Joint Plant Ownership

12 Months Ended

Dec. 31, 2018

Joint Plant Ownership - MGE Energy and MGE.

a. Columbia.

MGE and two other utilities jointly own Columbia, a coal-fired generating facility located in Portage, Wisconsin, which, as of December 31, 2018, accounts for 29% (219 MW) of MGE's net summer rated capacity. Power from this facility is shared in proportion to each company's ownership interest. As of December 31, 2018, MGE had a 19.4% ownership interest in Columbia. The other owners are WPL, which operates Columbia, and WPSC. MGE's share of fuel, operating, and maintenance expenses for Columbia was $36.5 million, $36.2 million, and $39.5 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Each owner provides its own financing and reflects its respective portion of facilities and operating costs in its financial statements. MGE's interest in Columbia's gross utility plant in service, and the related accumulated depreciation reserves as of December 31 were as follows:

(In thousands)		2018		2017
Utility plant	$	292,157	$	274,450
Accumulated depreciation		(94,766)		(87,144)
Property, plant, and equipment, net		197,391		187,306
Construction work in progress		2,021		20,382
Total property, plant, and equipment	$	199,412	$	207,688

In 2016, MGE and WPL negotiated an amendment to the existing Columbia joint operating agreement that has been approved by the PSCW. Under the terms of the amendments, MGE has reduced its obligation to pay certain capital expenditures (other than SCR-related expenditures) at Columbia in exchange for a proportional reduction in MGE's ownership in Columbia. On January 1 of each year from 2017 through 2019 and then on June 1, 2020, the ownership percentage is adjusted through a partial sale based on the amount of capital expenditures foregone. In June 2017, the FERC approved the ownership transfer in Columbia, effective January 1, 2017.

During 2018 and 2017, MGE accrued $3.1 million and $8.8 million, respectively, of foregone capital expenditures as part of the ownership transfer agreement with WPL. As of December 31, 2018 and 2017, MGE classified $3.1 million and $8.8 million, respectively, of Columbia assets as held-for-sale on the consolidated balance sheets. In January 2018, MGE reduced its ownership interest in Columbia from 20.4% to 19.4% and in January 2019, MGE further reduced its ownership to 19.1% through the partial sale of plant assets to WPL.

b. Elm Road.

MGE Power Elm Road owns an 8.33% ownership interest in each of two 615 MW coal-fired generating units in Oak Creek, Wisconsin, which, as of December 31, 2018, accounts for 14% (106 MW) of MGE's net summer rated capacity. Unit 1 entered commercial operation on February 2, 2010. Unit 2 entered commercial operation on January 12, 2011. MGE Power Elm Road's sole principal asset is that ownership interest in those generating units. MGE Power Elm Road's interest in the Elm Road Units is leased to MGE pursuant to long-term leases.

The remainder of the ownership interest in the Elm Road Units is held by two other entities, one of which is also responsible for the Units' operation. Each owner provides its own financing and reflects its respective portion of the facility and costs in its financial statements. MGE's share of fuel, operating, and maintenance expenses for the Elm Road Units was $17.6 million, $17.3 million, and $21.2 million for the years ended December 31, 2018, 2017, and 2016, respectively. MGE Power Elm Road's interest in the portion of the Elm Road Units in-service and the related accumulated depreciation reserves as of December 31 were as follows:

(In thousands)		2018		2017
Nonregulated plant	$	207,361	$	206,063
Accumulated depreciation		(33,897)		(30,061)
Property, plant, and equipment, net		173,464		176,002
Construction work in progress		530		1,225
Total property, plant, and equipment	$	173,994	$	177,227

c. Forward Wind.

In April 2018, MGE, along with two other utilities, purchased the Forward Wind Energy Center (Forward Wind), which consists of 86 wind turbines located in Wisconsin. The aggregate purchase price was approximately $174 million, of which MGE's proportionate share is 12.8%, or approximately $23 million. The purchase of Forward Wind replaced an existing purchase power agreement, under which MGE purchased 12.8% of the facility's energy output. MGE's proportionate share of Forward Wind's total capacity is 18 MW.

Each owner provides its own financing and reflects its respective portion of facilities and operating costs in its financial statements. MGE's share of operating and maintenance expenses for Forward Wind was $0.5 million for the year ended December 31, 2018, which was deferred in a regulatory asset account and will be recovered in future rates. MGE's interest in the portion of Forward Wind's utility plant in service and the related accumulated depreciation reserves as of December 31 were as follows:

(In thousands)		2018
Nonregulated plant	$	33,929
Accumulated depreciation		(12,530)
Property, plant, and equipment, net		21,399
Construction work in progress		67
Total property, plant, and equipment	$	21,466

d. WCCF.

MGE Power West Campus and the UW jointly own the West Campus Cogeneration Facility (WCCF) located on the UW campus in Madison, Wisconsin. MGE Power West Campus owns 55% of the facility and the UW owns 45% of the facility. The UW owns a controlling interest in the chilled-water and steam plants, which are used to meet the growing needs for air-conditioning and steam-heat capacity for the UW campus. MGE Power West Campus owns a controlling interest in the electric generation plant, which is leased and operated by MGE.

Each owner provides its own financing and reflects its respective portion of the facility and operating costs in its financial statements. MGE Power West Campus' interest in WCCF and the related accumulated depreciation reserves as of December 31 were as follows:

(In thousands)		2018		2017
Nonregulated plant	$	113,328	$	111,386
Accumulated depreciation		(32,055)		(31,104)
Property, plant, and equipment, net		81,273		80,282
Construction work in progress		478		610
Total property, plant, and equipment	$	81,751	$	80,892

Operating charges are allocated to the UW based on formulas contained in the operating agreement. Under the provisions of this arrangement, the UW is required to reimburse MGE for their allocated portion of fuel and operating expenses. For the years ended December 31, 2018, 2017, and 2016, the UW allocated share of fuel and operating costs was $6.3 million, $5.3 million, and $5.5 million, respectively.