Rate Matters	9 Months Ended
Sep. 30, 2020
Regulated Operations [Abstract]
Rate Matters	Rate Matters - MGE Energy and MGE. a.Rate Proceedings. In August 2020, MGE filed with the PSCW a proposed settlement agreement for its pending 2021 rate case. The settlement agreement proposes a zero percent increase for electric rates and an approximately 4% increase for gas rates in 2021. The electric rate settlement includes an increase in rate base primarily offset by lower fuel and purchase power costs and a one-time $18.2 million return to customers of the portion of excess deferred taxes related to the Tax Act not governed by IRS normalization rules. As part of the settlement, the fuel rules bandwidth will be set at plus or minus 1%. The gas rate increase covers infrastructure costs and technology improvements. The settlement agreement also seeks escrow accounting treatment for pension and other postretirement benefit costs, bad debt expense, and customer credit card fees. Escrow accounting treatment would allow MGE to defer to its next rate filing any difference between estimated costs in rates and actual costs incurred. Any difference, if allowed, would be recorded as a regulatory asset or regulatory liability. No change is proposed in the pending settlement agreement for 2021 from the 2020 authorized return on common equity or the financial capital structure. PSCW approval of the settlement agreement is pending. A final order is expected before the end of the year. In December 2018, the PSCW approved a settlement agreement between MGE and intervening parties in its then-pending rate case. The settlement decreased electric rates by 2.24%, or $9.2 million, in 2019. The decrease in electric rates reflected the ongoing tax impacts of the Tax Act. Lower fuel costs and an increase in rate base from renewable generation assets further impacted the rate change. In 2020, electric rates decreased a further 0.84%, or $3.4 million, as approved by the PSCW in December 2019 in MGE's 2020 Fuel Cost Plan, which reflected lower fuel costs. The settlement agreement increased gas rates by 1.06%, or $1.7 million, in 2019 and 1.46%, or $2.4 million, in 2020. The gas increase covered infrastructure costs. It also reflected the impacts of the Tax Act. The return on common stock equity for 2019 and 2020 is 9.8% based on a capital structure consisting of 56.6% common equity in 2019 and 56.1% common equity in 2020. b.Fuel Rules. Fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any over- or under-recovery of the actual costs is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is currently set at plus or minus 2%. Under fuel rules, MGE would defer costs, less any excess revenues, if its actual electric fuel costs exceeded 102% of the electric fuel costs allowed in its latest rate order. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. Conversely, MGE is required to defer the benefit of lower costs if actual electric fuel costs were less than 98% of the electric fuel costs allowed in that order. These costs are subject to the PSCW's annual review of fuel costs completed in the year following the deferral. The PSCW issued a final decision in the 2018 fuel rules proceedings for MGE to refund additional fuel savings realized in 2018 to its retail electric customers over a one-month period. MGE returned $9.5 million to electric customers in October 2019. There was no change to the refund in the fuel rules proceedings from the amount MGE deferred in the previous year. The PSCW issued a final decision in the 2019 fuel rules proceedings regarding $1.5 million of deferred savings giving MGE the option either to use the $1.5 million as part of the proposed settlement to MGE's pending 2021 rate case or to refund the balance to customers in October 2020. There was no change to the refund in the fuel rules proceedings from the amount MGE deferred in the previous year. The 2019 fuel credit is currently included in the proposed settlement to MGE's pending 2021 rate case. As of September 30, 2020, MGE had deferred $2.0 million of 2020 fuel savings. These costs will be subject to the PSCW's annual review of 2020 fuel costs, which is expected to be completed in 2021. c.COVID-19. On March 24, 2020, the PSCW ordered changes to the tariff provisions of all public utilities in Wisconsin in response to the COVID-19 pandemic. The order prohibited late payment charges, service disconnections, service refusals, and cash deposits as a condition of service. The order also required utilities to offer deferred payment arrangements to customers. The order resulted in increased bad debt expense and foregone revenue from late payment charges. This order, as it pertained to the prohibitions on service disconnections for residential customers, was in effect until November 1, 2020, at which time the annual winter disconnection moratorium began and continues until April 15, 2021. All other restrictions were lifted in July 2020. As permitted by regulatory action, MGE notified the PSCW on July 16, 2020, of its election to continue to waive late fees until December 31, 2020 for all customer classes and seek recovery in a future period. In October 2020, the PSCW issued a decision to allow utilities to extend the election to waive late fees until April 15, 2021, if the utility requests such waiver. On March 24, 2020, the PSCW issued a further order authorizing deferral of expenditures incurred to ensure the provision of safe, reliable, and affordable access to utility services during the COVID-19 pandemic and late payment charges. Expenditures may include items such as bad debt expense and personal protective equipment. Foregone revenue from late payment charges and the potential delay in payments from customers is expected to impact the timing of cash inflows. Subject to PSCW approval of recovery, foregone late payment charges are expected to be recognized as revenue when it is collected from customers, and deferred expenditures are expected to be recognized as a regulatory asset as costs are incurred (meaning that those expenditures will affect cash flows when paid but will not affect income until recovery is permitted by the PSCW). Recovery of expenditures and late payment charges is expected to be addressed in future rate proceedings. While management believes that cost recovery is probable, the timing of collection from customers cannot be estimated at this time. Management will continue to assess the probability of recovery of deferred costs as the COVID-19 pandemic progresses. As of September 30, 2020, MGE had deferred $2.8 million in costs as a regulatory asset.

