Joint Plant Ownership

12 Months Ended

Dec. 31, 2019

Regulated Operations [Abstract]

Joint Plant Ownership

Leases - MGE Energy and MGE.

(In thousands)		2019		2018
Utility plant	$	291,997	$	292,157
Accumulated depreciation		(105,778)		(94,766)
Property, plant, and equipment, net		186,219		197,391
Construction work in progress		1,777		2,021
Total property, plant, and equipment	$	187,996	$	199,412

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, MGE accrued $3.1 million of foregone capital expenditures as part of the ownership transfer agreement with WPL. MGE made no accrual for foregone capital expenditures during 2019. As of December 31, 2018, MGE classified $3.1 million of Columbia assets as held-for-sale on the consolidated balance sheets. As of December 31, 2019, there were no assets held-for-sale on the consolidated balance sheets. In January 2019, MGE reduced its ownership interest in Columbia from 19.4% to 19.1%.

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, 2019, accounts for 14% (105 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 $19.7 million, $17.6 million, and $17.3 million for the years ended December 31, 2019, 2018, and 2017, 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)		2019		2018
Nonregulated plant	$	207,834	$	207,361
Accumulated depreciation		(37,071)		(33,897)
Property, plant, and equipment, net		170,763		173,464
Construction work in progress		468		530
Total property, plant, and equipment	$	171,231	$	173,994

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 was 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 $0.6 million for the year ended December 31, 2018, which was deferred as a regulatory asset in 2018. This amount was recovered in rates and recognized as operating and maintenance expenses in 2019. MGE's share of operating and maintenance expenses for Forward Wind was $0.6 million for the year ended December 31, 2019. 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)		2019		2018
Utility plant	$	34,054	$	33,929
Accumulated depreciation		(13,413)		(12,530)
Property, plant, and equipment, net		20,641		21,399
Construction work in progress		45		67
Total property, plant, and equipment	$	20,686	$	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 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)		2019		2018
Nonregulated plant	$	113,259	$	113,328
Accumulated depreciation		(33,786)		(32,055)
Property, plant, and equipment, net		79,473		81,273
Construction work in progress		309		478
Total property, plant, and equipment	$	79,782	$	81,751

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, 2019, 2018, and 2017, the UW allocated share of fuel and operating costs was $6.6 million, $6.3 million, and $5.3 million, respectively.

e.Two Creeks.

In May 2019, MGE acquired a 33% ownership interest in a 150 MW solar generation array to be constructed in the Town of Two Creeks and the City of Two Rivers in Manitowoc and Kewaunee Counties, Wisconsin. MGE's sole principal asset will be the 33% undivided ownership interest in the solar generation facility, which is being constructed. The estimated share of capital costs for MGE's ownership interest is approximately $65 million (excluding AFUDC).

As of December 31, 2019, $43.9 million (excluding AFUDC) related to this project is reflected in "Construction work in progress" on the consolidated balance sheets. The project is anticipated to be completed by the end of 2020. MGE received specific approval to recover 100% AFUDC on the project. After tax, MGE has recognized $1.4 million in AFUDC equity related to this project for the year ended December 31, 2019.

f.Badger Hollow I.

In July 2019, MGE acquired a 33% ownership interest in a 150 MW solar generation array to be constructed in southwestern Wisconsin in Iowa County, near the villages of Montfort and Cobb. MGE's sole principal asset will be the 33% undivided ownership interest in the solar generation facility which is being constructed. The estimated share of capital costs for MGE's ownership interest is approximately $65 million (excluding AFUDC).

As of December 31, 2019, $18.7 million (excluding AFUDC) related to this project is reflected in "Construction work in progress" on the consolidated balance sheets. The project is anticipated to be completed by the end of 2020. MGE received specific approval to recover 100% AFUDC on the project. After tax, MGE has recognized $0.3 million in AFUDC equity related to this project for the year ended December 31, 2019.