Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

The estimated fair market values of financial instruments are as follows:

		June 30, 2017				December 31, 2016
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	102,916	$	102,916	$	95,959	$	95,959
Liabilities:
Long-term debt(a)		399,074		450,497		391,242		430,122
MGE
Assets:
Cash and cash equivalents	$	5,831	$	5,831	$	10,768	$	10,768
Liabilities:
Long-term debt(a)		399,074		450,497		391,242		430,122
(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of
$4.0 million and $4.1 million at June 30, 2017, and December 31, 2016, respectively.

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.

		Fair Value as of June 30, 2017
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives	$	1,818	$	455	$	-	$	1,363
Exchange-traded investments		715		715		-		-
Total Assets	$	2,533	$	1,170	$	-	$	1,363
Liabilities:
Derivatives	$	47,134	$	166	$	-	$	46,968
Deferred compensation		3,103		-		3,103		-
Total Liabilities	$	50,237	$	166	$	3,103	$	46,968
MGE
Assets:
Derivatives	$	1,818	$	455	$	-	$	1,363
Exchange-traded investments		90		90		-		-
Total Assets	$	1,908	$	545	$	-	$	1,363
Liabilities:
Derivatives	$	47,134	$	166	$	-	$	46,968
Deferred compensation		3,103		-		3,103		-
Total Liabilities	$	50,237	$	166	$	3,103	$	46,968

		Fair Value as of December 31, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		500		500		-		-
Total Assets	$	2,027	$	1,541	$	-	$	486
Liabilities:
Derivatives	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
MGE
Assets:
Derivatives	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		143		143		-		-
Total Assets	$	1,670	$	1,184	$	-	$	486
Liabilities:
Derivatives	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	June 30, 2017	December 31, 2016
Basis adjustment:
On peak	92.8%	91.9%
Off peak	94.7%	93.4%
Counterparty fuel mix:
Internal generation	55% - 75%	55% - 75%
Purchased power	45% - 25%	45% - 25%

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the changes in Level 3 commodity derivative assets and liabilities measured at fair value on a recurring basis.

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2017		2016		2017		2016
Beginning balance	$	(48,354)	$	(57,101)	$	(50,305)	$	(53,501)
Realized and unrealized gains (losses):
Included in regulatory liabilities		2,748		5,218		4,701		1,618
Included in other comprehensive income		-		-		-		-
Included in earnings		(550)		(1,809)		(1,136)		(3,972)
Included in current assets		(222)		-		(97)		-
Purchases		6,186		5,636		12,182		10,937
Sales		-		-		-		-
Issuances		-		-		-		-
Settlements		(5,413)		(3,827)		(10,950)		(6,965)
Transfers in and/or out of Level 3		-		-		-		-
Balance as of June 30,	$	(45,605)	$	(51,883)	$	(45,605)	$	(51,883)
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 (b).

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2017		2016		2017		2016
Purchased Power Expense	$	(487)	$	(1,809)	$	(918)	$	(3,972)
Cost of Gas Sold Expense		(63)		-		(218)		-
Total	$	(550)	$	(1,809)	$	(1,136)	$	(3,972)

(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.