
United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: March 31, ~~2022~~2023 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________
Commission File No.	Name of Registrant, State of Incorporation, Address of Principal Executive Offices, and Telephone No.	IRS Employer Identification No.
000-49965	MGE Energy, Inc. (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 \| mgeenergy.com	39-2040501
000-1125	Madison Gas and Electric Company (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 \| mge.com	39-0444025

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:


MGE Energy, Inc. Yes ☒ No ☐	Madison Gas and Electric Company Yes ☒ No ☐

Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files):


MGE Energy, Inc. Yes ☒ No ☐	Madison Gas and Electric Company Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer	Smaller Reporting Company	Emerging Growth Company
MGE Energy, Inc.	☒	☐	☐	☐	☐
Madison Gas and Electric Company	☐	☐	☒	☐	☐

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.


MGE Energy, Inc. ☐	Madison Gas and Electric Company ☐

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):


MGE Energy, Inc. Yes ☐ No ☒	Madison Gas and Electric Company Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $1 Par Value Per Share	MGEE	The NASDAQ Stock Market


Number of Shares Outstanding of Each Class of Common Stock as of April 30, ~~2022~~2023
MGE Energy, Inc.	Common stock, $1.00 par value, 36,163,370 shares outstanding.
Madison Gas and Electric Company	Common stock, $1.00 par value, 17,347,894 shares outstanding (all of which are owned beneficially and of record by MGE Energy, Inc.).

Table of Contents


PART I. FINANCIAL INFORMATION	3
Filing Format	3
Forward-Looking Statements	3
Where to Find More Information	3
Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report	4
Item 1. Financial Statements.	6
MGE Energy, Inc.	6
Consolidated Statements of Income (unaudited)	6
Consolidated Statements of Cash Flows (unaudited)	7
Consolidated Balance Sheets (unaudited)	8
Consolidated Statements of Common Equity (unaudited)	9
Madison Gas and Electric Company	10
Consolidated Statements of Income (unaudited)	10
Consolidated Statements of Cash Flows (unaudited)	11
Consolidated Balance Sheets (unaudited)	12
Consolidated Statements of Equity (unaudited)	13
MGE Energy, Inc., and Madison Gas and Electric Company - Notes to Consolidated Financial Statements (unaudited)	14
1. Summary of Significant Accounting Policies.	14
2. New Accounting Standards.	15
3. Investment in ATC and ATC Holdco.	15
4. Taxes.	16
5. Pension and Other Postretirement Plans.	16
6. Equity and Financing Arrangements.	17
7. Share-Based Compensation.	1718
8. Commitments and Contingencies.	18
9. Rate Matters.	21
10. Derivative and Hedging Instruments.	22
11. Fair Value of Financial Instruments.	25
12. Joint Plant Construction Project Ownership.	28
13. Revenue.	2928
14. Segment Information.	3029
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	3130
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	4443
Item 4. Controls and Procedures.	4743
PART II. OTHER INFORMATION.	4844
Item 1. Legal Proceedings.	4844
Item 1A. Risk Factors.	44
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	4844
Item 3. Defaults Upon Senior Securities.	4844
Item 4. Mine Safety Disclosures.	4844
Item 5. Other Information.	4844
Item 6. Exhibits.	4945
Signatures - MGE Energy, Inc.	5046
Signatures - Madison Gas and Electric Company	5147

PART I. FINANCIAL INFORMATION.

Filing Format

This combined Form 10-Q is being filed separately by MGE Energy, Inc. (MGE Energy) and Madison Gas and Electric Company (MGE). MGE is a wholly owned subsidiary of MGE Energy and represents a majority of its assets, liabilities, revenues, expenses, and operations. Thus, all information contained in this report relates to, and is filed by, MGE Energy. Information that is specifically identified in this report as relating solely to MGE Energy, such as its financial statements and information relating to its nonregulated business, does not relate to, and is not filed by, MGE. MGE makes no representation as to that information. The terms "we" and "our," as used in this report, refer to MGE Energy and its consolidated subsidiaries, unless otherwise indicated.

Forward-Looking Statements

This report, and other documents filed by MGE Energy and MGE with the Securities and Exchange Commission (SEC) from time to time, contain forward-looking statements that reflect management's current assumptions and estimates regarding future performance and economic conditions—especially as they relate to economic conditions, future load growth, revenues, expenses, capital expenditures and rate recovery, financial resources, regulatory matters, and the scope and expense associated with future environmental regulation. These forward-looking statements are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "expect," "anticipate," "estimate," "could," "should," "intend," "will," and other similar words, and words relating to goals, targets and projections, generally identify forward-looking statements. Both MGE Energy and MGE caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied.

