Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

The estimated fair market value of financial instruments are as follows:

	September 30, 2021				December 31, 2020
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	70,454	$	70,454	$	44,738	$	44,738
Liabilities:
Short-term debt - commercial paper		—		—		52,500		52,500
Long-term debt(a)		624,653		692,987		528,220		639,271
MGE
Assets:
Cash and cash equivalents	$	57,003	$	57,003	$	4,103	$	4,103
Liabilities:
Short-term debt - commercial paper		—		—		52,500		52,500
Long-term debt(a)		624,653		692,987		528,220		639,271

(a)Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.5 million and $4.1 million as of September 30, 2021, and December 31, 2020, 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 September 30, 2021
(In thousands)	Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	14,210	$	10,451	$	—	$	3,759
Exchange-traded investments		1,124		1,124		—		—
Total Assets	$	15,334	$	11,575	$	—	$	3,759
Liabilities:
Derivatives, net	$	535	$	365	$	—	$	170
Deferred compensation		3,496		—		3,496		—
Total Liabilities	$	4,031	$	365	$	3,496	$	170
MGE
Assets:
Derivatives, net(b)	$	14,210	$	10,451	$	—	$	3,759
Exchange-traded investments		244		244		—		—
Total Assets	$	14,454	$	10,695	$	—	$	3,759
Liabilities:
Derivatives, net	$	535	$	365	$	—	$	170
Deferred compensation		3,496		—		3,496		—
Total Liabilities	$	4,031	$	365	$	3,496	$	170

	Fair Value as of December 31, 2020
(In thousands)	Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	806	$	436	$	—	$	370
Exchange-traded investments		1,750		1,750		—		—
Total Assets	$	2,556	$	2,186	$	—	$	370
Liabilities:
Derivatives, net(b)	$	14,795	$	370	$	—	$	14,425
Deferred compensation		3,509		—		3,509		—
Total Liabilities	$	18,304	$	370	$	3,509	$	14,425
MGE
Assets:
Derivatives, net(b)	$	806	$	436	$	—	$	370
Exchange-traded investments		603		603		—		—
Total Assets	$	1,409	$	1,039	$	—	$	370
Liabilities:
Derivatives, net(b)	$	14,795	$	370	$	—	$	14,425
Deferred compensation		3,509		—		3,509		—
Total Liabilities	$	18,304	$	370	$	3,509	$	14,425

(b)As of September 30, 2021, MGE received collateral of $9.2 million from counterparties under a master netting agreement for outstanding exchange traded derivative positions. The fair value of the derivative asset disclosed in this table has not been reduced for the collateral received. No collateral was posted against derivative positions owed to counterparties under a master netting agreement on the consolidated balance sheet as of December 31, 2020.

Significant Unobservable Inputs

The following table presents the significant unobservable inputs used in the pricing model.

	Model Input
	September 30,	December 31,
Significant Unobservable Inputs	2021	2020
Basis adjustment:
On peak	95.5%	94.2%
Off peak	96.4%	94.5%
Counterparty fuel mix:
Internal generation - range	41%-66%	46%-65%
Internal generation - weighted average	54.2%	56.5%
Purchased power - range	59%-34%	54%-35%
Purchased power - weighted average	45.8%	43.5%

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2021			2020			2021			2020
Beginning balance	$	(4,533	)	$	(21,023	)	$	(14,055	)	$	(26,456	)
Realized and unrealized gains (losses):
Included in regulatory assets		—			5,296			—			10,729
Included in regulatory liability		8,122			—			17,644			—
Included in other comprehensive income		—			—			—			—
Included in earnings		2,476			(1,524	)		2,686			(4,687	)
Included in current assets		—			(37	)		175			(101	)
Purchases		6,638			5,505			18,899			15,837
Sales		—			—			—			—
Issuances		—			—			—			—
Settlements		(9,114	)		(3,944	)		(21,760	)		(11,049	)
Balance as of September 30,	$	3,589		$	(15,727	)	$	3,589		$	(15,727	)
Total gains (losses) included in earnings attributed to    the change in unrealized gains (losses) related to    assets and liabilities held as of September 30,(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).

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(In thousands)	2021		2020			2021			2020
Purchased power expense	$	2,476	$	(1,496	)	$	3,113		$	(4,343	)
Cost of gas sold expense		—		(28	)		(427	)		(344	)
Total	$	2,476	$	(1,524	)	$	2,686		$	(4,687	)

(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.