Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

		December 31, 2019				December 31, 2018
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	23,481	$	23,481	$	83,102	$	83,102
Liabilities:
Short-term debt - commercial paper		-		-		13,000		13,000
Long-term debt(a)		547,879		611,909		502,431		518,811
MGE
Assets:
Cash and cash equivalents	$	3,196	$	3,196	$	4,843	$	4,843
Liabilities:
Short-term debt - commercial paper		-		-		13,000		13,000
Long-term debt(a)		547,879		611,909		502,431		518,811

(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.5 million as of December 31, 2019 and 2018.

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 December 31, 2019
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	303	$	189	$	-	$	114
Exchange-traded investments		1,271		1,271		-		-
Total Assets	$	1,574	$	1,460	$	-	$	114
Liabilities:
Derivatives, net(b)	$	27,178	$	608	$	-	$	26,570
Deferred compensation		3,157		-		3,157		-
Total Liabilities	$	30,335	$	608	$	3,157	$	26,570
MGE
Assets:
Derivatives, net	$	303	$	189	$	-	$	114
Exchange-traded investments		209		209		-		-
Total Assets	$	512	$	398	$	-	$	114
Liabilities:
Derivatives, net(b)	$	27,178	$	608	$	-	$	26,570
Deferred compensation		3,157		-		3,157		-
Total Liabilities	$	30,335	$	608	$	3,157	$	26,570
	Fair Value as of December 31, 2018
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,042	$	296	$	-	$	746
Exchange-traded investments		848		848		-		-
Total Assets	$	1,890	$	1,144	$	-	$	746
Liabilities:
Derivatives, net	$	32,872	$	124	$	-	$	32,748
Deferred compensation		3,078		-		3,078		-
Total Liabilities	$	35,950	$	124	$	3,078	$	32,748
MGE
Assets:
Derivatives, net	$	1,042	$	296	$	-	$	746
Exchange-traded investments		43		43		-		-
Total Assets	$	1,085	$	339	$	-	$	746
Liabilities:
Derivatives, net	$	32,872	$	124	$	-	$	32,748
Deferred compensation		3,078		-		3,078		-
Total Liabilities	$	35,950	$	124	$	3,078	$	32,748

(b)These amounts are shown gross and exclude $1.5 million of collateral that was posted against derivative positions with counterparties as of December 31, 2019.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	2019		2018
Basis adjustment:
On peak	92.1	%	92.1	%
Off peak	92.7	%	92.8	%
Counterparty fuel mix:
Internal generation	40%-60	%	50%-75	%
Purchased power	60%-40	%	50%-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 liabilitiesmeasured at fair value on a recurring basis.

(In thousands)		2019		2018		2017
Balance as of January 1,	$	(32,002)	$	(42,026)	$	(50,306)
Realized and unrealized gains (losses):
Included in regulatory liabilities		5,545		10,024		8,281
Included in other comprehensive income		-		-		-
Included in earnings		(3,765)		132		(3,718)
Included in current assets		(70)		(47)		(9)
Purchases		22,974		23,643		24,181
Sales		-		-		-
Issuances		-		-		-
Settlements		(19,138)		(23,728)		(20,455)
Transfers in and/or out of Level 3		-		-		-
Balance as of December 31,	$	(26,456)	$	(32,002)	$	(42,026)
Total gains (losses) included in earnings attributed to the
change in unrealized gains (losses) related to assets and
liabilities held as of December 31,(c)	$	-	$	-	$	-

(c)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 (c).

(In thousands)
Year Ended December 31,		2019		2018		2017
Purchased power expense	$	(3,334)	$	355	$	(3,314)
Cost of gas sold expense		(431)		(223)		(404)
Total	$	(3,765)	$	132	$	(3,718)

(c)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.