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Fair Value of Financial Instruments (Tables)
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Estimated Fair Market Value of Financial Instruments The estimated fair market value of financial instruments are as follows:

 

 

 

December 31, 2020

 

 

December 31, 2019

 

 

(In thousands)

 

Carrying Amount

 

Fair

Value

 

 

Carrying Amount

 

Fair

Value

 

 

MGE Energy

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

44,738

$

44,738

 

$

23,481

$

23,481

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Short-term debt - commercial paper

 

52,500

 

52,500

 

 

-

 

-

 

 

Long-term debt(a)

 

528,220

 

639,271

 

 

547,879

 

611,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MGE

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

4,103

$

4,103

 

$

3,196

$

3,196

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Short-term debt - commercial paper

 

52,500

 

52,500

 

 

-

 

-

 

 

Long-term debt(a)

 

528,220

 

639,271

 

 

547,879

 

611,909

 

(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.1 million and $4.5 million as of December 31, 2020 and 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 December 31, 2020

 

 

(In thousands)

 

Total

 

Level 1

 

Level 2

 

Level 3

 

 

MGE Energy

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

806

$

436

$

-

$

370

 

 

Exchange-traded investments

 

1,750

 

1,750

 

-

 

-

 

 

Total Assets

$

2,556

$

2,186

$

-

$

370

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Derivatives, net(b)

$

14,795

$

370

$

-

$

14,425

 

 

Deferred compensation

 

3,509

 

-

 

3,509

 

-

 

 

Total Liabilities

$

18,304

$

370

$

3,509

$

14,425

 

 

 

 

 

 

 

 

 

 

 

 

 

MGE

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

Derivatives, net

$

806

$

436

$

-

$

370

 

 

Exchange-traded investments

 

603

 

603

 

-

 

-

 

 

Total Assets

$

1,409

$

1,039

$

-

$

370

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

Derivatives, net(b)

$

14,795

$

370

$

-

$

14,425

 

 

Deferred compensation

 

3,509

 

-

 

3,509

 

-

 

 

Total Liabilities

$

18,304

$

370

$

3,509

$

14,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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(c)

$

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(c)

$

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. No collateral was posted against derivative positions with counterparties as of December 31, 2020.

 

(c)These amounts are shown gross and exclude $1.5 million of collateral that was posted against derivative positions with counterparties as of December 31, 2019.
Significant Unobservable Inputs The following table presents the significant unobservable inputs used in the pricing model:

 

 

 

Model Input

 

Significant Unobservable Inputs

 

2020

 

2019

 

Basis adjustment:

 

 

 

 

 

 

 

On peak

 

94.2

%

 

92.1

%

 

Off peak

 

94.5

%

 

92.7

%

 

Counterparty fuel mix:

 

 

 

 

 

 

 

Internal generation - range

 

46%-65

%

 

40%-60

%

 

Internal generation - weighted average

 

56.5

%

 

52.2

%

 

Purchased power - range

 

54%-35

%

 

60%-40

%

 

Purchased power - weighted average

 

43.5

%

 

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.

 

(In thousands)

 

2020

 

2019

 

2018

 

 

Balance as of January 1,

$

(26,456)

$

(32,002)

$

(42,026)

 

 

Realized and unrealized gains (losses):

 

 

 

 

 

 

 

 

Included in regulatory assets

 

12,402

 

5,545

 

10,024

 

 

Included in other comprehensive income

 

-

 

-

 

-

 

 

Included in earnings

 

(6,439)

 

(3,765)

 

132

 

 

Included in current assets

 

(87)

 

(70)

 

(47)

 

 

Purchases

 

22,232

 

22,974

 

23,643

 

 

Sales

 

-

 

-

 

-

 

 

Issuances

 

-

 

-

 

-

 

 

Settlements

 

(15,707)

 

(19,138)

 

(23,728)

 

 

Transfers in and/or out of Level 3

 

-

 

-

 

-

 

 

Balance as of December 31,

$

(14,055)

$

(26,456)

$

(32,002)

 

 

Total gains (losses) included in earnings attributed to the

 

 

 

 

 

 

 

 

change in unrealized gains (losses) related to assets and

 

 

 

 

 

 

 

 

liabilities held as of December 31,(d)

$

-

$

-

$

-

 

(d)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 (d).

 

(In thousands)

 

 

 

 

 

 

 

 

Year Ended December 31,

 

2020

 

2019

 

2018

 

 

Purchased power expense

$

(5,888)

$

(3,334)

$

355

 

 

Cost of gas sold expense

 

(551)

 

(431)

 

(223)

 

 

Total

$

(6,439)

$

(3,765)

$

132

 

(d)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.