Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

		March 31, 2020				December 31, 2019
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	17,451	$	17,451	$	23,481	$	23,481
Liabilities:
Short-term debt - commercial paper		3,000		3,000		-		-
Long-term debt(a)		546,724		604,568		547,879		611,909
MGE
Assets:
Cash and cash equivalents	$	3,321	$	3,321	$	3,196	$	3,196
Liabilities:
Short-term debt - commercial paper		3,000		3,000		-		-
Long-term debt(a)		546,724		604,568		547,879		611,909

(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, 2020, and December 31, 2019, 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, 2020
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	682	$	634	$	-	$	48
Exchange-traded investments		1,382		1,382		-		-
Total Assets	$	2,064	$	2,016	$	-	$	48
Liabilities:
Derivatives, net(b)	$	26,009	$	314	$	-	$	25,695
Deferred compensation		3,195		-		3,195		-
Total Liabilities	$	29,204	$	314	$	3,195	$	25,695
MGE
Assets:
Derivatives, net	$	682	$	634	$	-	$	48
Exchange-traded investments		227		227		-		-
Total Assets	$	909	$	861	$	-	$	48
Liabilities:
Derivatives, net(b)	$	26,009	$	314	$	-	$	25,695
Deferred compensation		3,195		-		3,195		-
Total Liabilities	$	29,204	$	314	$	3,195	$	25,695

		Fair Value as of December 31, 2019
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net	$	303	$	189	$	-	$	114
Exchange-traded investments		1,271		1,271		-		-
Total Assets	$	1,574	$	1,460	$	-	$	114
Liabilities:
Derivatives, net(b)	$	27,178	$	608	$	-	$	26,570
Deferred compensation		3,157		-		3,157		-
Total Liabilities	$	30,335	$	608	$	3,157	$	26,570
MGE
Assets:
Derivatives, net	$	303	$	189	$	-	$	114
Exchange-traded investments		209		209		-		-
Total Assets	$	512	$	398	$	-	$	114
Liabilities:
Derivatives, net(b)	$	27,178	$	608	$	-	$	26,570
Deferred compensation		3,157		-		3,157		-
Total Liabilities	$	30,335	$	608	$	3,157	$	26,570

(b) These amounts are shown gross and exclude $1.7 million and $1.5 million of collateral that was posted against derivative positions with counterparties as of March 31, 2020 and December 31, 2019, respectively.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	March 31, 2020		December 31, 2019
Basis adjustment:
On peak	92.8	%	92.1	%
Off peak	93.5	%	92.7	%
Counterparty fuel mix:
Internal generation - range	46.0% - 65.0	%	40.0% - 60.0	%
Internal generation - weighted average	55.9	%	52.2	%
Purchased power - range	54.0% - 35.0	%	60.0% - 40.0	%
Purchased power - weighted average	44.1	%	47.8	%

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)		2020		2019
Beginning balance	$	(26,456)	$	(32,002)
Realized and unrealized gains (losses):
Included in regulatory assets		810		719
Included in other comprehensive income		-		-
Included in earnings		(1,453)		(644)
Included in current assets		247		173
Purchases		5,015		5,765
Sales		-		-
Issuances		-		-
Settlements		(3,810)		(5,294)
Balance as of March 31,	$	(25,647)	$	(31,283)
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 gains (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)		2020		2019
Purchased power expense	$	(1,184)	$	(556)
Cost of gas sold expense		(269)		(88)
Total	$	(1,453)	$	(644)

(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.