New accounting pronouncement, effect of adoption, decrease in assets and liabilities (debt issuance costs)	3.9	$ 4.3
Accounting Standards Update 2016-18 - Restricted Cash [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Restricted cash	$ 5.1

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Segment Information (Details) - USD ($) $ in Thousands		3 Months Ended										12 Months Ended
		Dec. 31, 2016		Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015		Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016		Dec. 31, 2015		Dec. 31, 2014
Segment Reporting Information [Line Items]
Operating revenues		$ 138,925		$ 136,717	$ 121,576	$ 147,527	$ 130,973		$ 140,795	$ 122,126	$ 170,134	$ 544,745		$ 564,028		$ 619,852
Depreciation and amortization												(44,646)		(44,225)		(40,695)
Other operating expenses												(371,871)		(395,548)		(441,059)
Operating Income (Loss)		23,958		46,527	28,212	29,531	22,178		46,177	24,049	31,851	128,228		124,255		138,098
Other (deductions) income, net												9,711		8,613		10,079
Interest (expense) income, net												(19,866)		(20,162)		(19,673)
Income before income taxes												118,073		112,706		128,504
Income tax (provision) benefit		(7,570)		(15,714)	(9,284)	(9,945)	(7,417)		(15,351)	(8,008)	(10,587)	(42,513)		(41,363)		(48,185)
Net Income		14,502		$ 27,880	$ 16,150	$ 17,028	11,232		$ 28,354	$ 13,479	$ 18,278	75,560		71,343		80,319
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		1,801,060					1,726,403	[1]				1,801,060		1,726,403	[1]	1,689,521	[1]
Capital expenditures												83,659		72,030		92,676
Electric [Member]
Segment Reporting Information [Line Items]
Operating revenues												409,006		412,528		394,849
Gas [Member]
Segment Reporting Information [Line Items]
Operating revenues												134,543		143,737		221,720
Non Regulated Energy [Member]
Segment Reporting Information [Line Items]
Operating revenues												1,196		7,763		3,283
Transmission Investment [Member]
Segment Reporting Information [Line Items]
Operating revenues												0		0		0
All Others [Member]
Segment Reporting Information [Line Items]
Operating revenues												0		0		0
Operating Segments [Member]
Segment Reporting Information [Line Items]
Operating revenues												544,745		564,028		619,852
Operating Segments [Member] | Electric [Member]
Segment Reporting Information [Line Items]
Operating revenues												410,918		413,041		395,358
Depreciation and amortization												(29,122)		(29,945)		(26,933)
Other operating expenses												(310,941)		(318,001)		(297,409)
Operating Income (Loss)												70,855		65,095		71,016
Other (deductions) income, net												960		400		2,847
Interest (expense) income, net												(11,147)		(11,187)		(10,410)
Income before income taxes												60,668		54,308		63,453
Income tax (provision) benefit												(20,115)		(17,915)		(22,070)
Net Income												40,553		36,393		41,383
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		1,021,905					974,235	[1]				1,021,905		974,235	[1]	945,790	[1]
Capital expenditures												50,699		49,370		68,067
Operating Segments [Member] | Gas [Member]
Segment Reporting Information [Line Items]
Operating revenues												155,921		155,517		230,086
Depreciation and amortization												(8,128)		(6,758)		(6,308)
Other operating expenses												(127,083)		(128,241)		(194,203)
Operating Income (Loss)												20,710		20,518		29,575
Other (deductions) income, net												30		(33)		(86)
Interest (expense) income, net												(3,223)		(3,203)		(3,229)
Income before income taxes												17,517		17,282		26,260
Income tax (provision) benefit												(6,894)		(6,915)		(10,480)
Net Income												10,623		10,367		15,780
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		318,603					298,435	[1]				318,603		298,435	[1]	306,106	[1]
Capital expenditures												29,136		18,787		22,104
Operating Segments [Member] | Non Regulated Energy [Member]
Segment Reporting Information [Line Items]
Operating revenues												45,126		47,198		45,975
Depreciation and amortization												(7,372)		(7,475)		(7,407)
Other operating expenses												(155)		(158)		(139)
Operating Income (Loss)												37,599		39,565		38,429
Other (deductions) income, net												0		0		0
Interest (expense) income, net												(5,768)		(5,993)		(6,208)
Income before income taxes												31,831		33,572		32,221
Income tax (provision) benefit												(12,775)		(13,474)		(12,932)
Net Income												19,056		20,098		19,289
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		271,277					277,858	[1]				271,277		277,858	[1]	280,542	[1]
Capital expenditures												3,824		3,873		2,505
Operating Segments [Member] | Transmission Investment [Member]
Segment Reporting Information [Line Items]
Operating revenues												0		0		0
