Asset Retirement Obligations

12 Months Ended

Dec. 31, 2020

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligations

Asset Retirement Obligations - MGE Energy and MGE.

MGE recorded an obligation for the fair value of its legal liability for asset retirement obligations (AROs) associated with removal of the West Campus Cogeneration Facility and the Elm Road Units, electric substations, combustion turbine generating units, wind generating facilities, and photovoltaic generating facilities, all of which are located on property not owned by MGE Energy and MGE and would need to be removed upon the ultimate end of the associated leases. The significant conditional AROs identified by MGE included the costs of abandoning in place gas services and mains, the abatement and disposal of equipment and buildings contaminated with asbestos and PCBs, and the proper disposal and removal of tanks,

batteries, and underground cable. Changes in management's assumptions regarding settlement dates, settlement methods, or assigned probabilities could have a material effect on the liabilities and the associated regulatory asset recorded as of December 31, 2020.

MGE also may have AROs relating to the removal of various assets, such as certain electric and gas distribution facilities. These facilities are generally located on property owned by third parties, on which MGE is permitted to operate by lease, permit, easement, license, or service agreement. The asset retirement obligations associated with these facilities cannot be reasonably determined due to the indeterminate life of the related agreements.

The following table summarizes the change in AROs. Amounts include conditional AROs.

(In thousands)		2020		2019
Balance as of January 1,	$	28,355	$	29,980
Liabilities incurred(a)		3,503		1,586
Accretion expense		1,366		1,574
Liabilities settled		(372)		(323)
Revisions in estimated cash flows(b)		(1,656)		(4,462)
Balance as of December 31,	$	31,196	$	28,355

(a)In 2020, MGE recorded an obligation of $3.2 million for the fair value of its legal liability for AROs associated with Two Creeks. See Footnote 6 for additional information on Two Creeks. In 2019, MGE recorded an obligation of $1.5 million for the fair value of its legal liability for AROs associated with Saratoga. Construction of Saratoga was completed in February 2019.

(b)In 2019, MGE revised the AROs associated with certain wind farms based on updated estimated decommissioning costs.