Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

		March 31, 2019				December 31, 2018
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	82,402	$	82,402	$	83,102	$	83,102
Liabilities:
Short-term debt - commercial paper		6,000		6,000		13,000		13,000
Long-term debt(a)		501,303		553,598		502,431		518,811
MGE
Assets:
Cash and cash equivalents	$	9,624	$	9,624	$	4,843	$	4,843
Liabilities:
Short-term debt - commercial paper		6,000		6,000		13,000		13,000
Long-term debt(a)		501,303		553,598		502,431		518,811
(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of
$4.4 million and $4.5 million as of March 31, 2019, and December 31, 2018, 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, 2019
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	799	$	316	$	-	$	483
Exchange-traded investments		963		963		-		-
Total Assets	$	1,762	$	1,279	$	-	$	483
Liabilities:
Derivatives, net	$	31,822	$	56	$	-	$	31,766
Deferred compensation		3,009		-		3,009		-
Total Liabilities	$	34,831	$	56	$	3,009	$	31,766
MGE
Assets:
Derivatives, net	$	799	$	316	$	-	$	483
Exchange-traded investments		70		70		-		-
Total Assets	$	869	$	386	$	-	$	483
Liabilities:
Derivatives, net	$	31,822	$	56	$	-	$	31,766
Deferred compensation		3,009		-		3,009		-
Total Liabilities	$	34,831	$	56	$	3,009	$	31,766

		Fair Value as of December 31, 2018
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	1,042	$	296	$	-	$	746
Exchange-traded investments		848		848		-		-
Total Assets	$	1,890	$	1,144	$	-	$	746
Liabilities:
Derivatives, net	$	32,872	$	124	$	-	$	32,748
Deferred compensation		3,078		-		3,078		-
Total Liabilities	$	35,950	$	124	$	3,078	$	32,748
MGE
Assets:
Derivatives, net	$	1,042	$	296	$	-	$	746
Exchange-traded investments		43		43		-		-
Total Assets	$	1,085	$	339	$	-	$	746
Liabilities:
Derivatives, net	$	32,872	$	124	$	-	$	32,748
Deferred compensation		3,078		-		3,078		-
Total Liabilities	$	35,950	$	124	$	3,078	$	32,748

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	March 31, 2019	December 31, 2018
Basis adjustment:
On peak	92.1%	92.1%
Off peak	92.5%	92.8%
Counterparty fuel mix:
Internal generation	40% - 60%	50% - 75%
Purchased power	60% - 40%	50% - 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)		2019		2018
Beginning balance	$	(32,002)	$	(42,026)
Realized and unrealized gains (losses):
Included in regulatory assets		719		563
Included in other comprehensive income		-		-
Included in earnings		(644)		(542)
Included in current assets		173		(173)
Purchases		5,765		5,834
Sales		-		-
Issuances		-		-
Settlements		(5,294)		(5,119)
Transfers in and/or out of Level 3		-		-
Balance as of March 31,	$	(31,283)	$	(41,463)
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)		2019		2018
Purchased power expense	$	(556)	$	(723)
Cost of gas sold expense		(88)		181
Total	$	(644)	$	(542)

(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.