Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

	March 31, 2022				December 31, 2021
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt(a)		622,238		643,259		623,449		729,914

(a)Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.2 million and $4.3 million as of March 31, 2022, and December 31, 2021, 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 March 31, 2022
(In thousands)	Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	10,144	$	3,183	$	—	$	6,961
Exchange-traded investments		1,443		1,443		—		—
Total Assets	$	11,587	$	4,626	$	—	$	6,961
Liabilities:
Derivatives, net(b)	$	503	$	321	$	—	$	182
Deferred compensation		3,613		—		3,613		—
Total Liabilities	$	4,116	$	321	$	3,613	$	182
MGE
Assets:
Derivatives, net(b)	$	10,144	$	3,183	$	—	$	6,961
Exchange-traded investments		177		177		—		—
Total Assets	$	10,321	$	3,360	$	—	$	6,961
Liabilities:
Derivatives, net(b)	$	503	$	321	$	—	$	182
Deferred compensation		3,613		—		3,613		—
Total Liabilities	$	4,116	$	321	$	3,613	$	182

	Fair Value as of December 31, 2021
(In thousands)	Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	3,606	$	1,170	$	—	$	2,436
Exchange-traded investments		1,296		1,296		—		—
Total Assets	$	4,902	$	2,466	$	—	$	2,436
Liabilities:
Derivatives, net(b)	$	2,989	$	731	$	—	$	2,258
Deferred compensation		3,653		—		3,653		—
Total Liabilities	$	6,642	$	731	$	3,653	$	2,258
MGE
Assets:
Derivatives, net(b)	$	3,606	$	1,170	$	—	$	2,436
Exchange-traded investments		230		230		—		—
Total Assets	$	3,836	$	1,400	$	—	$	2,436
Liabilities:
Derivatives, net(b)	$	2,989	$	731	$	—	$	2,258
Deferred compensation		3,653		—		3,653		—
Total Liabilities	$	6,642	$	731	$	3,653	$	2,258

(b)As of March 31, 2022 and December 31, 2021 MGE received collateral of $6.9 million and $1.3 million, respectively, from counterparties under a master netting agreement for outstanding exchange traded derivative positions. The fair value of the derivative asset disclosed in this table has not been reduced for the collateral received.

Significant Unobservable Inputs

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

	Model Input
	March 31,	December 31,
Significant Unobservable Inputs	2022	2021
Basis adjustment:
On peak	92.1%	94.1%
Off peak	90.0%	92.4%
Counterparty fuel mix:
Internal generation - range	41%-66%	41%-66%
Internal generation - weighted average	49.5%	56.6%
Purchased power - range	59%-34%	59%-34%
Purchased power - weighted average	50.5%	43.4%

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
	March 31,
(In thousands)	2022		2021
Beginning balance	$	178	$	(14,055)
Realized and unrealized gains (losses):
Included in regulatory assets		—		2,688
Included in regulatory liability		6,600		—
Included in other comprehensive income		—		—
Included in earnings		855		307
Included in current assets		73		355
Purchases		7,026		5,884
Sales		—		—
Issuances		—		—
Settlements		(7,953)		(6,546)
Balance as of March 31,	$	6,779	$	(11,367)
Total gains (losses) included in earnings attributed to    the change in unrealized gains (losses) related to    assets and liabilities held as of March 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).

	Three Months Ended
	March 31,
(In thousands)	2022		2021
Purchased power expense	$	973	$	702
Cost of gas sold expense		(118)		(395)
Total	$	855	$	307

(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.