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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2011

		MGE Energy						MGE
(In thousands)		2011		2010		2009		2011		2010		2009
Current payable:
Federal	$	(1,504)	$	6,148	$	8,008	$	(607)	$	7,499	$	8,292
State		4,580		2,603		2,796		4,658		2,764		2,855
Net-deferred:
Federal		30,115		20,811		14,408		29,255		19,861		13,441
State		3,102		4,570		3,300		3,034		4,493		3,065
Amortized investment tax credits		(301)		(312)		(342)		(301)		(312)		(342)
Total income tax provision	$	35,992	$	33,820	$	28,170	$	36,039	$	34,305	$	27,311

Effective Tax Rate Reconciliation

	MGE Energy			MGE
	2011	2010	2009	2011	2010	2009
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%	5.1%	5.1%	5.1%	5.1%	5.1%
Amortized investment tax credits	(0.3)%	(0.3)%	(0.4)%	(0.3)%	(0.3)%	(0.4)%
Credit for electricity from wind energy	(1.8)%	(1.7)%	(2.5)%	(1.8)%	(1.7)%	(2.6)%
Domestic manufacturing deduction	(0.7)%	(0.4)%	(0.5)%	(0.7)%	(0.4)%	(0.5)%
Other, net, individually insignificant	(0.2)%	(0.7)%	(1.1)%	(0.3)%	(0.7)%	(1.2)%
Effective income tax rate	37.1%	37.0%	35.6%	37.0%	37.0%	35.4%

Deferred Tax Liabilities (Assets)

		MGE Energy				MGE
(In thousands)		2011		2010		2011		2010
Property-related	$	188,235	$	159,348	$	188,235	$	159,348
Investment in ATC		26,896		24,467		23,594		22,093
Bond transactions		1,746		1,850		1,746		1,850
Pension and other postretirement benefits		68,352		38,417		68,352		38,417
Derivatives		16,498		7,771		16,498		7,771
Tax deductible prepayments		7,276		6,764		7,276		6,764
Other		12,714		22,325		12,697		22,308
Gross deferred income tax liabilities		321,717		260,942		318,398		258,551
Accrued expenses		(28,458)		(27,529)		(28,438)		(27,513)
Pension and other postretirement benefits		(69,646)		(43,637)		(69,646)		(43,637)
Deferred tax regulatory account		(1,828)		(2,150)		(1,828)		(2,150)
Derivatives		(16,498)		(7,771)		(16,498)		(7,771)
Other		(2,782)		(11,048)		(2,783)		(11,048)
Gross deferred income tax assets		(119,212)		(92,135)		(119,193)		(92,119)
Less valuation allowance		365		365		365		365
Net deferred income tax assets		(118,847)		(91,770)		(118,828)		(91,754)
Deferred income taxes	$	202,870	$	169,172	$	199,570	$	166,797

Unrecognized Tax Benefits and Interest

(In thousands)
Unrecognized tax benefits:		2011		2010		2009
Unrecognized tax benefits, January 1,	$	4,377	$	176	$	176
Additions based on tax positions related to the current year		128		386		0
Additions based on tax positions related to the prior years		427		3,815		0
Reductions based on tax positions related to the prior years		(2,568)		0		0
Unrecognized tax benefits, December 31,	$	2,364	$	4,377	$	176

(In thousands)
Interest on unrecognized tax benefits:		2011		2010		2009
Accrued interest on unrecognized tax benefits, January 1,	$	214	$	21	$	9
Interest expense on uncertain tax positions		2		193		12
Accrued interest on unrecognized tax benefits, December 31,	$	216	$	214	$	21

Tax Years that Remain Subject to Examination

	Taxpayer	Open Years
	MGE Energy and consolidated subsidiaries in federal return	2007 through 2011
	MGE Energy Wisconsin separate corporation return	2007 through 2008
	MGE Wisconsin separate corporation return	2007 through 2008
	MGE Energy Wisconsin combined reporting corporation return	2009 through 2011

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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- Definition

Tabular disclosure of income tax examinations that an enterprise is currently subject to or that have been completed in the current period typically including a description of the examination, the jurisdiction conducting the examination, the tax year(s) under examination, the likelihood of an unfavorable settlement, the range of possible losses, the liability recorded, the increase or decrease in the liability from the prior period, and any penalties and interest that have been recorded.

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