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Fair Value of Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Estimated Fair Market Value of Financial Instruments The estimated fair market value offinancial instruments are as follows:

 

 

 

September 30, 2019

 

December 31, 2018

 

 

(In thousands)

 

Carrying Amount

 

Fair Value

 

Carrying Amount

 

Fair Value

 

 

MGE Energy

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

61,112

$

61,112

$

83,102

$

83,102

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Short-term debt - commercial paper

 

54,500

 

54,500

 

13,000

 

13,000

 

 

Long-term debt(a)

 

499,027

 

578,229

 

502,431

 

518,811

 

 

 

 

 

 

 

 

 

 

 

 

 

MGE

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

4,656

$

4,656

$

4,843

$

4,843

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Short-term debt - commercial paper

 

54,500

 

54,500

 

13,000

 

13,000

 

 

Long-term debt(a)

 

499,027

 

578,229

 

502,431

 

518,811

 

(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.2million and $4.5million as of September 30, 2019, and December 31, 2018, 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, 2019

 

 

(In thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

MGE Energy

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Derivatives, net(b)

$

1,093

$

525

$

-

$

568

 

 

Exchange-traded investments

 

1,001

 

1,001

 

-

 

-

 

 

Total Assets

$

2,094

$

1,526

$

-

$

568

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

30,275

$

687

$

-

$

29,588

 

 

Deferred compensation

 

3,025

 

-

 

3,025

 

-

 

 

Total Liabilities

$

33,300

$

687

$

3,025

$

29,588

 

 

 

 

 

 

 

 

 

 

 

 

 

MGE

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Derivatives, net(b)

$

1,093

$

525

$

-

$

568

 

 

Exchange-traded investments

 

178

 

178

 

-

 

-

 

 

Total Assets

$

1,271

$

703

$

-

$

568

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

30,275

$

687

$

-

$

29,588

 

 

Deferred compensation

 

3,025

 

-

 

3,025

 

-

 

 

Total Liabilities

$

33,300

$

687

$

3,025

$

29,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value as of December 31, 2018

 

 

(In thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

MGE Energy

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

1,042

$

296

$

-

$

746

 

 

Exchange-traded investments

 

848

 

848

 

-

 

-

 

 

Total Assets

$

1,890

$

1,144

$

-

$

746

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

32,872

$

124

$

-

$

32,748

 

 

Deferred compensation

 

3,078

 

-

 

3,078

 

-

 

 

Total Liabilities

$

35,950

$

124

$

3,078

$

32,748

 

 

 

 

 

 

 

 

 

 

 

 

 

MGE

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

1,042

$

296

$

-

$

746

 

 

Exchange-traded investments

 

43

 

43

 

-

 

-

 

 

Total Assets

$

1,085

$

339

$

-

$

746

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

32,872

$

124

$

-

$

32,748

 

 

Deferred compensation

 

3,078

 

-

 

3,078

 

-

 

 

Total Liabilities

$

35,950

$

124

$

3,078

$

32,748

 

 

 

 

 

 

 

 

 

 

 

 

(b) These amounts are shown gross and exclude $0.7 million of collateral that was posted against derivative positions with counterparties as of September 30, 2019.
Significant Unobservable Inputs The following table presents the significant unobservable inputs used in the pricing model.

 

 

 

Model Input

 

Significant Unobservable Inputs

 

September 30, 2019

 

December 31, 2018

 

Basis adjustment:

 

 

 

 

 

 

 

On peak

 

92.2

%

 

92.1

%

 

Off peak

 

92.8

%

 

92.8

%

 

Counterparty fuel mix:

 

 

 

 

 

 

 

Internal generation

 

40.0% - 60.0

%

 

50.0% - 75.0

%

 

Purchased power

 

60.0% - 40.0

%

 

50.0% - 25.0

%
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)

 

2019

 

2018

 

2019

 

2018

Beginning balance

$

(33,337)

$

(37,332)

$

(32,002)

$

(42,026)

Realized and unrealized gains (losses):

 

 

 

 

 

 

 

 

Included in regulatory assets

 

4,317

 

2,018

 

2,982

 

6,711

Included in other comprehensive income

 

-

 

-

 

-

 

-

Included in earnings

 

(492)

 

26

 

(1,928)

 

(434)

Included in current assets

 

4

 

(25)

 

(198)

 

(496)

Purchases

 

5,205

 

5,736

 

16,827

 

17,602

Sales

 

-

 

-

 

-

 

-

Issuances

 

-

 

-

 

-

 

-

Settlements

 

(4,717)

 

(5,737)

 

(14,701)

 

(16,671)

Transfers in and/or out of Level 3

 

-

 

-

 

-

 

-

Balance as of September 30,

$

(29,020)

$

(35,314)

$

(29,020)

$

(35,314)

Total gains (losses) included in earnings attributed to

 

 

 

 

 

 

 

 

the change in unrealized gains (losses) related to

 

 

 

 

 

 

 

 

assets and liabilities held at 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)

 

2019

 

2018

 

2019

 

2018

 

 

Purchased Power Expense

$

(409)

$

26

$

(1,658)

$

(637)

 

 

Cost of Gas Sold Expense

 

(83)

 

-

 

(270)

 

203

 

 

Total

$

(492)

$

26

$

(1,928)

$

(434)

 

(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.