Taxes

3 Months Ended

Mar. 31, 2013

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 hasadopted a tax method of accounting to accelerate tax deductions for repairs.MGE Energy and MGE have an unrecognized tax benefit at March 31, 2013 and December 31, 2012, in the amount of $3.4 million and $3.2million, respectively, for the tax uncertainty related to the change in tax method of accounting forrepairs.

On April 18, 2013, MGE Energy received notification from the Internal Revenue Service that the examination of tax periods 2007-2009 has been completed. Unrecognized tax benefits of $1.5 million related to those years will be reversed (in the second quarter) due to those positions not being adversely adjusted in the examination.

b.       Effective Tax Rate.

MGE Energy's and MGE's effective income tax rate for the three months endedMarch 31, 2013, was37.7%, compared to 38.1%for the same period in 2012.