Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

		March 31, 2018				December 31, 2017
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	101,157	$	101,157	$	107,952	$	107,952
Liabilities:
Short-term debt - commercial paper		3,000		3,000		4,000		4,000
Long-term debt(a)		425,780		462,151		426,883		475,282
MGE
Assets:
Cash and cash equivalents	$	4,152	$	4,152	$	5,951	$	5,951
Liabilities:
Short-term debt - commercial paper		3,000		3,000		4,000		4,000
Long-term debt(a)		425,780		462,151		426,883		475,282
(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of
$4.2 million and $4.3 million at March 31, 2018, and December 31, 2017, 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, 2018
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	531	$	284	$	-	$	247
Exchange-traded investments		855		855		-		-
Total Assets	$	1,386	$	1,139	$	-	$	247
Liabilities:
Derivatives, net(b)	$	41,772	$	62	$	-	$	41,710
Deferred compensation		3,110		-		3,110		-
Total Liabilities	$	44,882	$	62	$	3,110	$	41,710
MGE
Assets:
Derivatives, net	$	531	$	284	$	-	$	247
Exchange-traded investments		65		65		-		-
Total Assets	$	596	$	349	$	-	$	247
Liabilities:
Derivatives, net(b)	$	41,772	$	62	$	-	$	41,710
Deferred compensation		3,110		-		3,110		-
Total Liabilities	$	44,882	$	62	$	3,110	$	41,710

		Fair Value as of December 31, 2017
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,005	$	278	$	-	$	727
Exchange-traded investments		792		792		-		-
Total Assets	$	1,797	$	1,070	$	-	$	727
Liabilities:
Derivatives, net(b)	$	42,963	$	210	$	-	$	42,753
Deferred compensation		3,065		-		3,065		-
Total Liabilities	$	46,028	$	210	$	3,065	$	42,753
MGE
Assets:
Derivatives, net	$	1,005	$	278	$	-	$	727
Exchange-traded investments		64		64		-		-
Total Assets	$	1,069	$	342	$	-	$	727
Liabilities:
Derivatives, net(b)	$	42,963	$	210	$	-	$	42,753
Deferred compensation		3,065		-		3,065		-
Total Liabilities	$	46,028	$	210	$	3,065	$	42,753
(b)     These amounts are shown gross and exclude $0.1 million of collateral that was posted against derivative
positions with counterparties as of March 31, 2018, and December 31, 2017.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	March 31, 2018	December 31, 2017
Basis adjustment:
On peak	91.7%	92.3%
Off peak	93.1%	94.1%
Counterparty fuel mix:
Internal generation	50% - 75%	55% - 75%
Purchased power	50% - 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)		2018		2017
Beginning balance	$	(42,026)	$	(50,306)
Realized and unrealized gains (losses):
Included in regulatory assets		563		1,953
Included in other comprehensive income		-		-
Included in earnings		(542)		(586)
Included in current assets		(173)		125
Purchases		5,834		5,996
Sales		-		-
Issuances		-		-
Settlements		(5,119)		(5,536)
Transfers in and/or out of Level 3		-		-
Balance as of March 31,	$	(41,463)	$	(48,354)
Total gains (losses) included in earnings attributed to the change in unrealized gains (losses) related to assets and liabilities held at March 31,(c)	$	-	$	-

(c)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 losses included in income for Level 3 assets and liabilities measured at fair value on a recurring basis (c).

		Three Months Ended
		March 31,
(In thousands)		2018		2017
Purchased power expense	$	(723)	$	(431)
Cost of gas sold expense		181		(155)
Total	$	(542)	$	(586)

(c)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.