Asset Retirement Obligations

12 Months Ended

Dec. 31, 2011

Asset Retirement Obligations Disclosure [Abstract]

Asset Retirement Obligations Disclosure

20.       Asset Retirement Obligations - MGE Energy and MGE.

a.       Conditional Asset Retirement Obligations.

MGE recorded an obligation for the fair value of its legal liability for asset retirement obligations (AROs) associated with removing 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 lease. 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, 2011, 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 shows a rollforward of the AROs from January 1, 2010 toDecember 31, 2011. Amounts include conditional AROs.

(In thousands)		2011		2010
Balance at January 1,	$	19,913	$	16,513
Liabilities incurred		85		439
Accretion expense		1,071		1,093
Liabilities settled		(157)		(98)
Revisions in estimated cash flows(a)		(1,739)		1,966
Balance at December 31,	$	19,173	$	19,913

• In 2011 and 2010, MGE recorded revisions in estimated cash flows of a decrease of $1.6 million and an increase of $0.7 million, respectively, based on revised remediation timing and cost information for its share of the Columbia ash landfill ARO. In 2010, MGE recorded revisions in estimated cash flows of an increase of $1.2 million based on revised remediation timing and cost information for its wind generating facilities ARO.

b.       Non-ARO Costs.

Accumulated costs of removal that are non-ARO obligations are classified within the financial statements as regulatory liabilities. At December 31, 2011 and 2010, there were $13.1 million and $12.3 million of these costs recorded as regulatory liabilities within the financial statements, respectively.