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Fair Value of Financial Instruments (Tables)
 6 Months Ended
Jun. 30, 2022
Fair Value Disclosures [Abstract]  
Estimated Fair Market Value of Financial Instruments The estimated fair market value of financial instruments are as follows:

 

 

 

June 30, 2022

 

 

December 31, 2021

 

(In thousands)

 

Carrying Amount

 

 

Fair Value

 

 

Carrying Amount

 

 

Fair Value

 

Long-term debt(a)

 

$

621,020

 

 

$

594,277

 

 

$

623,449

 

 

$

729,914

 

 

(a)
Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.1 million and $4.3 million as of June 30, 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 June 30, 2022

 

(In thousands)

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

MGE Energy

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives, net(b)

 

$

12,178

 

 

$

3,009

 

 

$

—

 

 

$

9,169

 

Exchange-traded investments

 

 

1,493

 

 

 

1,493

 

 

 

—

 

 

 

—

 

Total Assets

 

$

13,671

 

 

$

4,502

 

 

$

—

 

 

$

9,169

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives, net

 

$

3,694

 

 

$

3,484

 

 

$

—

 

 

$

210

 

Deferred compensation

 

 

3,783

 

 

 

—

 

 

 

3,783

 

 

 

—

 

Total Liabilities

 

$

7,477

 

 

$

3,484

 

 

$

3,783

 

 

$

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MGE

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives, net(b)

 

$

12,178

 

 

$

3,009

 

 

$

—

 

 

$

9,169

 

Exchange-traded investments

 

 

126

 

 

 

126

 

 

 

—

 

 

 

—

 

Total Assets

 

$

12,304

 

 

$

3,135

 

 

$

—

 

 

$

9,169

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives, net

 

$

3,694

 

 

$

3,484

 

 

$

—

 

 

$

210

 

Deferred compensation

 

 

3,783

 

 

 

—

 

 

 

3,783

 

 

 

—

 

Total Liabilities

 

$

7,477

 

 

$

3,484

 

 

$

3,783

 

 

$

210

 

 

 

 

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

 

$

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

 

$

2,989

 

 

$

731

 

 

$

—

 

 

$

2,258

 

Deferred compensation

 

 

3,653

 

 

 

—

 

 

 

3,653

 

 

 

—

 

Total Liabilities

 

$

6,642

 

 

$

731

 

 

$

3,653

 

 

$

2,258

 

 

(b)
As of June 30, 2022 and December 31, 2021 MGE received collateral of $6.5 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.
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)

 

2022

 

2021

 

2022

 

2021

Beginning balance

 

$

6,779

 

$

  (11,367)

 

$

178

 

$

  (14,055)

Realized and unrealized gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Included in regulatory assets

 

 

—

 

 

6,834

 

 

—

 

 

9,522

Included in regulatory liability

 

 

2,180

 

 

—

 

 

8,780

 

 

—

Included in other comprehensive income

 

 

—

 

 

—

 

 

—

 

 

—

Included in earnings

 

 

6,143

 

 

  (98)

 

 

6,998

 

 

210

Included in current assets

 

 

45

 

 

  (180)

 

 

118

 

 

175

Purchases

 

 

4,777

 

 

6,377

 

 

11,803

 

 

12,261

Sales

 

 

—

 

 

—

 

 

—

 

 

—

Issuances

 

 

—

 

 

—

 

 

—

 

 

—

Settlements

 

 

  (10,965)

 

 

  (6,099)

 

 

  (18,918)

 

 

  (12,646)

Balance as of June 30,

 

$

8,959

 

$

  (4,533)

 

$

8,959

 

$

  (4,533)

Total gains (losses) included in earnings attributed to
   the change in unrealized gains (losses) related to
   assets and liabilities held as of June 30,(c)

 

$

—

 

$

—

 

$

—

 

$

—

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

 

Six Months Ended

 

 

June 30,

 

June 30,

(In thousands)

 

2022

 

2021

 

2022

 

2021

Purchased power expense

 

$

6,188

 

$

(65)

 

$

7,161

 

$

637

Cost of gas sold expense

 

 

  (45)

 

 

  (33)

 

 

  (163)

 

 

  (427)

Total

 

$

6,143

 

$

(98)

 

$

6,998

 

$

210

 

 

(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.