Segment Information

12 Months Ended

Dec. 31, 2017

Segment Information - MGE Energy and MGE.

The electric utility business purchases, generates and distributes electricity, and contracts for transmission service. The gas utility business purchases and distributes natural gas and contracts for the transportation of natural gas. Both the electric and gas segments operate through MGE Energy's principal subsidiary, MGE.

The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power, MGE Power Elm Road, and MGE Power West Campus. These subsidiaries own and lease electric generating capacity to assist MGE. MGE Power Elm Road has an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin, which are leased to MGE, and MGE Power West Campus owns a controlling interest in the electric generation plant of a natural gas-fired cogeneration facility on the UW campus. MGE Power West Campus's portion is also leased to MGE.

The transmission investment segment invests, through MGE Transco, in ATC, a company that provides electric transmission services primarily in Wisconsin and MGEE Transco, in ATC Holdco, a company formed to pursue electric transmission development and investments outside of Wisconsin. See Footnote 4 for further discussion.

The "All Others" segment includes: corporate, CWDC, MAGAEL, MGE State Energy Services, MGE Services, and NGV Fueling Services. These entities' operations consist of investing in companies and property which relate to the regulated operations, financing the regulated operations, or owning and operating natural gas compression equipment.

General corporate expenses include the cost of executive management, corporate accounting and finance, information technology, risk management, human resources and legal functions, and employee benefits that are allocated to electric and gas segments based on formulas prescribed by the PSCW. Identifiable assets are those used in MGE's operations in each segment. Assets not allocated consist primarily of cash and cash equivalents, restricted cash, investments, other accounts receivable, and prepaid assets.

Sales between our electric and gas segments are based on PSCW approved tariffed rates. Additionally, intersegment operations related to the leasing arrangement between our electric segment and MGE Power Elm Road/MGE Power West Campus are based on terms previously approved by the PSCW. Consistent with internal reporting, management has presented the direct financing capital leases between MGE and MGE Power Elm Road/MGE Power West Campus based on actual lease payments included in rates. Lease payments made by MGE to MGE Power Elm Road and MGE Power West Campus are shown as operating expenses. The lease payments received by MGE Power Elm Road and MGE Power West Campus from MGE are shown as lease income in interdepartmental revenues. The depreciation expense associated with the Elm Road Units and WCCF is reflected in the nonregulated energy segment.

The following table shows segment information for MGE Energy's and MGE's operations:

(In thousands)MGE Energy		Electric		Gas		Non-Regulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2017
Operating revenues	$	413,926	$	148,825	$	348	$	-	$	-	$	-	$	563,099
Interdepartmental revenues		(510)		14,974		44,468		-		-		(58,932)		-
Total operating revenues		413,416		163,799		44,816		-		-		(58,932)		563,099
Depreciation and amortization		(36,660)		(9,000)		(7,417)		-		-		-		(53,077)
Other operating expenses		(305,539)		(133,479)		(190)		(9)		(1,001)		58,932		(381,286)
Operating income (loss)		71,217		21,320		37,209		(9)		(1,001)		-		128,736
Other income (deductions), net		1,978		362		-		9,844		(1,896)		-		10,288
Interest (expense) income, net		(11,257)		(3,234)		(5,533)		-		700		-		(19,324)
Income (loss) before taxes		61,938		18,448		31,676		9,835		(2,197)		-		119,700
Income tax (provision) benefit^(a)		(20,547)		(7,303)		8,860		(3,954)		850		-		(22,094)
Net income (loss)	$	41,391	$	11,145	$	40,536	$	5,881	$	(1,347)	$	-	$	97,606

Year Ended December 31, 2016
Operating revenues	$	409,006	$	134,543	$	1,196	$	-	$	-	$	-	$	544,745
Interdepartmental revenues		1,912		21,378		43,930		-		-		(67,220)		-
Total operating revenues		410,918		155,921		45,126		-		-		(67,220)		544,745
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		(24)		-		(44,646)
Other operating expenses		(310,941)		(127,083)		(155)		(17)		(895)		67,220		(371,871)
Operating income (loss)		70,855		20,710		37,599		(17)		(919)		-		128,228
Other income, net		960		30		-		8,429		292		-		9,711
Interest (expense) income, net		(11,147)		(3,223)		(5,768)		-		272		-		(19,866)
Income (loss) before taxes		60,668		17,517		31,831		8,412		(355)		-		118,073
Income tax (provision) benefit		(20,115)		(6,894)		(12,775)		(2,836)		107		-		(42,513)
Net income (loss)	$	40,553	$	10,623	$	19,056	$	5,576	$	(248)	$	-	$	75,560

Year Ended December 31, 2015
Operating revenues	$	412,528	$	143,737	$	7,763	$	-	$	-	$	-	$	564,028
Interdepartmental revenues		513		11,780		39,435		-		-		(51,728)		-
Total operating revenues		413,041		155,517		47,198		-		-		(51,728)		564,028
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		(47)		-		(44,225)
Other operating expenses		(318,001)		(128,241)		(158)		(19)		(857)		51,728		(395,548)
Operating income (loss)		65,095		20,518		39,565		(19)		(904)		-		124,255
Other income (deductions), net		400		(33)		-		7,728		518		-		8,613
Interest (expense) income, net		(11,187)		(3,203)		(5,993)		-		221		-		(20,162)
Income (loss) before taxes		54,308		17,282		33,572		7,709		(165)		-		112,706
Income tax (provision) benefit		(17,915)		(6,915)		(13,474)		(3,102)		43		-		(41,363)
Net income (loss)	$	36,393	$	10,367	$	20,098	$	4,607	$	(122)	$	-	$	71,343

(a) In December 2017, there was a $21.7 million one-time tax impact as a result of the Tax Act. See Footnote 12 for further information.

