Taxes

9 Months Ended

Sep. 30, 2011

Taxes Disclosure [Abstract]

Taxes

5.       Taxes - MGE Energy and MGE.

a.       Accounting for Uncertainty in Income Taxes.

MGE Energy and MGE account for the difference between the tax benefit amount taken on prior year tax returns, or expected to be taken on a current year tax return, and the tax benefit amount recognized in the financial statements as an unrecognized tax benefit.

MGE Energy has changed its tax method of accounting for repairs,the 2010 tax return for gas repairs and the 2009 tax return for electric repairs. This method change accelerates tax deductions for repairs in accordance with Treasury Regulations and case law, as compared to the prior method of claiming tax depreciation on project costs.MGE Energy and MGE have an unrecognized tax benefit at September 30, 2011 and December 31, 2010, in the amount of $5.2 million and $4.4million, respectively, for the tax uncertainty primarily related to the change in tax method of accounting forrepairs.

b.       Effective Tax Rate.

MGE Energy's effective income tax rate for the three and nine months endedSeptember 30, 2011, are 37.3% and37.3%, respectively, compared to 39.5% and 37.8% for the same periods in 2010; and MGE's effective income tax rate for the three and nine months ended September 30, 2011, are 37.1% and 37.3%, respectively, compared to 39.5% and 37.8% for the same periods in 2010. The lower effective tax rate is, in part, attributable to a higherestimated domestic manufacturing deduction.