Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

The estimated fair market value of MGE Energy's and MGE's financial instruments are as follows:

		March 31, 2014				December 31, 2013
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	93,489	$	93,489	$	68,813	$	68,813
Liabilities:
Long-term debt*		402,774		436,788		403,793		432,010
MGE
Assets:
Cash and cash equivalents	$	37,988	$	37,988	$	14,808	$	14,808
Liabilities:
Long-term debt*		402,774		436,788		403,793		432,010
*Includes long-term debt due within one year.

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 for MGE Energy and MGE.

		Fair Value as of March 31, 2014
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Exchange-traded investments	$	804	$	804	$	-	$	-
Total Assets	$	804	$	804	$	-	$	-
Liabilities:
Derivatives, net	$	58,213	$	(584)	$	-	$	58,797
Deferred compensation		2,472		-		2,472		-
Total Liabilities	$	60,685	$	(584)	$	2,472	$	58,797
MGE
Assets:
Exchange-traded investments	$	461	$	461	$	-	$	-
Total Assets	$	461	$	461	$	-	$	-
Liabilities:
Derivatives, net	$	58,213	$	(584)	$	-	$	58,797
Deferred compensation		2,472		-		2,472		-
Total Liabilities	$	60,685	$	(584)	$	2,472	$	58,797

		Fair Value as of December 31, 2013
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Exchange-traded investments	$	792	$	792	$	-	$	-
Total Assets	$	792	$	792	$	-	$	-
Liabilities:
Derivatives, net(a)	$	63,893	$	(735)	$	-	$	64,628
Deferred compensation		2,364		-		2,364		-
Total Liabilities	$	66,257	$	(735)	$	2,364	$	64,628
MGE
Assets:
Exchange-traded investments	$	431	$	431	$	-	$	-
Total Assets	$	431	$	431	$	-	$	-
Liabilities:
Derivatives, net(a)	$	63,893	$	(735)	$	-	$	64,628
Deferred compensation		2,364		-		2,364		-
Total Liabilities	$	66,257	$	(735)	$	2,364	$	64,628
(a) These amounts are shown gross and exclude $0.2 million of collateral that was posted
against derivative positions with counterparties.

Significant Unobservable Inputs

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

Significant Unobservable Inputs	Model Input
Basis adjustment:
On peak	95.5%
Off peak	93.1%
Counterparty fuel mix:
Internal generation	50% - 70%
Purchased power	50% - 30%

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for both MGE Energy and MGE.

		Three Months Ended
		March 31,
(In thousands)		2014		2013
Beginning balance,	$	(64,628)	$	(72,346)
Realized and unrealized gains (losses):
Included in regulatory liabilities		5,831		2,748
Included in other comprehensive income		-		-
Included in earnings		6,634		(1,148)
Included in current assets		(53)		-
Purchases		6,859		5,562
Sales		(60)		(3)
Issuances		-		-
Settlements		(13,380)		(4,411)
Transfers in and/or out of Level 3		-		-
Balance as of March 31,	$	(58,797)	$	(69,598)
Total gains (losses) included in earnings attributed to the change in unrealized gains (losses) related to assets and liabilities held at March 31,(b)	$	-	$	-

(b)MGE's exchange-traded derivative contracts, over-the-counter party transactions, ten-year purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset 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 for both MGE Energy and MGE(b).

		Three Months Ended
		March 31,
(In thousands)		2014		2013
Purchased Power Expense	$	6,634	$	(1,148)

(b)MGE's exchange-traded derivative contracts, over-the-counter party transactions, ten-year purchased power agreement, and FTRs are subject to regulatory deferral. These derivatives are therefore marked to fair value and are offset with a corresponding regulatory asset or liability.