The factors that could cause actual results to differ materially from the forward-looking statements made by a registrant include: (a) those factors discussed in the registrants' ~~2021~~2022 Annual Report on Form 10-K: Item 1A. Risk Factors, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, as updated by Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, and Item 8. Financial Statements and Supplementary Data – Note 16, as updated by Part I, Item 1. Financial Statements – Note 8 in this report, and (b) other factors discussed herein and in other filings made by that registrant with the SEC.

Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. MGE Energy and MGE undertake no obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date of this report, except as required by law.

Where to Find More Information

We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

MGE Energy maintains a website at mgeenergy.com, and MGE maintains a website at mge.com. Copies of the reports and other information that we file with the SEC may be obtained from our websites free of charge. Information contained on MGE Energy's and MGE's websites shall not be deemed incorporated into, or to be a part of, this report.

Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report

Abbreviations, acronyms, and definitions used in the text and notes of this report are defined below.


MGE Energy and Subsidiaries:

CWDC	Central Wisconsin Development Corporation
MAGAEL	MAGAEL, LLC
MGE	Madison Gas and Electric Company
MGE Energy	MGE Energy, Inc.
MGE Power	MGE Power, LLC
MGE Power Elm Road	MGE Power Elm Road, LLC
MGE Power West Campus	MGE Power West Campus, LLC
MGE Services	MGE Services, LLC
MGE State Energy Services	MGE State Energy Services, LLC
MGE Transco	MGE Transco Investment, LLC
MGEE Transco	MGEE Transco, LLC
North Mendota	North Mendota Energy & Technology Park, LLC

Other Defined Terms:

2017 Tax Act	Tax Cut and Jobs Act of 2017
~~2021~~2022 Annual Report on Form 10-K	MGE ~~Energy’s~~Energy's and ~~MGE’s~~MGE's Annual Report ofon Form 10-K for the year ended December 31, ~~2021~~2022
2021 Plan	MGE Energy's 2021 Long-Term Incentive Plan
AFUDC	Allowance for Funds Used During Construction
ATC	American Transmission Company LLC
ATC Holdco	ATC Holdco, LLC
Badger Hollow I	Badger Hollow I Solar Farm
Badger Hollow II	Badger Hollow II Solar Farm
Blount	Blount Station
BTA	Best technology available
CA	Certificate of Authority
CASAC	Clean Air Scientific Advisory Committee
CBP	~~United States~~U.S. Customs and Border Protection
CCR	Coal Combustion Residual
Columbia	Columbia Energy Center
~~COVID-19~~	~~Coronavirus Disease 2019~~
CSAPR	Cross-State Air Pollution Rule
D.C. Circuit	United States Court of Appeals for the District of Columbia Circuit
Darien	Darien Solar Energy Center
Dth	Dekatherms, a quantity measure for natural gas
EGU	Electric generating unit
ELG	Effluent Limitations Guidelines
~~electric margin~~	~~Electric revenues less fuel for electric generation and purchased power costs, a non-GAAP measure~~
Elm Road Units	Elm Road Generating Station
EPA	United States Environmental Protection Agency
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FIP	Federal Implementation Plan
FTR	Financial Transmission Rights
~~GAAP~~	~~Generally Accepted Accounting Principles~~
~~gas margin~~	~~Gas revenues less cost of gas sold, a non-GAAP measure~~
GHG	Greenhouse gas
heating degree days (HDD)	Measure of the extent to which the average daily temperature is below 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide heating
IRS	Internal Revenue Service
kWh	Kilowatt-hour, a measure of electric energy produced
MISO	Midcontinent Independent System Operator (a regional transmission organization)
MW	Megawatt, a measure of electric energy generating capacity
MWh	Megawatt-hour, a measure of electric energy produced
NAAQS	National Ambient Air Quality Standards
~~NOx~~Nasdaq	The Nasdaq Stock Market
NOx	Nitrogen oxide
NSPS	New Source Performance Standards
Paris	Paris Solar and Battery Park
the Petition	Petition for Judicial Review of Agency Action
PGA	Purchased Gas Adjustment clause, a regulatory mechanism used to reconcile natural gas costs recovered in rates to actual costs
PM	Particulate Matter
PPA	Purchased Power Agreement


