Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 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:

		September 30, 2015				December 31, 2014
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	94,267	$	94,267	$	65,755	$	65,755
Liabilities:
Short-term debt - commercial paper		-		-		7,000		7,000
Long-term debt*		396,562		446,176		399,690		457,420
MGE
Assets:
Cash and cash equivalents	$	41,971	$	41,971	$	4,562	$	4,562
Liabilities:
Short-term debt - commercial paper		-		-		7,000		7,000
Long-term debt*		396,562		446,176		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 September 30, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	379	$	-	$	-	$	379
Exchange-traded investments		627		627		-		-
Total Assets	$	1,006	$	627	$	-	$	379
Liabilities:
Derivatives, net(a)	$	57,777	$	316	$	-	$	57,461
Deferred compensation		3,160		-		3,160		-
Total Liabilities	$	60,937	$	316	$	3,160	$	57,461
MGE
Assets:
Derivatives, net	$	379	$	-	$	-	$	379
Exchange-traded investments		122		122		-		-
Total Assets	$	501	$	122	$	-	$	379
Liabilities:
Derivatives, net(a)	$	57,777	$	316	$	-	$	57,461
Deferred compensation		3,160		-		3,160		-
Total Liabilities	$	60,937	$	316	$	3,160	$	57,461

		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 $0.8 million and $2.2 million of collateral that was
posted against derivative positions with counterparties as of September 30, 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	September 30, 2015	December 31, 2014
Basis adjustment:
On peak	97.4%	98.1%
Off peak	95.4%	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				Nine Months Ended
		September 30,				September 30,
(In thousands)		2015		2014		2015		2014
Beginning balance	$	(56,194)	$	(49,349)	$	(53,986)	$	(64,628)
Realized and unrealized gains (losses):
Included in regulatory liabilities (assets)		(888)		(3,752)		(3,096)		11,528
Included in other comprehensive income		-		-		-		-
Included in earnings		(2,285)		(1,419)		(4,497)		5,837
Included in current assets		-		-		-		(89)
Purchases		6,364		6,371		17,497		19,900
Sales		-		-		34		(60)
Issuances		-		-		-		-
Settlements		(4,079)		(4,952)		(13,034)		(25,589)
Transfers in and/or out of Level 3		-		-		-		-
Balance as of September 30,	$	(57,082)	$	(53,101)	$	(57,082)	$	(53,101)
Total gains (losses) included in earnings attributed to
the change in unrealized gains (losses) related to
assets and liabilities held at September 30,(b)	$	-	$	-	$	-	$	-

(b)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.

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				Nine Months Ended
		September 30,				September 30,
(In thousands)		2015		2014		2015		2014
Purchased Power Expense	$	(2,302)	$	(1,411)	$	(4,515)	$	5,845
Cost of Gas Sold Expense		17		(8)		18		(8)
Total	$	(2,285)	$	(1,419)	$	(4,497)	$	5,837

(b)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.