Depreciation and amortization												0		0		0
Other operating expenses												(17)		(19)		0
Operating Income (Loss)												(17)		(19)		0
Other (deductions) income, net												8,429		7,728		9,150
Interest (expense) income, net												0		0		0
Income before income taxes												8,412		7,709		9,150
Income tax (provision) benefit												(2,836)		(3,102)		(3,664)
Net Income												5,576		4,607		5,486
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		74,535					69,470	[1]				74,535		69,470	[1]	67,697	[1]
Capital expenditures												0		0		0
Operating Segments [Member] | All Others [Member]
Segment Reporting Information [Line Items]
Operating revenues												0		0		0
Depreciation and amortization												(24)		(47)		(47)
Other operating expenses												(895)		(857)		(875)
Operating Income (Loss)												(919)		(904)		(922)
Other (deductions) income, net												292		518		(1,832)
Interest (expense) income, net												272		221		174
Income before income taxes												(355)		(165)		(2,580)
Income tax (provision) benefit												107		43		961
Net Income												(248)		(122)		(1,619)
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		465,202					434,868	[1]				465,202		434,868	[1]	438,898	[1]
Capital expenditures												0		0		0
Operating Segments [Member] | Assets Not Allocated [Member]
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		27,338					49,753	[1]				27,338		49,753	[1]	41,124	[1]
Capital expenditures												0		0		0
Consolidation/Elimination Entries [Member]
Segment Reporting Information [Line Items]
Operating revenues												(67,220)		(51,728)		(51,567)
Depreciation and amortization												0		0		0
Other operating expenses												67,220		51,728		51,567
Operating Income (Loss)												0		0		0
Other (deductions) income, net												0		0		0
Interest (expense) income, net												0		0		0
Income before income taxes												0		0		0
Income tax (provision) benefit												0		0		0
Net Income												0		0		0
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		(377,800)					(378,216)	[1]				(377,800)		(378,216)	[1]	(390,636)	[1]
Capital expenditures												0		0		0
Consolidation/Elimination Entries [Member] | Electric [Member]
Segment Reporting Information [Line Items]
Operating revenues												1,912		513		509
Consolidation/Elimination Entries [Member] | Gas [Member]
Segment Reporting Information [Line Items]
Operating revenues												21,378		11,780		8,366
Consolidation/Elimination Entries [Member] | Non Regulated Energy [Member]
Segment Reporting Information [Line Items]
Operating revenues												43,930		39,435		42,692
Consolidation/Elimination Entries [Member] | Transmission Investment [Member]
Segment Reporting Information [Line Items]
Operating revenues												0		0		0
Consolidation/Elimination Entries [Member] | All Others [Member]
Segment Reporting Information [Line Items]
Operating revenues												0		0		0
MGE [Member]
Segment Reporting Information [Line Items]
Operating revenues												544,798		564,065		619,895
Depreciation and amortization												(44,622)		(44,178)		(40,648)
Other operating expenses	[2]											(410,627)		(432,887)		(485,319)
Operating Income (Loss)	[2]											89,549		87,000		93,928
Other (deductions) income, net	[2]											5,181		4,848		7,857
Interest (expense) income, net												(20,138)		(20,383)		(19,847)
Income tax (provision) benefit												(41,791)		(41,406)		(49,145)
Net Income Including Noncontrolling Interest												74,592		71,465		81,938
Less Net Income Attributable to Noncontrolling Interest, net of tax												(23,358)		(26,097)		(26,310)
Net Income												51,234		45,368		55,628
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		1,638,852					1,669,514	[1]				1,638,852		1,669,514	[1]	1,634,688	[1]
Capital expenditures												83,659		72,030		92,676
MGE [Member] | Electric [Member]
Segment Reporting Information [Line Items]
Operating revenues												409,030		412,550		394,871
MGE [Member] | Gas [Member]
Segment Reporting Information [Line Items]
Operating revenues												134,572		143,752		221,741
MGE [Member] | Non Regulated Energy [Member]
Segment Reporting Information [Line Items]
Operating revenues												1,196		7,763		3,283
MGE [Member] | Transmission Investment [Member]
Segment Reporting Information [Line Items]
Operating revenues												0	[3]	0		0
MGE [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Operating revenues												544,798		564,065		619,895
MGE [Member] | Operating Segments [Member] | Electric [Member]
Segment Reporting Information [Line Items]
Operating revenues												410,918		413,041		395,358
Depreciation and amortization												(29,122)		(29,945)		(26,933)
Other operating expenses	[2]											(330,924)		(335,803)		(319,175)
