Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2015

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, 2015				December 31, 2014
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	75,791	$	75,791	$	65,755	$	65,755
Liabilities:
Short-term debt - commercial paper		-		-		7,000		7,000
Long-term debt*		397,610		443,180		399,690		457,420
MGE
Assets:
Cash and cash equivalents	$	23,323	$	23,323	$	4,562	$	4,562
Liabilities:
Short-term debt - commercial paper		-		-		7,000		7,000
Long-term debt*		397,610		443,180		399,690		457,420
*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, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(a)	$	959	$	146	$	-	$	813
Exchange-traded investments		768		768		-		-
Total Assets	$	1,727	$	914	$	-	$	813
Liabilities:
Derivatives, net(a)	$	57,007	$	-	$	-	$	57,007
Deferred compensation		3,058		-		3,058		-
Total Liabilities	$	60,065	$	-	$	3,058	$	57,007
MGE
Assets:
Derivatives, net(a)	$	959	$	146	$	-	$	813
Exchange-traded investments		169		169		-		-
Total Assets	$	1,128	$	315	$	-	$	813
Liabilities:
Derivatives, net(a)	$	57,007	$	-	$	-	$	57,007
Deferred compensation		3,058		-		3,058		-
Total Liabilities	$	60,065	$	-	$	3,058	$	57,007

		Fair Value as of December 31, 2014
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	642	$	-	$	-	$	642
Exchange-traded investments		927		927		-		-
Total Assets	$	1,569	$	927	$	-	$	642
Liabilities:
Derivatives, net(a)	$	55,640	$	1,012	$	-	$	54,628
Deferred compensation		2,832		-		2,832		-
Total Liabilities	$	58,472	$	1,012	$	2,832	$	54,628
MGE
Assets:
Derivatives, net	$	642	$	-	$	-	$	642
Exchange-traded investments		350		350		-		-
Total Assets	$	992	$	350	$	-	$	642
Liabilities:
Derivatives, net(a)	$	55,640	$	1,012	$	-	$	54,628
Deferred compensation		2,832		-		2,832		-
Total Liabilities	$	58,472	$	1,012	$	2,832	$	54,628
(a) These amounts are shown gross and exclude $0.9 million and $2.2 million of collateral that was
posted against derivative positions with counterparties as of June 30, 2015, and
December 31, 2014, respectively.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	June 30, 2015	December 31, 2014
Basis adjustment:
On peak	97.6%	98.1%
Off peak	95.4%	95.0%
Counterparty fuel mix:
Internal generation	60% - 75%	50% - 70%
Purchased power	40% - 25%	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)		2015		2014		2015		2014
Beginning balance	$	(53,866)	$	(58,797)	$	(53,986)	$	(64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities (assets)		(2,327)		9,448		(2,208)		15,279
Included in other comprehensive income		-		-		-		-
Included in earnings		(883)		651		(2,211)		7,218
Included in current assets		-		(185)		-		(185)
Purchases		4,953		6,828		11,115		13,634
Sales		-		-		34		(60)
Issuances		-		-		-		-
Settlements		(4,071)		(7,294)		(8,938)		(20,607)
Transfers in and/or out of Level 3		-		-		-		-
Balance as of June 30,	$	(56,194)	$	(49,349)	$	(56,194)	$	(49,349)
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, 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 for both MGE Energy and MGE(b).

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2015		2014		2015		2014
Purchased Power Expense	$	(885)	$	651	$	(2,213)	$	7,218
Cost of Gas Sold Expense		2		-		2		-
Total	$	(883)	$	651	$	(2,211)	$	7,218

(b)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.