Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2015

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, 2015				December 31, 2014
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	70,703	$	70,703	$	65,755	$	65,755
Liabilities:
Short-term debt - commercial paper		-		-		7,000		7,000
Long-term debt*		398,653		465,534		399,690		457,420
MGE
Assets:
Cash and cash equivalents	$	17,156	$	17,156	$	4,562	$	4,562
Liabilities:
Short-term debt - commercial paper		-		-		7,000		7,000
Long-term debt*		398,653		465,534		399,690		457,420
*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, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	38	$	-	$	-	$	38
Exchange-traded investments		786		786		-		-
Total Assets	$	824	$	786	$	-	$	38
Liabilities:
Derivatives, net(a)	$	54,004	$	100	$	-	$	53,904
Deferred compensation		2,958		-		2,958		-
Total Liabilities	$	56,962	$	100	$	2,958	$	53,904
MGE
Assets:
Derivatives, net	$	38	$	-	$	-	$	38
Exchange-traded investments		214		214		-		-
Total Assets	$	252	$	214	$	-	$	38
Liabilities:
Derivatives, net(a)	$	54,004	$	100	$	-	$	53,904
Deferred compensation		2,958		-		2,958		-
Total Liabilities	$	56,962	$	100	$	2,958	$	53,904

		Fair Value as of December 31, 2014
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	642	$	-	$	-	$	642
Exchange-traded investments		927		927		-		-
Total Assets	$	1,569	$	927	$	-	$	642
Liabilities:
Derivatives, net(a)	$	55,640	$	1,012	$	-	$	54,628
Deferred compensation		2,832		-		2,832		-
Total Liabilities	$	58,472	$	1,012	$	2,832	$	54,628
MGE
Assets:
Derivatives, net	$	642	$	-	$	-	$	642
Exchange-traded investments		350		350		-		-
Total Assets	$	992	$	350	$	-	$	642
Liabilities:
Derivatives, net(a)	$	55,640	$	1,012	$	-	$	54,628
Deferred compensation		2,832		-		2,832		-
Total Liabilities	$	58,472	$	1,012	$	2,832	$	54,628
(a) These amounts are shown gross and exclude $0.6 million and $2.2 million of collateral that was
posted against derivative positions with counterparties as of March 31, 2015 and
December 31, 2014, respectively.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	March 31, 2015	December 31, 2014
Basis adjustment:
On peak	97.5%	98.1%
Off peak	94.7%	95.0%
Counterparty fuel mix:
Internal generation	60% - 75%	50% - 70%
Purchased power	40% - 25%	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)		2015		2014
Beginning balance	$	(53,986)	$	(64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities		119		5,831
Included in other comprehensive income		-		-
Included in earnings		(1,328)		6,634
Included in current assets		-		(53)
Purchases		6,162		6,859
Sales		34		(60)
Issuances		-		-
Settlements		(4,867)		(13,380)
Transfers in and/or out of Level 3		-		-
Balance as of March 31,	$	(53,866)	$	(58,797)
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 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 for both MGE Energy and MGE(b).

		Three Months Ended
		March 31,
(In thousands)		2015		2014
Purchased Power Expense	$	(1,328)	$	6,634

(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 in the financial statements with a corresponding regulatory asset or liability.