PSCW	Public Service Commission of Wisconsin


ROE	Return on equity
~~Saratoga~~	~~Saratoga Wind Farm~~
~~SCR~~	~~Selective Catalytic Reduction~~
SEC	Securities and Exchange Commission
SIP	State Implementation Plan
~~SO2~~SO2	Sulfur dioxide
Stock Plan	Direct Stock Purchase and Dividend Reinvestment Plan of MGE Energy
~~Two Creeks~~USDOC	~~Two Creeks Solar Farm~~U.S. Department of Commerce
WCCF	West Campus Cogeneration Facility
WDNR	Wisconsin Department of Natural Resources
WEPCO	Wisconsin Electric Power Company, a subsidiary of WEC Energy Group, Inc.
West Riverside	West Riverside Energy Center in Beloit, Wisconsin
working capital	Current assets less current liabilities
WPL	Wisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation
WRO	Withhold Release Order
XBRL	eXtensible Business Reporting Language

Item 1. Financial Statements.

MGE Energy, Inc.

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022
Operating Revenues:
Electric revenues	$	110,127		$	100,645		$	117,291		$	110,127
Gas revenues		98,811			67,270			99,962			98,811
Total Operating Revenues		208,938			167,915			217,253			208,938

Operating Expenses:
Fuel for electric generation		13,485			13,171			13,807			13,485
Purchased power		12,543			9,355			15,386			12,543
Cost of gas sold		64,802			37,444			67,847			64,802
Other operations and maintenance		49,994			45,682			49,958			49,994
Depreciation and amortization		21,046			18,382			24,611			21,046
Other general taxes		5,205			4,827			5,610			5,205
Total Operating Expenses		167,075			128,861			177,219			167,075
Operating Income		41,863			39,054			40,034			41,863

Other income, net		6,972			2,078			5,355			6,972
Interest expense, net		(6,571	)		(5,740	)		(7,487	)		(6,571	)
Income before income taxes		42,264			35,392			37,902			42,264
Income tax provision		(7,844	)		(459	)		(6,824	)		(7,844	)
Net Income	$	34,420		$	34,933		$	31,078		$	34,420

Earnings Per Share of Common Stock
Basic	$	0.95		$	0.97		$	0.86		$	0.95
Diluted	$	0.95		$	0.97		$	0.86		$	0.95

Dividends per share of common stock	$	0.388		$	0.370		$	0.408		$	0.388

Weighted Average Shares Outstanding
Basic		36,163			36,163			36,163			36,163
Diluted		36,171			36,165			36,180			36,171

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022
Operating Activities:
Net income	$	34,420		$	34,933		$	31,078		$	34,420
Items not affecting cash:
Depreciation and amortization		21,046			18,382			24,611			21,046
Deferred income taxes		5,606			(796	)		6,056			5,606
Provision for doubtful receivables		441			388			441			441
Employee benefit plan cost (credit)		(1,678	)		1,461			(648	)		(1,678	)
Equity earnings in investments		(2,504	)		(2,444	)		(2,611	)		(2,504	)
Other items		(486	)		(277	)		(1,366	)		(486	)
Changes in working capital items:
Decrease (increase) in current assets		12,332			(2,851	)
Decrease in current liabilities		(7,115	)		(4,213	)
Decrease in current assets								28,211			12,332
Decrease in accounts payable								(18,509	)		(11,258	)
(Decrease) increase in other current liabilities								(6,742	)		4,143
Dividends from investments		2,001			1,967			2,206			2,001
Cash contributions to pension and other postretirement plans		(1,660	)		(1,552	)		(1,785	)		(1,660	)
Other noncurrent items, net		(304	)		(1,115	)		(4,939	)		(304	)
Cash Provided by Operating Activities		62,099			43,883			56,003			62,099

Investing Activities:
Capital expenditures		(30,778	)		(34,746	)		(47,556	)		(30,778	)
Capital contributions to investments		(1,546	)		(670	)		(1,527	)		(1,546	)
Other		155			(419	)		(483	)		155
Cash Used for Investing Activities		(32,169	)		(35,835	)		(49,566	)		(32,169	)

Financing Activities:
Cash dividends paid on common stock		(14,013	)		(13,380	)		(14,736	)		(14,013	)
Repayments of long-term debt		(1,211	)		(1,182	)		(20,542	)		(1,211	)
(Repayments of) proceeds from short-term debt		(5,500	)		1,500
Issuance of long-term debt								69,300			—
Repayments of short-term debt								(37,500	)		(5,500	)
Other		(492	)		(523	)		(1,296	)		(492	)
Cash Used for Financing Activities		(21,216	)		(13,585	)		(4,774	)		(21,216	)

