Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

The estimated fair market values of financial instruments are as follows:

		March 31, 2017				December 31, 2016
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	117,702	$	117,702	$	95,959	$	95,959
Liabilities:
Long-term debt(a)		400,161		445,037		391,242		430,122
MGE
Assets:
Cash and cash equivalents	$	23,098	$	23,098	$	10,768	$	10,768
Liabilities:
Long-term debt(a)		400,161		445,037		391,242		430,122
(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of
$4.3 million and $4.1 million at March 31, 2017, and December 31, 2016, respectively.

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.

		Fair Value as of March 31, 2017
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives	$	819	$	341	$	-	$	478
Exchange-traded investments		662		662		-		-
Total Assets	$	1,481	$	1,003	$	-	$	478
Liabilities:
Derivatives	$	48,892	$	60	$	-	$	48,832
Deferred compensation		3,014		-		3,014		-
Total Liabilities	$	51,906	$	60	$	3,014	$	48,832
MGE
Assets:
Derivatives	$	819	$	341	$	-	$	478
Exchange-traded investments		132		132		-		-
Total Assets	$	951	$	473	$	-	$	478
Liabilities:
Derivatives	$	48,892	$	60	$	-	$	48,832
Deferred compensation		3,014		-		3,014		-
Total Liabilities	$	51,906	$	60	$	3,014	$	48,832

		Fair Value as of December 31, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		500		500		-		-
Total Assets	$	2,027	$	1,541	$	-	$	486
Liabilities:
Derivatives	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792
MGE
Assets:
Derivatives	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		143		143		-		-
Total Assets	$	1,670	$	1,184	$	-	$	486
Liabilities:
Derivatives	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	March 31, 2017	December 31, 2016
Basis adjustment:
On peak	92.2%	91.9%
Off peak	94.0%	93.4%
Counterparty fuel mix:
Internal generation	55% - 75%	55% - 75%
Purchased power	45% - 25%	45% - 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 commodity derivative assets and liabilities measured at fair value on a recurring basis.

		Three Months Ended
		March 31,
(In thousands)		2017		2016
Beginning balance	$	(50,306)	$	(53,501)
Realized and unrealized gains (losses):
Included in regulatory (assets) liabilities		1,953		(3,600)
Included in other comprehensive income		-		-
Included in earnings		(586)		(2,163)
Included in current assets		125		-
Purchases		5,996		5,301
Sales		-		-
Issuances		-		-
Settlements		(5,536)		(3,138)
Transfers in and/or out of Level 3		-		-
Balance as of March 31,	$	(48,354)	$	(57,101)
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, 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 (b).

		Three Months Ended
		March 31,
(In thousands)		2017		2016
Purchased Power Expense	$	(431)	$	(2,163)
Cost of Gas Sold Expense		(155)		-
Total	$	(586)	$	(2,163)

(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.