Rate Matters

9 Months Ended

Sep. 30, 2020

Rate Matters - MGE Energy and MGE.

a.Rate Proceedings.

In August 2020, MGE filed with the PSCW a proposed settlement agreement for its pending 2021 rate case. The settlement agreement proposes a zero percent increase for electric rates and an approximately 4% increase for gas rates in 2021. The electric rate settlement includes an increase in rate base primarily offset by lower fuel and purchase power costs and a one-time $18.2 million return to customers of the portion of excess deferred taxes related to the Tax Act not governed by IRS normalization rules. As part of the settlement, the fuel rules bandwidth will be set at plus or minus 1%. The gas rate increase covers infrastructure costs and technology improvements. The settlement agreement also seeks escrow accounting treatment for pension and other postretirement benefit costs, bad debt expense, and customer credit card fees. Escrow accounting treatment would allow MGE to defer to its next rate filing any difference between estimated costs in rates and actual costs incurred. Any difference, if allowed, would be recorded as a regulatory asset or regulatory liability. No change is proposed in the pending settlement agreement for 2021 from the 2020 authorized return on common equity or the financial capital structure. PSCW approval of the settlement agreement is pending. A final order is expected before the end of the year.

In December 2018, the PSCW approved a settlement agreement between MGE and intervening parties in its then-pending rate case. The settlement decreased electric rates by 2.24%, or $9.2 million, in 2019. The decrease in electric rates reflected the ongoing tax impacts of the Tax Act. Lower fuel costs and an increase in rate base from renewable generation assets further impacted the rate change. In 2020, electric rates decreased a further 0.84%, or $3.4 million, as approved by the PSCW in December 2019 in MGE's 2020 Fuel Cost Plan, which reflected lower fuel costs. The settlement agreement increased gas rates by 1.06%, or $1.7 million, in 2019 and 1.46%, or $2.4 million, in 2020. The gas increase covered infrastructure costs. It also reflected the impacts of the Tax Act. The return on common stock equity for 2019 and 2020 is 9.8% based on a capital structure consisting of 56.6% common equity in 2019 and 56.1% common equity in 2020.

b.Fuel Rules.

Fuel rules require the PSCW and Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any over- or under-recovery of the actual costs is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is currently set at plus or minus 2%. Under fuel rules, MGE would defer costs, less any excess revenues, if its actual electric fuel costs exceeded 102% of the electric fuel costs allowed in its latest rate order. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. Conversely, MGE is required to defer the benefit of lower costs if actual electric fuel costs were less than 98% of the electric fuel costs allowed in that order. These costs are subject to the PSCW's annual review of fuel costs completed in the year following the deferral.

The PSCW issued a final decision in the 2018 fuel rules proceedings for MGE to refund additional fuel savings realized in 2018 to its retail electric customers over a one-month period. MGE returned $9.5 million to electric customers in October 2019. There was no change to the refund in the fuel rules proceedings from the amount MGE deferred in the previous year.

The PSCW issued a final decision in the 2019 fuel rules proceedings regarding $1.5 million of deferred savings giving MGE the option either to use the $1.5 million as part of the proposed settlement to MGE's pending 2021 rate case or to refund the balance to customers in October 2020. There was no change to the refund in the fuel rules proceedings from the amount MGE deferred in the previous year. The 2019 fuel credit is currently included in the proposed settlement to MGE's pending 2021 rate case.

As of September 30, 2020, MGE had deferred $2.0 million of 2020 fuel savings. These costs will be subject to the PSCW's annual review of 2020 fuel costs, which is expected to be completed in 2021.

c.COVID-19.

On March 24, 2020, the PSCW ordered changes to the tariff provisions of all public utilities in Wisconsin in response to the COVID-19 pandemic. The order prohibited late payment charges, service disconnections, service refusals, and cash deposits as a condition of service. The order also required utilities to offer deferred payment arrangements to customers. The order resulted in increased bad debt expense and foregone revenue from late payment charges. This order, as it pertained to the prohibitions on service disconnections for residential customers, was in effect until November 1, 2020, at which time the annual winter disconnection moratorium began and continues until April 15, 2021. All other restrictions were lifted in July 2020. As permitted by regulatory action, MGE notified the PSCW on July 16, 2020, of its election to continue to waive late fees until December 31, 2020 for all customer classes and seek recovery in a future period. In October 2020, the PSCW issued a decision to allow utilities to extend the election to waive late fees until April 15, 2021, if the utility requests such waiver.

On March 24, 2020, the PSCW issued a further order authorizing deferral of expenditures incurred to ensure the provision of safe, reliable, and affordable access to utility services during the COVID-19 pandemic and late payment charges. Expenditures may include items such as bad debt expense and personal protective equipment. Foregone revenue from late payment charges and the potential delay in payments from customers is expected to impact the timing of cash inflows. Subject to PSCW approval of recovery, foregone late payment charges are expected to be recognized as revenue when it is collected from customers, and deferred expenditures are expected to be recognized as a regulatory asset as costs are incurred (meaning that those expenditures will affect cash flows when paid but will not affect income until recovery is permitted by the PSCW). Recovery of expenditures and late payment charges is expected to be addressed in future rate proceedings. While management believes that cost recovery is probable, the timing of collection from customers cannot be estimated at this time. Management will continue to assess the probability of recovery of deferred costs as the COVID-19 pandemic progresses. As of September 30, 2020, MGE had deferred $2.8 million in costs as a regulatory asset.