Change in cash, cash equivalents, and restricted cash		8,714			(5,537	)		1,663			8,714
Cash, cash equivalents, and restricted cash at beginning of period		18,835			47,039			17,968			18,835
Cash, cash equivalents, and restricted cash at end of period	$	27,549		$	41,502		$	19,631		$	27,549

Supplemental disclosures of cash flow information:
Significant noncash investing activities:
Accrued capital expenditures	$	6,735		$	8,843		$	4,402		$	6,735

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands)


	March 31,		December 31,		March 31,		December 31,
ASSETS	2022		2021		2023		2022
Current Assets:
Cash and cash equivalents	$	26,374	$	17,438	$	14,708	$	11,604
Accounts receivable, less reserves of $8,952 and $6,940, respectively		50,167		46,205
Other accounts receivable, less reserves of $1,213 and $1,364, respectively		15,244		16,094
Accounts receivable, less reserves of $7,894 and $7,050, respectively						52,612		55,407
Other accounts receivable, less reserves of $1,351 and $1,323, respectively						11,667		11,418
Unbilled revenues		30,839		34,812		31,654		43,086
Materials and supplies, at average cost		30,951		29,863		34,697		33,465
Fuel for electric generation, at average cost		6,331		6,429		11,605		7,962
Stored natural gas, at average cost		5,580		15,668		23,132		32,848
Prepaid taxes		15,487		20,214		12,522		19,132
Regulatory assets - current		2,205		1,465		16,790		9,541
Other current assets		11,255		11,183		13,862		19,017
Total Current Assets		194,433		199,371		223,249		243,480
Other long-term receivables		691		1,155
Regulatory assets		108,271		107,547		100,556		103,900
Pension benefit asset		62,806		58,757		70,591		68,872
Other deferred assets and other		26,697		27,548		22,993		24,365
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,843,122		1,828,171		1,890,784		1,865,352
Construction work in progress		40,156		50,603		106,322		105,748
Total Property, Plant, and Equipment		1,883,278		1,878,774		1,997,106		1,971,100
Investments		101,365		98,754		107,706		105,883
Total Assets	$	2,377,541	$	2,371,906	$	2,522,201	$	2,517,600

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,920	$	4,889	$	35,046	$	54,314
Short-term debt		0		5,500		33,000		70,500
Accounts payable		44,690		64,149		38,720		59,334
Accrued interest and taxes		9,265		10,385		6,482		7,868
Accrued payroll related items		9,296		12,951		9,888		13,064
Regulatory liabilities - current		24,557		9,365		17,017		11,925
Derivative liabilities		130		2,140
Other current liabilities		5,246		8,468		5,853		8,057
Total Current Liabilities		98,104		117,847		146,006		225,062
Other Credits:
Deferred income taxes		233,146		231,149		259,180		252,190
Investment tax credit - deferred		48,773		44,836		48,260		48,735
Regulatory liabilities		155,096		154,298		153,253		156,988
Accrued pension and other postretirement benefits		72,881		73,085		53,850		53,607
Finance lease liabilities		16,920		17,322		17,286		17,108
Other deferred liabilities and other		91,363		91,690		93,192		96,990
Total Other Credits		618,179		612,380		625,021		625,618
Capitalization:
Common shareholders' equity		1,048,153		1,027,468		1,098,370		1,081,674
Long-term debt		613,105		614,211		652,804		585,246
Total Capitalization		1,661,258		1,641,679		1,751,174		1,666,920
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization	$	2,377,541	$	2,371,906	$	2,522,201	$	2,517,600

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc.

Consolidated Statements of Common Equity (unaudited)

(In thousands, except per share amounts)


										Accumulated														Accumulated
					Additional					Other									Additional					Other
	Common Stock				Paid-in		Retained			Comprehensive					Common Stock				Paid-in		Retained			Comprehensive
	Shares		Value		Capital		Earnings			Income/(Loss)		Total
Three Months Ended March 31, 2021
Beginning Balance		36,163	$	36,163	$	394,408	$	545,429		$	0	$	976,000
Net income								34,933					34,933
Common stock dividends declared ($0.370 per share)								(13,380	)				(13,380	)
Equity-based compensation plans and other						158							158
Ending Balance - March 31, 2021		36,163	$	36,163	$	394,566	$	566,982		$	0	$	997,711
															Shares		Value		Capital		Earnings			Income/(Loss)		Total
Three Months Ended March 31, 2022
Beginning Balance		36,163	$	36,163	$	394,903	$	596,402		$	0	$	1,027,468			36,163	$	36,163	$	394,903	$	596,402		$	—	$	1,027,468
Net income								34,420					34,420									34,420					34,420
Common stock dividends declared ($0.388 per share)								(14,013	)				(14,013	)								(14,013	)				(14,013	)
Equity-based compensation plans and other						278							278							278							278
Ending Balance - March 31, 2022		36,163	$	36,163	$	395,181	$	616,809		$	0	$	1,048,153			36,163	$	36,163	$	395,181	$	616,809		$	—	$	1,048,153

