Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2021

Fair Value Disclosures [Abstract]

Estimated Fair Market Value of Financial Instruments

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

		March 31, 2021				December 31, 2020
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	40,239	$	40,239	$	44,738	$	44,738
Liabilities:
Short-term debt - commercial paper		54,000		54,000		52,500		52,500
Long-term debt(a)		527,038		590,748		528,220		639,271
MGE
Assets:
Cash and cash equivalents	$	6,709	$	6,709	$	4,103	$	4,103
Liabilities:
Short-term debt - commercial paper		54,000		54,000		52,500		52,500
Long-term debt(a)		527,038		590,748		528,220		639,271

(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.0 million and $4.1 million as of March 31, 2021, and December 31, 2020, 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, 2021
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	721	$	423	$	-	$	298
Exchange-traded investments		1,474		1,474		-		-
Total Assets	$	2,195	$	1,897	$	-	$	298
Liabilities:
Derivatives, net(b)	$	11,780	$	115	$	-	$	11,665
Deferred compensation		3,581		-		3,581		-
Total Liabilities	$	15,361	$	115	$	3,581	$	11,665
MGE
Assets:
Derivatives, net(b)	$	721	$	423	$	-	$	298
Exchange-traded investments		431		431		-		-
Total Assets	$	1,152	$	854	$	-	$	298
Liabilities:
Derivatives, net(b)	$	11,780	$	115	$	-	$	11,665
Deferred compensation		3,581		-		3,581		-
Total Liabilities	$	15,361	$	115	$	3,581	$	11,665

		Fair Value as of December 31, 2020
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	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(b)	$	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

(b) These amounts are shown gross. No collateral was posted against derivative positions with counterparties as of March 31, 2021, or December 31, 2020.

Significant Unobservable Inputs

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

	Model Input
Significant Unobservable Inputs	March 31, 2021		December 31, 2020
Basis adjustment:
On peak	94.4	%	94.2	%
Off peak	95.0	%	94.5	%
Counterparty fuel mix:
Internal generation - range	41.0% - 66.0	%	46.0% - 65.0	%
Internal generation - weighted average	56.9	%	56.5	%
Purchased power - range	59.0% - 34.0	%	54.0% - 35.0	%
Purchased power - weighted average	43.1	%	43.5	%

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)		2021		2020
Beginning balance	$	(14,055)	$	(26,456)
Realized and unrealized gains (losses):
Included in regulatory assets		2,688		810
Included in other comprehensive income		-		-
Included in earnings		307		(1,453)
Included in current assets		355		247
Purchases		5,884		5,015
Sales		-		-
Issuances		-		-
Settlements		(6,546)		(3,810)
Balance as of March 31,	$	(11,367)	$	(25,647)
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)		2021		2020
Purchased power expense	$	702	$	(1,184)
Cost of gas sold expense		(395)		(269)
Total	$	307	$	(1,453)

(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.