Operating Income (Loss)	[2]											50,872		47,293		49,250
Other (deductions) income, net	[2]											828		287		2,543
Interest (expense) income, net												(11,147)		(11,187)		(10,410)
Net Income Including Noncontrolling Interest												40,553		36,393		41,383
Less Net Income Attributable to Noncontrolling Interest, net of tax												0		0		0
Net Income												40,553		36,393		41,383
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		1,021,905					974,235	[1]				1,021,905		974,235	[1]	945,790	[1]
Capital expenditures												50,699		49,370		68,067
MGE [Member] | Operating Segments [Member] | Gas [Member]
Segment Reporting Information [Line Items]
Operating revenues												155,921		155,517		230,086
Depreciation and amortization												(8,128)		(6,758)		(6,308)
Other operating expenses	[2]											(133,940)		(135,124)		(204,597)
Operating Income (Loss)	[2]											13,853		13,635		19,181
Other (deductions) income, net	[2]											(7)		(65)		(172)
Interest (expense) income, net												(3,223)		(3,203)		(3,229)
Net Income Including Noncontrolling Interest												10,623		10,367		15,780
Less Net Income Attributable to Noncontrolling Interest, net of tax												0		0		0
Net Income												10,623		10,367		15,780
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		318,603					298,435	[1]				318,603		298,435	[1]	306,106	[1]
Capital expenditures												29,136		18,787		22,104
MGE [Member] | Operating Segments [Member] | Non Regulated Energy [Member]
Segment Reporting Information [Line Items]
Operating revenues												45,126		47,198		45,975
Depreciation and amortization												(7,372)		(7,475)		(7,407)
Other operating expenses	[2]											(12,930)		(13,632)		(13,071)
Operating Income (Loss)	[2]											24,824		26,091		25,497
Other (deductions) income, net	[2]											0		0		0
Interest (expense) income, net												(5,768)		(5,993)		(6,208)
Net Income Including Noncontrolling Interest												19,056		20,098		19,289
Less Net Income Attributable to Noncontrolling Interest, net of tax												0		0		0
Net Income												19,056		20,098		19,289
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		271,227					277,808	[1]				271,227		277,808	[1]	280,492	[1]
Capital expenditures												3,824		3,873		2,505
MGE [Member] | Operating Segments [Member] | Transmission Investment [Member]
Segment Reporting Information [Line Items]
Operating revenues												0	[3]	0		0
Depreciation and amortization												0	[3]	0		0
Other operating expenses	[2]											0	[3]	(19)		0
Operating Income (Loss)	[2]											0	[3]	(19)		0
Other (deductions) income, net	[2]											4,360	[3]	4,626		5,486
Interest (expense) income, net												0	[3]	0		0
Net Income Including Noncontrolling Interest												4,360	[3]	4,607		5,486
Less Net Income Attributable to Noncontrolling Interest, net of tax												0	[3]	0		0
Net Income												4,360	[3]	4,607		5,486
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		0	[4]				69,470	[1]				0	[4]	69,470	[1]	67,697	[1]
Capital expenditures												0		0		0
MGE [Member] | Operating Segments [Member] | Assets Not Allocated [Member]
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		27,338					49,753	[1]				27,338		49,753	[1]	41,124	[1]
Capital expenditures												0		0		0
MGE [Member] | Consolidation/Elimination Entries [Member]
Segment Reporting Information [Line Items]
Operating revenues												(67,167)		(51,691)		(51,524)
Depreciation and amortization												0		0		0
Other operating expenses	[2]											67,167		51,691		51,524
Operating Income (Loss)	[2]											0		0		0
Other (deductions) income, net	[2]											0		0		0
Interest (expense) income, net												0		0		0
Net Income Including Noncontrolling Interest												0		0		0
Less Net Income Attributable to Noncontrolling Interest, net of tax												(23,358)		(26,097)		(26,310)
Net Income												(23,358)		(26,097)		(26,310)
Segment Reporting Information Assets And Capital Expenditures [Abstract]
Assets		$ (221)					$ (187)	[1]				(221)		(187)	[1]	(6,521)	[1]
Capital expenditures												0		0		0
MGE [Member] | Consolidation/Elimination Entries [Member] | Electric [Member]
Segment Reporting Information [Line Items]
Operating revenues												1,888		491		487
MGE [Member] | Consolidation/Elimination Entries [Member] | Gas [Member]
Segment Reporting Information [Line Items]
Operating revenues												21,349		11,765		8,345
MGE [Member] | Consolidation/Elimination Entries [Member] | Non Regulated Energy [Member]
Segment Reporting Information [Line Items]
Operating revenues												43,930		39,435		42,692
MGE [Member] | Consolidation/Elimination Entries [Member] | Transmission Investment [Member]
Segment Reporting Information [Line Items]
Operating revenues												$ 0	[3]	$ 0		$ 0