Three Months Ended March 31, 2023
Beginning Balance																36,163	$	36,163	$	395,657	$	649,854		$	—	$	1,081,674
Net income																						31,078					31,078
Common stock dividends declared ($0.408 per share)																						(14,736	)				(14,736	)
Equity-based compensation plans and other																				354							354
Ending Balance - March 31, 2023																36,163	$	36,163	$	396,011	$	666,196		$	—	$	1,098,370

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Statements of Income (unaudited)

(In thousands)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022
Operating Revenues:
Electric revenues	$	110,127		$	100,645		$	117,291		$	110,127
Gas revenues		98,811			67,270			99,962			98,811
Total Operating Revenues		208,938			167,915			217,253			208,938

Operating Expenses:
Fuel for electric generation		13,485			13,171			13,807			13,485
Purchased power		12,543			9,355			15,386			12,543
Cost of gas sold		64,802			37,444			67,847			64,802
Other operations and maintenance		49,746			45,538			49,569			49,746
Depreciation and amortization		21,046			18,382			24,611			21,046
Other general taxes		5,205			4,827			5,610			5,205
Total Operating Expenses		166,827			128,717			176,830			166,827
Operating Income		42,111			39,198			40,423			42,111

Other income (expense), net		3,519			(104	)
Other income, net								2,907			3,519
Interest expense, net		(6,577	)		(5,753	)		(7,520	)		(6,577	)
Income before income taxes		39,053			33,341			35,810			39,053
Income tax (provision) benefit		(7,000	)		433
Income tax provision								(6,167	)		(7,000	)
Net Income	$	32,053		$	33,774		$	29,643		$	32,053
Less: Net Income Attributable to Noncontrolling Interest, net of tax		(4,756	)		(5,501	)		(5,520	)		(4,756	)
Net Income Attributable to MGE	$	27,297		$	28,273		$	24,123		$	27,297

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2022			2021			2023			2022
Operating Activities:
Net income	$	32,053		$	33,774		$	29,643		$	32,053
Items not affecting cash:
Depreciation and amortization		21,046			18,382			24,611			21,046
Deferred income taxes		5,230			(1,766	)		5,679			5,230
Provision for doubtful receivables		441			388			441			441
Employee benefit plan cost (credit)		(1,678	)		1,461			(648	)		(1,678	)
Other items		587			(252	)		(1,146	)		587
Changes in working capital items:
Decrease (increase) in current assets		11,810			(3,037	)
Decrease in current liabilities		(4,648	)		(4,037	)
Decrease in current assets								27,758			11,810
Decrease in accounts payable								(18,515	)		(11,258	)
(Decrease) increase in other current liabilities								(4,835	)		6,610
Cash contributions to pension and other postretirement plans		(1,660	)		(1,552	)		(1,785	)		(1,660	)
Other noncurrent items, net		(500	)		(1,380	)		(5,224	)		(500	)
Cash Provided by Operating Activities		62,681			41,981			55,979			62,681

Investing Activities:
Capital expenditures		(30,778	)		(34,746	)		(47,556	)		(30,778	)
Other		(164	)		(462	)		(387	)		(164	)
Cash Used for Investing Activities		(30,942	)		(35,208	)		(47,943	)		(30,942	)

Financing Activities:
Cash dividends paid to parent by MGE		(5,000	)		0			(12,500	)		(5,000	)
Distributions to parent from noncontrolling interest		(9,000	)		(5,000	)		(6,000	)		(9,000	)
Repayments of long-term debt		(1,211	)		(1,182	)		(20,542	)		(1,211	)
(Repayments of) proceeds from short-term debt		(5,500	)		1,500
Issuance of long-term debt								69,300			—
Repayments of short-term debt								(37,500	)		(5,500	)
Other		(492	)		(523	)		(1,296	)		(492	)
Cash Used for Financing Activities		(21,203	)		(5,205	)		(8,538	)		(21,203	)

