Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

		June 30, 2014				December 31, 2013
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	87,911	$	87,911	$	68,813	$	68,813
Liabilities:
Long-term debt*		401,751		444,752		403,793		432,010
MGE
Assets:
Cash and cash equivalents	$	26,284	$	26,284	$	14,808	$	14,808
Liabilities:
Long-term debt*		401,751		444,752		403,793		432,010
*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 June 30, 2014
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Exchange-traded investments	$	727	$	727	$	-	$	-
Total Assets	$	727	$	727	$	-	$	-
Liabilities:
Derivatives, net(a)	$	48,854	$	(495)	$	-	$	49,349
Deferred compensation		2,591		-		2,591		-
Total Liabilities	$	51,445	$	(495)	$	2,591	$	49,349
MGE
Assets:
Exchange-traded investments	$	268	$	268	$	-	$	-
Total Assets	$	268	$	268	$	-	$	-
Liabilities:
Derivatives, net(a)	$	48,854	$	(495)	$	-	$	49,349
Deferred compensation		2,591		-		2,591		-
Total Liabilities	$	51,445	$	(495)	$	2,591	$	49,349

		Fair Value as of December 31, 2013
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Exchange-traded investments	$	792	$	792	$	-	$	-
Total Assets	$	792	$	792	$	-	$	-
Liabilities:
Derivatives, net(a)	$	63,893	$	(735)	$	-	$	64,628
Deferred compensation		2,364		-		2,364		-
Total Liabilities	$	66,257	$	(735)	$	2,364	$	64,628
MGE
Assets:
Exchange-traded investments	$	431	$	431	$	-	$	-
Total Assets	$	431	$	431	$	-	$	-
Liabilities:
Derivatives, net(a)	$	63,893	$	(735)	$	-	$	64,628
Deferred compensation		2,364		-		2,364		-
Total Liabilities	$	66,257	$	(735)	$	2,364	$	64,628
(a) These amounts are shown gross and exclude $0.3 million and $0.2 million of collateral that was
posted against derivative positions with counterparties as of June 30, 2014 and
December 31, 2013, respectively.

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	96.9%
Off peak	94.2%
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				Six Months Ended
		June 30,				June 30,
(In thousands)		2014		2013		2014		2013
Beginning balance,	$	(58,797)	$	(69,598)	$	(64,628)	$	(72,346)
Realized and unrealized gains (losses):
Included in regulatory liabilities (assets)		9,448		2,743		15,279		5,490
Included in other comprehensive income		-		-		-		-
Included in earnings		651		(44)		7,218		(1,351)
Included in current assets		(185)		(123)		(185)		(123)
Purchases		6,828		6,162		13,634		11,724
Sales		-		-		(60)		(2)
Issuances		-		-		-		-
Settlements		(7,294)		(5,996)		(20,607)		(10,248)
Transfers in and/or out of Level 3		-		-		-		-
Balance as of June 30,	$	(49,349)	$	(66,856)	$	(49,349)	$	(66,856)
Total gains (losses) included in earnings attributed to
the change in unrealized gains (losses) related to
assets and liabilities held at June 30,(b)	$	-	$	-	$	-	$	-

(b)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(b).

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2014		2013		2014		2013
Purchased Power Expense	$	651	$	(44)	$	7,218	$	(1,351)

(b)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.