[1] Reflects retrospective application of new accounting pronouncement. See Footnote 19 for additional information.

[2] Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statements of Income.

[3] As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco. See Footnote 4 for additional information.

[4] In December 2016, MGE’s ownership interest in MGE Transco was transferred to MGE Energy, see Footnote 4 for additional information.

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Quarterly Summary of Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Revenues:
Electric revenues	$ 96,750	$ 119,147	$ 100,615	$ 93,690	$ 95,264	$ 123,364	$ 101,457	$ 100,206	$ 410,202	$ 420,291	$ 398,132
Gas revenues	42,175	17,570	20,961	53,837	35,709	17,431	20,669	69,928	134,543	143,737	221,720
Total Operating Revenues	138,925	136,717	121,576	147,527	130,973	140,795	122,126	170,134	544,745	564,028	619,852
Operating expenses	114,967	90,190	93,364	117,996	108,795	94,618	98,077	138,283	416,517	439,773	481,754
Operating Income (Loss)	23,958	46,527	28,212	29,531	22,178	46,177	24,049	31,851	128,228	124,255	138,098
Interest and other income, net	(1,886)	(2,933)	(2,778)	(2,558)	(3,529)	(2,472)	(2,562)	(2,986)
Income tax provision	(7,570)	(15,714)	(9,284)	(9,945)	(7,417)	(15,351)	(8,008)	(10,587)	(42,513)	(41,363)	(48,185)
Net Income	$ 14,502	$ 27,880	$ 16,150	$ 17,028	$ 11,232	$ 28,354	$ 13,479	$ 18,278	$ 75,560	$ 71,343	$ 80,319
Earnings per common share	$ 0.42	$ 0.8	$ 0.47	$ 0.49	$ 0.32	$ 0.82	$ 0.39	$ 0.53	$ 2.18	$ 2.06	$ 2.32
Dividends per share	$ 0.308	$ 0.308	$ 0.295	$ 0.295	$ 0.295	$ 0.295	$ 0.283	$ 0.283	$ 1.21	$ 1.16	$ 1.11

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Related Party Transactions (Details) - ATC [Member] - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Related party transaction [Line Items]
Related party expenses	$ 29.1	$ 28.2	$ 26.8
Due from Related Parties	$ 0.1	$ 0.2	$ 0.1