Change in cash, cash equivalents, and restricted cash		10,536			1,568			(502	)		10,536
Cash, cash equivalents, and restricted cash at beginning of period		7,798			6,404			10,500			7,798
Cash, cash equivalents, and restricted cash at end of period	$	18,334		$	7,972		$	9,998		$	18,334

Supplemental disclosures of cash flow information:
Significant noncash investing activities:
Accrued capital expenditures	$	6,735		$	8,843		$	4,402		$	6,735

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Balance Sheets (unaudited)

(In thousands)


	March 31,		December 31,		March 31,		December 31,
ASSETS	2022		2021		2023		2022
Current Assets:
Cash and cash equivalents	$	17,159	$	6,401	$	5,075	$	4,136
Accounts receivable, less reserves of $8,952 and $6,940, respectively		50,167		46,205
Affiliate receivables		530		558
Other accounts receivable, less reserves of $1,213 and $1,364, respectively		15,242		16,092
Accounts receivable, less reserves of $7,894 and $7,050, respectively						52,612		55,407
Other accounts receivable, less reserves of $1,351 and $1,323, respectively						11,664		11,416
Unbilled revenues		30,839		34,812		31,654		43,086
Materials and supplies, at average cost		30,951		29,863		34,697		33,465
Fuel for electric generation, at average cost		6,331		6,429		11,605		7,962
Stored natural gas, at average cost		5,580		15,668		23,132		32,848
Prepaid taxes		15,193		19,379		12,181		18,467
Regulatory assets - current		2,205		1,465		16,790		9,541
Other current assets		11,152		11,071		14,452		19,479
Total Current Assets		185,349		187,943		213,862		235,807
Affiliate receivable long-term		1,456		1,589
Regulatory assets		108,271		107,547		100,556		103,900
Pension benefit asset		62,806		58,757		70,591		68,872
Other deferred assets and other		26,806		27,907		23,280		24,817
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,843,150		1,828,199		1,890,812		1,865,380
Construction work in progress		40,156		50,603		106,322		105,748
Total Property, Plant, and Equipment		1,883,306		1,878,802		1,997,134		1,971,128
Investments		177		230		130		115
Total Assets	$	2,268,171	$	2,262,775	$	2,405,553	$	2,404,639

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,920	$	4,889	$	35,046	$	54,314
Short-term debt		0		5,500		33,000		70,500
Accounts payable		44,672		64,130		38,696		59,317
Accrued interest and taxes		9,417		10,649		6,437		7,912
Accrued payroll related items		9,296		12,951		9,888		13,064
Regulatory liabilities - current		24,557		9,365		17,017		11,925
Derivative liabilities		130		2,140
Other current liabilities		5,324		5,968		5,852		6,062
Total Current Liabilities		98,316		115,592		145,936		223,094
Other Credits:
Deferred income taxes		200,507		198,885		225,872		219,258
Investment tax credit - deferred		48,773		44,836		48,260		48,735
Regulatory liabilities		155,096		154,298		153,253		156,988
Accrued pension and other postretirement benefits		72,881		73,085		53,850		53,607
Finance lease liabilities		16,920		17,322		17,286		17,108
Other deferred liabilities and other		92,126		92,152		94,763		98,217
Total Other Credits		586,303		580,578		593,284		593,913
Capitalization:
Common shareholder's equity		826,104		803,807		865,846		854,223
Noncontrolling interest		144,343		148,587		147,683		148,163
Total Equity		970,447		952,394		1,013,529		1,002,386
Long-term debt		613,105		614,211		652,804		585,246
Total Capitalization		1,583,552		1,566,605		1,666,333		1,587,632
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization	$	2,268,171	$	2,262,775	$	2,405,553	$	2,404,639

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

Madison Gas and Electric Company

Consolidated Statements of Equity (unaudited)

(In thousands)


