Investment in ATC and ATC Holdco

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investment in ATC and ATC Holdco

Investment in ATC and ATC Holdco - MGE Energy and MGE.

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, which, as of December 1, 2016, is owned by MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a subsidiary of MGE Energy.

MGE Transco and MGEE Transco have accounted for their investments in ATC and ATC Holdco, respectively, under the equity method of accounting. Equity earnings from investments are recorded as "Other income" on the consolidated statements of income of MGE Energy. MGE Transco recorded the following amounts related to its investment in ATC:

		Three Months Ended
		March 31,
(In thousands)		2020		2019
Equity earnings from investment in ATC	$	2,266	$	2,218
Dividends from ATC		2,391		2,012
Capital contributions to ATC		178		178

ATC Holdco was formed in December 2016. In the near term, it is expected that ATC Holdco will be pursuing transmission development opportunities that typically have long development and investment lead times before becoming operational.

In April 2020, MGE Transco made a $0.4 million capital contribution to ATC.

ATC's summarized financial data is as follows:

		Three Months Ended
		March 31,
(In thousands)		2020		2019
Operating revenues	$	186,801	$	177,715
Operating expenses		(95,211)		(90,387)
Other income, net		375		260
Interest expense, net		(28,888)		(29,118)
Earnings before members' income taxes	$	63,077	$	58,470

MGE receives transmission and other related services from ATC. During the three months ended March 31, 2020 and 2019, MGE recorded $7.7 million and $7.6 million, respectively, for transmission services received from ATC. MGE also provides a variety of operational, maintenance, and project management services for ATC, which is reimbursed by ATC. As of March 31, 2020, and December 31, 2019, MGE had a receivable due from ATC of $1.3 and $1.6 million, respectively. The receivable includes expenditures to fund transmission infrastructure upgrades at Badger Hollow I and Two Creeks. MGE will be reimbursed for these costs after the new generation assets have been placed into service.