Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

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:

		June 30, 2016				December 31, 2015
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	110,308	$	110,308	$	81,384	$	81,384
Liabilities:
Long-term debt*		393,386		472,696		395,508		435,767
MGE
Assets:
Cash and cash equivalents	$	40,947	$	40,947	$	26,760	$	26,760
Liabilities:
Long-term debt*		393,386		472,696		395,508		435,767
*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 June 30, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,719	$	1,362	$	-	$	357
Exchange-traded investments		501		501		-		-
Total Assets	$	2,220	$	1,863	$	-	$	357
Liabilities:
Derivatives, net	$	52,240	$	-	$	-	$	52,240
Deferred compensation		3,250		-		3,250		-
Total Liabilities	$	55,490	$	-	$	3,250	$	52,240
MGE
Assets:
Derivatives, net	$	1,719	$	1,362	$	-	$	357
Exchange-traded investments		84		84		-		-
Total Assets	$	1,803	$	1,446	$	-	$	357
Liabilities:
Derivatives, net	$	52,240	$	-	$	-	$	52,240
Deferred compensation		3,250		-		3,250		-
Total Liabilities	$	55,490	$	-	$	3,250	$	52,240

		Fair Value as of December 31, 2015
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		759		759		-		-
Total Assets	$	993	$	759	$	-	$	234
Liabilities:
Derivatives, net(a)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
MGE
Assets:
Derivatives, net	$	234	$	-	$	-	$	234
Exchange-traded investments		148		148		-		-
Total Assets	$	382	$	148	$	-	$	234
Liabilities:
Derivatives, net(a)	$	54,316	$	581	$	-	$	53,735
Deferred compensation		3,145		-		3,145		-
Total Liabilities	$	57,461	$	581	$	3,145	$	53,735
(a) These amounts are shown gross and exclude $1.0 million of collateral that was posted
against derivative positions with counterparties as of December 31, 2015.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	June 30, 2016	December 31, 2015
Basis adjustment:
On peak	94.9%	96.9%
Off peak	94.7%	95.1%
Counterparty fuel mix:
Internal generation	55% - 75%	60% - 75%
Purchased power	45% - 25%	40% - 25%

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				Six Months Ended
		June 30,				June 30,
(In thousands)		2016		2015		2016		2015
Beginning balance	$	(57,101)	$	(53,866)	$	(53,501)	$	(53,986)
Realized and unrealized gains (losses):
Included in regulatory liabilities (assets)		5,218		(2,327)		1,618		(2,208)
Included in other comprehensive income		-		-		-		-
Included in earnings		(1,809)		(883)		(3,972)		(2,211)
Included in current assets		-		-		-		-
Purchases		5,636		4,953		10,937		11,115
Sales		-		-		-		-
Issuances		-		-		-		-
Settlements		(3,827)		(4,071)		(6,965)		(8,904)
Transfers in and/or out of Level 3		-		-		-		-
Balance as of June 30,	$	(51,883)	$	(56,194)	$	(51,883)	$	(56,194)
Total gains (losses) included in earnings attributed to
the change in unrealized gains (losses) related to
assets and liabilities held at June 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				Six Months Ended
		June 30,				June 30,
(In thousands)		2016		2015		2016		2015
Purchased Power Expense	$	(1,809)	$	(885)	$	(3,972)	$	(2,213)
Cost of Gas Sold Expense		-		2		-		2
Total	$	(1,809)	$	(883)	$	(3,972)	$	(2,211)

(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.