										Accumulated																	Accumulated
					Additional					Other		Non-										Additional					Other		Non-
	Common Stock				Paid-in		Retained			Comprehensive		Controlling						Common Stock				Paid-in		Retained			Comprehensive		Controlling
	Shares		Value		Capital		Earnings			Income/(Loss)		Interest			Total
Three Months Ended March 31, 2021
Beginning balance		17,348	$	17,348	$	252,917	$	460,151		$	0	$	141,196		$	871,612
Net income								28,273					5,501			33,774
Distributions to parent from noncontrolling interest													(5,000	)		(5,000	)
Ending Balance - March 31, 2021		17,348	$	17,348	$	252,917	$	488,424		$	0	$	141,697		$	900,386
																		Shares		Value		Capital		Earnings			Income/(Loss)		Interest			Total
Three Months Ended March 31, 2022
Beginning balance		17,348	$	17,348	$	252,917	$	533,542		$	0	$	148,587		$	952,394			17,348	$	17,348	$	252,917	$	533,542		$	—	$	148,587		$	952,394
Net income								27,297					4,756			32,053									27,297					4,756			32,053
Cash dividends paid to parent by MGE								(5,000	)							(5,000	)								(5,000	)							(5,000	)
Distributions to parent from noncontrolling interest													(9,000	)		(9,000	)													(9,000	)		(9,000	)
Ending Balance - March 31, 2022		17,348	$	17,348	$	252,917	$	555,839		$	0	$	144,343		$	970,447			17,348	$	17,348	$	252,917	$	555,839		$	—	$	144,343		$	970,447

Three Months Ended March 31, 2023
Beginning balance																			17,348	$	17,348	$	252,917	$	583,958		$	—	$	148,163		$	1,002,386
Net income																									24,123					5,520			29,643
Cash dividends paid to parent by MGE																									(12,500	)							(12,500	)
Distributions to parent from noncontrolling interest																														(6,000	)		(6,000	)
Ending Balance - March 31, 2023																			17,348	$	17,348	$	252,917	$	595,581		$	—	$	147,683		$	1,013,529

The accompanying notes are an integral part of the above unaudited consolidated financial statements.

MGE Energy, Inc., and Madison Gas and Electric Company

Notes to Consolidated Financial Statements (unaudited)

March 31, ~~2022~~2023

Summary of Significant Accounting Policies – MGE Energy and MGE.

Basis of Presentation.

This report is a combined report of MGE Energy and MGE. References in this report to "MGE Energy" are to MGE Energy, Inc. and its subsidiaries. References in this report to "MGE" are to Madison Gas and Electric Company.

MGE Power Elm Road and MGE Power West Campus own electric generating assets and lease those assets to MGE. Both entities are variable interest entities under applicable authoritative accounting guidance. MGE is considered the primary beneficiary of these entities as a result of contractual agreements. As a result, MGE has consolidated MGE Power Elm Road and MGE Power West Campus. See Footnote 3 of Notes to Consolidated Financial Statements under Item 8, Financial Statements and Supplementary Data, of MGE Energy's and MGE's ~~2021~~2022 Annual Report on Form 10-K (the ~~2021~~2022 Annual Report on Form ~~10-K)~~10-K).

The accompanying consolidated financial statements as of March 31, ~~2022,~~2023, and during the three months ended March 31, ~~2022,~~2023, are unaudited but include all adjustments that MGE Energy and MGE management consider necessary for a fair statement of their respective financial statements. All adjustments are of a normal, recurring nature except as otherwise disclosed. The year-end consolidated balance sheet information was derived from the audited balance sheet appearing in the ~~2021~~2022 Annual Report on Form 10-K but does not include all disclosures required by accounting principles generally accepted in the United States of America. These notes should be read in conjunction with the financial statements and the notes on pages 6157 through ~~115~~107 of the ~~2021~~2022 Annual Report on Form ~~10-K.~~10-K.

Cash, Cash Equivalents, and Restricted Cash.

The following table presents the components of total cash, cash equivalents, and restricted cash on the consolidated balance sheets.


	MGE Energy				MGE				MGE Energy				MGE
	March 31,		December 31,		March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
(In thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Cash and cash equivalents	$	26,374	$	17,438	$	17,159	$	6,401	$	14,708	$	11,604	$	5,075	$	4,136
Restricted cash		641		847		641		847		104		867		104		867
Receivable - margin account		534		550		534		550		4,819		5,497		4,819		5,497
Cash, cash equivalents, and restricted cash	$	27,549	$	18,835	$	18,334	$	7,798	$	19,631	$	17,968	$	9,998	$	10,500

Cash Equivalents

All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.

Restricted Cash

MGE has certain cash accounts that are restricted to uses other than current operations and designated for a specific purpose. MGE's restricted cash accounts include cash held by trustees for certain employee benefits and cash deposits held by third parties. These are included in "Other current assets" on the consolidated balance sheets.

Receivable – Margin Account

Cash amounts held by counterparties as margin collateral for certain financial transactions are recorded as Receivable – margin account in "Other current assets" on the consolidated balance sheets. The costs being hedged are fuel for electric generation, purchased power, and cost of gas sold.

Property, Plant, and Equipment.

Columbia.