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Schedule I - Condensed Parent Company Finanical Statements (Details-Comprehensive Income Statement) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Expenses:
Other operations and maintenance									$ 167,989	$ 164,478	$ 161,703
Total Operating Expenses	$ 114,967	$ 90,190	$ 93,364	$ 117,996	$ 108,795	$ 94,618	$ 98,077	$ 138,283	416,517	439,773	481,754
Operating Income (Loss)	23,958	46,527	28,212	29,531	22,178	46,177	24,049	31,851	128,228	124,255	138,098
Equity earnings from investment in ATC									8,428	7,728	9,150
Income before income taxes									118,073	112,706	128,504
Income tax provision	(7,570)	(15,714)	(9,284)	(9,945)	(7,417)	(15,351)	(8,008)	(10,587)	(42,513)	(41,363)	(48,185)
Net Income	$ 14,502	$ 27,880	$ 16,150	$ 17,028	$ 11,232	$ 28,354	$ 13,479	$ 18,278	75,560	71,343	80,319
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent [Abstract]
Unrealized (loss) gain on available for sale securities, net of tax									(155)	(101)	81
Comprehensive Income									75,405	71,242	80,400
MGE Energy [Member]
Operating Expenses:
Other operations and maintenance									720	690	689
Total Operating Expenses									720	690	689
Operating Income (Loss)									(720)	(690)	(689)
Equity earnings from investment in ATC									75,581	71,306	81,811
Other income/(loss), net									435	526	(1,879)
Other interest									176	136	93
Income before income taxes									75,472	71,278	79,336
Net Income									75,560	71,343	80,319
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent [Abstract]
Unrealized (loss) gain on available for sale securities, net of tax									(155)	(101)	81
Comprehensive Income									$ 75,405	$ 71,242	$ 80,400

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Schedule I - Condensed Parent Company Finanical Statements (Details-Comprehensive Income Statement Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Condensed Income Statements, Captions [Line Items]
Unrealized (loss) gain on available-for-sale securities, taxes	$ (104)	$ (67)	$ 54
MGE Energy [Member]
Condensed Income Statements, Captions [Line Items]
Unrealized (loss) gain on available-for-sale securities, taxes	$ (104)	$ (67)	$ 54

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Schedule I - Condensed Parent Company Finanical Statements (Details-Cash Flow Statement) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Flows Provided by Operating Activities	$ 147,513	$ 141,185	$ 128,762
Investing Activities:
Other investing	(209)	(230)	(1,297)
Cash Used for Investing Activities	(86,826)	(73,313)	(96,158)
Financing Activities:
Cash dividends paid on common stock	(41,775)	(40,043)	(38,429)
Change in short-term debt	0	(7,000)	7,000
Other financing	(70)	(1,018)	(130)
Cash Used for Financing Activities	(46,112)	(52,243)	(35,662)
Change in cash and cash equivalents:	14,575	15,629	(3,058)
Cash and cash equivalents at beginning of period	81,384	65,755	68,813
Cash and cash equivalents at end of period	95,959	81,384	65,755
MGE Energy [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net Cash Flows Provided by Operating Activities	74,994	37,085	48,165
Investing Activities:
Other investing	(2,764)	(3,690)	(2,422)
Cash Used for Investing Activities	(2,764)	(3,690)	(2,422)
Financing Activities:
Cash dividends paid on common stock	(41,775)	(40,043)	(38,429)
Other financing	(11)	0	(89)
Cash Used for Financing Activities	(41,786)	(40,043)	(38,518)
Change in cash and cash equivalents:	30,444	(6,648)	7,225
Cash and cash equivalents at beginning of period	51,781	58,429	51,204
Cash and cash equivalents at end of period	$ 82,225	$ 51,781	$ 58,429

