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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2013

Estimated Fair Market Value of Financial Instruments

The estimated fair market value of MGE Energy's and MGE's financial instruments are as follows:

		September 30, 2013				December 31, 2012
		Carrying		Fair		Carrying		Fair
(In thousands)		Amount		Value		Amount		Value
MGE Energy
Assets:
Cash and cash equivalents	$	75,330	$	75,330	$	46,357	$	46,357
Liabilities:
Long-term debt*		404,805		445,247		361,805		427,456

MGE
Assets:
Cash and cash equivalents		42,590		42,590		6,350		6,350
Liabilities:
Long-term debt*		404,805		445,247		361,805		427,456

*Includes long-term debt due within one year.

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 for MGE Energy and MGE.

	Fair Value as of September 30, 2013
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Exchange-traded investments	$	613	$	613	$	0	$	0
Total Assets	$	613	$	613	$	0	$	0
Liabilities:
Derivatives, net	$	68,083	$	(245)	$	0	$	68,328
Deferred compensation		2,253		0		2,253		0
Total Liabilities	$	70,336	$	(245)	$	2,253	$	68,328

MGE
Assets:
Exchange-traded investments	$	246	$	246	$	0	$	0
Total Assets	$	246	$	246	$	0	$	0
Liabilities:
Derivatives, net	$	68,083	$	(245)	$	0	$	68,328
Deferred compensation		2,253		0		2,253		0
Total Liabilities	$	70,336	$	(245)	$	2,253	$	68,328

	Fair Value as of December 31, 2012
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Exchange-traded investments	$	320	$	320	$	0	$	0
Total Assets	$	320	$	320	$	0	$	0
Liabilities:
Derivatives, net	$	72,329	$	(17)	$	0	$	72,346
Deferred compensation		2,010		0		2,010		0
Total Liabilities	$	74,339	$	(17)	$	2,010	$	72,346

MGE
Assets:
Exchange-traded investments	$	117	$	117	$	0	$	0
Total Assets	$	117	$	117	$	0	$	0
Liabilities:
Derivatives, net	$	72,329	$	(17)	$	0	$	72,346
Deferred compensation		2,010		0		2,010		0
Total Liabilities	$	74,339	$	(17)	$	2,010	$	72,346

Significant Unobservable Inputs

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

	Significant Unobservable Inputs		Model Input
	Basis adjustment:
	On peak		99.7%
	Off peak		97.9%
	Counterparty fuel mix:
	Internal generation		50 % - 70 %
	Purchased power		50 % - 30 %

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 for both MGE Energy and MGE.

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(In thousands)		2013		2012		2013		2012
Beginning balance,	$	(66,856)	$	(79,580)	$	(72,346)	$	(40,661)
Realized and unrealized gains (losses):
Included in regulatory liabilities (assets)		(1,472)		3,465		4,018		(35,455)
Included in other comprehensive income		0		0		0		0
Included in earnings		(174)		(3,422)		(2,034)		(6,659)
Included in current assets		(38)		0		(94)		(77)
Purchases		6,052		5,864		17,709		7,764
Sales		0		45		(2)		77
Issuances		0		0		0		0
Settlements		(5,840)		(2,487)		(15,579)		(1,104)
Transfers in and/or out of Level 3		0		0		0		0
Balance as of September 30,	$	(68,328)	$	(76,115)	$	(68,328)	$	(76,115)
Total gains (losses) included in earnings attributed to
the change in unrealized gains (losses) related to
assets and liabilities held at September 30,^(a)	$	0	$	0	$	0	$	0

(a) MGE's exchange-traded derivative contracts, over-the-counter party transactions, ten-year purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset 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 for both MGE Energy and MGE (a).

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(In thousands)		2013		2012		2013		2012
Purchased Power Expense	$	(174)	$	(3,422)	$	(2,034)	$	(6,659)
Cost of Gas Sold Expense		0		0		0		0
Regulated Gas Revenues		0		0		0		0
Total	$	(174)	$	(3,422)	$	(2,034)	$	(6,659)

- Definition

Tabular disclosure of the amount of gains or losses for the period included in earnings or resulted in a change to net assets, have arisen from the use of significant unobservable inputs (level 3) to measure the fair value of assets, liabilities, and financial instruments classified in shareholders' equity.

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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