Investment in ATC and ATC Holdco

9 Months Ended

Sep. 30, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investment in ATC and ATC Holdco

Investment in ATC and ATC Holdco - MGE Energy and MGE.

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in

ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which, since December 1, 2016, is owned by MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary of MGE Energy.

MGE Transco and MGEE Transco have accounted for their investments in ATC and ATC Holdco, respectively, under the equity method of accounting. Equity earnings from investments are recorded as "Other income" on the consolidated statements of income of MGE Energy. MGE Transco recorded the following:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(In thousands)		2019		2018		2019		2018
Equity earnings from investment in ATC	$	2,364	$	1,672	$	6,879	$	6,113
Dividends from ATC(a)		1,781		1,581		5,526		4,540
Capital contributions to ATC		888		533		2,131		2,308

(a)MGE Transco recorded a $2.3 million dividend receivable from ATC as of December 31, 2017. A cash dividend was received in January of the following year. MGE Transco recorded a $1.6 million dividend receivable from ATC as of September 30, 2018. A cash dividend was received in October 2018.

ATC Holdco was formed in December 2016. In the near term, it is expected that ATC Holdco will be pursuing transmission development opportunities that typically have long development and investment lead times before becoming operational.

In October 2019, MGE Transco made a $0.9 million capital contribution to ATC.

ATC's summarized financial data is as follows:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(In thousands)		2019		2018		2019		2018
Operating revenues	$	184,833	$	170,341	$	544,760	$	501,276
Operating expenses		(94,713)		(87,959)		(278,673)		(264,326)
Other income, net		484		439		1,031		2,070
Interest expense, net		(29,165)		(27,754)		(87,121)		(82,411)
Earnings before members' income taxes	$	61,439	$	55,067	$	179,997	$	156,609

MGE receives transmission and other related services from ATC. During the three and nine months ended September 30, 2019, MGE recorded $7.6 million and $22.8 million, respectively, for transmission services received compared to $7.2 million and $21.7 million for the comparable periods in 2018. MGE also provides a variety of operational, maintenance, and project management services for ATC, which is reimbursed by ATC. As of September 30, 2019, and December 31, 2018, MGE had a receivable due from ATC of $1.6 million and $0.1 million, respectively.