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Schedule I - Condensed Parent Company Finanical Statements (Details-Balance Sheet) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015		Dec. 31, 2014		Dec. 31, 2013
Current Assets:
Cash and cash equivalents	$ 95,959	$ 81,384		$ 65,755		$ 68,813
Accounts receivable, net:
Other current assets	12,293	10,570
Total Current Assets	275,515	254,751
Other deferred assets and other	1,088	1,332	[1]
Investments:
Other investments	120	159
Total investments	76,290	73,631
Total Assets	1,801,060	1,726,403	[1]	1,689,521	[1]
Current Liabilities:
Other current liabilities	19,456	4,910
Total Current Liabilities	103,505	84,146
Other Credits:
Deferred income taxes	383,813	360,785
Total Other Credits	590,676	565,055
Shareholders' Equity:
Retained income	372,950	339,165
Other comprehensive income	202	357
Total Common Shareholders' Equity	724,088	690,458		659,401		617,510
Commitments and contingencies (see Footnote 3)
Total Liabilities and Capitalization	1,801,060	1,726,403	[1]
MGE Energy [Member]
Current Assets:
Cash and cash equivalents	82,225	51,781		$ 58,429		$ 51,204
Accounts receivable, net:
Accounts receivable from affiliates	83	20
Other current assets	1,221	1,386
Total Current Assets	83,529	53,187
Other deferred assets and other	201	249
Investments:
Investments in affiliates	684,968	649,276
Other investments	1,161	1,447
Total investments	686,129	650,723
Total Assets	769,859	704,159
Current Liabilities:
Accounts payable to affiliates	530	530
Accrued taxes	218	263
Other current liabilities	115	144
Total Current Liabilities	863	937
Other Credits:
Deferred income taxes	40,672	7,998
Accounts payable to affiliates	4,236	4,766
Total Other Credits	44,908	12,764
Shareholders' Equity:
Common shareholders' equity	350,936	350,936
Retained income	372,950	339,165
Other comprehensive income	202	357
Total Common Shareholders' Equity	724,088	690,458
Commitments and contingencies (see Footnote 3)
Total Liabilities and Capitalization	$ 769,859	$ 704,159

[1] Reflects retrospective application of new accounting pronouncement. See Footnote 19 for additional information.

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Schedule I - Condensed Parent Company Finanical Statements (Details-Notes 1) - Line of Credit [Member] - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
Credit facilities [Line Items]
Available lines of credit	[1]	$ 150,000	$ 150,000
MGE Energy [Member] | MGE Energy unsecured committed revolving line of credit totaling $50 million
Credit facilities [Line Items]
Available lines of credit		50,000
Line of credit, borrowings outstanding		$ 0

[1] MGE Energy short-term borrowings include MGE Energy and MGE lines of credit and MGE commercial paper.

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Schedule I - Condensed Parent Company Finanical Statements (Details-Notes 2) $ in Thousands		12 Months Ended
	Dec. 01, 2016 USD ($)	Dec. 31, 2016 USD ($)		Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
First Mortgage Bonds [Member] | 7.70%, 2028 Series
Dividend Restrictions
Debt covenant, allowable amount available for payment of dividends		$ 338,500
MGE [Member]
Dividends from Affiliates [Line Items]
Dividends from affiliates		50,000	[1]	$ 30,000	$ 26,500
Dividend in kind from affiliate	$ 15,800	$ 15,822		0	0
Dividend Restrictions
Common equity ratio		0.602
Amount available for dividend payments without regulatory approval		$ 43,000
MGE [Member] | Minimum [Member]
Dividend Restrictions
Dividend restrictions, common equity ratio		0.55
MGE [Member] | First Mortgage Bonds [Member] | 7.70%, 2028 Series
Dividend Restrictions
Debt covenant, allowable amount available for payment of dividends		$ 338,500
MGE Power Elm Road [Member]
Dividends from Affiliates [Line Items]
Dividends from affiliates		13,500		10,000	13,500
MGE Power West Campus [Member]
Dividends from Affiliates [Line Items]
Dividends from affiliates		9,500		3,000	6,000
MGE Transco [Member]
Dividends from Affiliates [Line Items]
Dividends from affiliates		1,107		1,708	1,859
MGE Energy [Member]
Dividends from Affiliates [Line Items]
Dividends from affiliates		$ 74,107		$ 44,708	$ 47,859
Dividend in kind from affiliate	$ (15,800)

[1] Excludes $15.8 million dividend in kind to MGE Energy from MGE.

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Schedule II - Valuation and Qualifying Accounts (Details) - USD ($)		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Valuation and Qualifying Accounts [Roll Forward]
Balance at beginning of period		$ 3,694,080	$ 4,748,657	$ 4,969,711
Charged to costs and expenses		1,195,500	595,500	1,898,300
Charged to other accounts		19,500	25,500	15,092
Net accounts written off	[1]	(1,465,784)	(1,675,577)	(2,134,446)
Balance at end of period		$ 3,443,296	$ 3,694,080	$ 4,748,657

[1] Net of recovery of amounts previously written off.