(In thousands)MGE		Electric		Gas		Non-Regulated Energy		Transmission Investment^(c)		Consolidation/ Elimination Entries		Consolidated Total
Year Ended December 31, 2017
Operating revenues	$	413,929	$	148,834	$	348	$	-	$	-	$	563,111
Interdepartmental revenues		(513)		14,965		44,468		-		(58,920)		-
Total operating revenues		413,416		163,799		44,816		-		(58,920)		563,111
Depreciation and amortization		(36,660)		(9,000)		(7,417)		-		-		(53,077)
Other operating (expenses) income^(a,b)		(325,532)		(140,625)		8,670		-		58,920		(398,567)
Operating income^(b)		51,224		14,174		46,069		-		-		111,467
Other income, net^(b)		1,424		205		-		-		-		1,629
Interest expense, net		(11,257)		(3,234)		(5,533)		-		-		(20,024)
Net income		41,391		11,145		40,536		-		-		93,072
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(43,237)		(43,237)
Net income attributable to MGE	$	41,391	$	11,145	$	40,536	$	-	$	(43,237)	$	49,835

Year Ended December 31, 2016
Operating revenues	$	409,030	$	134,572	$	1,196	$	-	$	-	$	544,798
Interdepartmental revenues		1,888		21,349		43,930		-		(67,167)		-
Total operating revenues		410,918		155,921		45,126		-		(67,167)		544,798
Depreciation and amortization		(29,122)		(8,128)		(7,372)		-		-		(44,622)
Other operating expenses^(b)		(330,924)		(133,940)		(12,930)		-		67,167		(410,627)
Operating income^(b)		50,872		13,853		24,824		-		-		89,549
Other income (deductions), net^(b)		828		(7)		-		4,360		-		5,181
Interest expense, net		(11,147)		(3,223)		(5,768)		-		-		(20,138)
Net income		40,553		10,623		19,056		4,360		-		74,592
Less: net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(23,358)		(23,358)
Net income attributable to MGE	$	40,553	$	10,623	$	19,056	$	4,360	$	(23,358)	$	51,234

Year Ended December 31, 2015
Operating revenues	$	412,550	$	143,752	$	7,763	$	-	$	-	$	564,065
Interdepartmental revenues		491		11,765		39,435		-		(51,691)		-
Total operating revenues		413,041		155,517		47,198		-		(51,691)		564,065
Depreciation and amortization		(29,945)		(6,758)		(7,475)		-		-		(44,178)
Other operating expenses^(b)		(335,803)		(135,124)		(13,632)		(19)		51,691		(432,887)
Operating income (loss)^(b)		47,293		13,635		26,091		(19)		-		87,000
Other income (deductions), net^(b)		287		(65)		-		4,626		-		4,848
Interest expense, net		(11,187)		(3,203)		(5,993)		-		-		(20,383)
Net income		36,393		10,367		20,098		4,607		-		71,465
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(26,097)		(26,097)
Net income attributable to MGE	$	36,393	$	10,367	$	20,098	$	4,607	$	(26,097)	$	45,368

(a) In December 2017, there was a $21.7 million one-time tax impact as a result of the Tax Act. See Footnote 12 for further information.
(b) Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statements of Income.
(c) As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco.
See Footnote 4 for further information.

The following table shows segment information for MGE Energy's and MGE's assets and capital expenditures:

		Utility						Consolidated
(In thousands) MGE Energy		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment^(d)		All Others		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2017	$	1,043,181	$	344,337	$	26,345	$	270,384	$	61,783	$	485,548	$	(376,396)	$	1,855,182
December 31, 2016		1,021,905		318,603		27,338		271,277		74,535		465,202		(377,800)		1,801,060
December 31, 2015		974,235		298,435		49,753		277,858		69,470		434,868		(378,216)		1,726,403
Capital Expenditures:
Year ended Dec. 31, 2017	$	77,353	$	26,847	$	-	$	3,931	$	-	$	-	$	-	$	108,131
Year ended Dec. 31, 2016		50,699		29,136		-		3,824		-		-		-		83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		-		72,030

		Utility						Consolidated
(In thousands)MGE		Electric		Gas		Assets not Allocated		Non-regulated Energy		Transmission Investment^(e)		Consolidation/ Elimination Entries		Total
Assets:
December 31, 2017	$	1,043,181	$	344,337	$	26,345	$	270,334	$	-	$	(156)	$	1,684,041
December 31, 2016		1,021,905		318,603		27,338		271,227		-		(221)		1,638,852
December 31, 2015		974,235		298,435		49,753		277,808		69,470		(187)		1,669,514
Capital Expenditures:
Year ended Dec. 31, 2017	$	77,353	$	26,847	$	-	$	3,931	$	-	$	-	$	108,131
Year ended Dec. 31, 2016		50,699		29,136		-		3,824		-		-		83,659
Year ended Dec. 31, 2015		49,370		18,787		-		3,873		-		-		72,030

(d) In December 2017, there was a $20.4 million one-time tax impact as a result of the Tax Act. See Footnote 12 for further information.
(e) In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy. See Footnote 4 for further information.