Investment in ATC and ATC Holdco

6 Months Ended

Jun. 30, 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, a subsidiary of 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				Six Months Ended
		June 30,				June 30,
(In thousands)		2020		2019		2020		2019
Equity earnings from investment in ATC	$	3,139	$	2,297	$	5,405	$	4,515
Dividends from ATC		1,880		1,733		4,271		3,745
Capital contributions to ATC		355		1,065		533		1,243

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

ATC's summarized financial data is as follows:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
(In thousands)		2020		2019		2020		2019
Operating revenues	$	203,071	$	182,212	$	389,872	$	359,927
Operating expenses		(97,511)		(93,573)		(192,722)		(183,960)
Other income, net		906		287		1,281		547
Interest expense, net		(26,258)		(28,838)		(55,146)		(57,956)
Earnings before members' income taxes	$	80,208	$	60,088	$	143,285	$	118,558

MGE receives transmission and other related services from ATC. During the three and six months ended June 30, 2020, MGE recorded $7.6 million and $15.3 million, respectively, for transmission services received compared to $7.6 million and $15.2 million for the comparable periods in 2019. MGE also provides a variety of operational, maintenance, and project management services for ATC, which are reimbursed by ATC. As of June 30, 2020, and December 31, 2019, MGE had a receivable due from ATC of $1.5 million and $1.6 million, respectively. The receivable includes expenditures to fund transmission infrastructure upgrades at BadgerHollow I and II and Two Creeks. MGE will be reimbursed for these costs after the new generation assets have been placed into service.