Investment in ATC

3 Months Ended

Mar. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

Investment in ATC - MGE Energy and MGE.

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which is jointly owned by MGE Energy and MGE.

MGE Transco has accounted for its investment in ATC under the equity method of accounting. For the three months ended March 31, 2016 and 2015, MGE Transco recorded the following:

		Three Months Ended
		March 31,
(In thousands)		2016		2015
Equity in earnings from investment in ATC	$	2,233	$	1,881
Dividends received from ATC		865		1,420
Capital contributions to ATC		533		178

MGE Transco's investment in ATC as of March 31, 2016, and December 31, 2015, was $71.4 million and $69.5 million, respectively.

At March 31, 2016, MGE is the majority owner (51%), and MGE Energy, the holding company, is the minority owner (49%) of MGE Transco. MGE Energy's proportionate share of the equity and net income of MGE Transco is classified within the MGE financial statements as noncontrolling interest. MGE's ownership interest is expected to decline below a majority during 2016 as a result of continued funding of ATC capital contributions by MGE Energy, and may be completely eliminated in favor of MGE Energy if the PSCW accepts a staff recommendation that MGE transfer its interest in ATC to MGE Energy. The recommendation arose in the context of requests for regulatory approvals by several owners of ATC in connection with a reorganization of ATC designed to separate its existing Wisconsin-based transmission operations from its non-Wisconsin transmission development activities. The change will have no effect on MGE Energy's consolidated financial statements. No gain or loss is expected to be recognized on the date MGE ceases to have a controlling financial interest.

ATC's summarized financial data for the three months ended March 31, 2016 and 2015, is as follows:

		Three Months Ended
		March 31,
(In thousands)		2016		2015
Operating revenues	$	164,240	$	152,357
Operating expenses		(79,065)		(79,951)
Other income, net		127		62
Interest expense, net		(24,208)		(24,483)
Earnings before members' income taxes	$	61,094	$	47,985