An asset that will be retired in the near future and substantially in advance of its previously expected retirement date is subject to abandonment accounting. In the second quarter of 2021, the operator of Columbia received approval from MISO to retire Columbia Units 1 and 2. The co-owners intend to retire Unit 1 ~~by the end of 2023~~ and Unit 2 by ~~the end of 2024.~~June 2026. Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors. As of March 31, ~~2022,~~2023, early retirement of Columbia was probable.

The net book value of our ownership share of this generating unit was $~~156.7~~145.2 million as of March 31, ~~2022.~~2023. This amount was classified as plant to be retired within "Property, plant, and equipment, net" on the consolidated balance sheets. Assets for Columbia Unit 1 and Unit 2 are currently included in rate base, and MGE continues to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW that included retirement dates of 2029 for Unit 1 and 2038 for Unit 2. MGE is currently seeking approval from the PSCW in its 2023 electric limited reopener to revise the depreciation schedule for Columbia Unit 2 to 2029 to align with Unit 1. See Footnote 9 for further details on MGE's rate proceedings.both Units.

If it becomes probable that regulators will disallow full recovery or a return on the remaining net book value of a generating unit that is either abandoned or probable of being abandoned, an impairment loss would be required. An impairment loss would be recorded ~~for~~to the ~~difference of~~extent that the remaining net book value of the generating unit ~~that is greater than~~exceeds the present value of the amount expected to be recovered from ratepayers. ~~NaN~~No impairment was recorded as of March 31, ~~2022.~~2023.

New Accounting Standards - MGE Energy and MGE.

MGE Energy and MGE reviewed FASB authoritative guidance recently issued, none of which are expected to have a material impact on their consolidated results of operations, financial condition, or cash flows.

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				Three Months Ended
	March 31,				March 31,
(In thousands)	2022		2021		2023		2022
Equity earnings from investment in ATC	$	2,478	$	2,420	$	2,583	$	2,478
Dividends received from ATC		2,001		1,967		2,206		2,001
Capital contributions to ATC		1,243		0		357		1,243

ATC Holdco was formed in December 2016. ATC Holdco's transmission development activities have been suspended for the near term.

In April ~~2022,~~2023, MGE Transco made a $~~0.5~~1.6 million capital contribution to ATC.

ATC's summarized financial data is as follows:


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(In thousands)	2022			2021			2023			2022
Operating revenues	$	190,999		$	188,694		$	200,426		$	190,999
Operating expenses		(95,491	)		(95,104	)		(99,076	)		(95,491	)
Other income, net		404			378			391			404
Interest expense, net		(28,440	)		(28,871	)		(32,910	)		(28,440	)
Earnings before members' income taxes	$	67,472		$	65,097		$	68,831		$	67,472

MGE receives transmission and other related services from ATC. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, MGE recorded $~~7.9~~8.5 million and $~~8.0~~7.9 million, respectively, for transmission ~~services.~~service. MGE also provides a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, MGE had a receivable due from ATC of $~~8.1~~5.2 million and $~~7.0~~4.8 million, respectively. The receivable is primarily related to transmission interconnection activities at Badger Hollow I and ~~II.~~Paris solar generation sites. MGE iswill be reimbursed for these costs after the new generation assets are placed into service.

Taxes - MGE Energy and MGE.

Effective Tax Rate.

The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:


	MGE Energy								MGE								MGE Energy								MGE
Three Months Ended March 31,	2022				2021				2022				2021				2023				2022				2023				2022
Statutory federal income tax rate		21.0		%		21.0		%		21.0		%		21.0		%		21.0		%		21.0		%		21.0		%		21.0		%
State income taxes, net of federal benefit		6.3				6.3				6.3				6.3				6.3				6.3				6.2				6.3
Amortized investment tax credits		(0.7	)			(1.6	)			(0.8	)			(1.8	)			(0.8	)			(0.7	)			(0.8	)			(0.8	)
Credit for electricity from wind energy		(5.4	)			(7.1	)			(6.0	)			(7.8	)
Credit for electricity from renewable energy																		(6.0	)			(5.4	)			(6.5	)			(6.0	)
AFUDC equity, net		(0.5	)			(0.6	)			(0.5	)			(0.6	)			(0.5	)			(0.5	)			(0.5	)			(0.5	)
Amortization of utility excess deferred tax - tax reform(a)		(1.9	)			(16.7	)			(1.8	)			(18.3	)			(1.8	)			(1.9	)			(1.9	)			(1.8	)
Other, net, individually insignificant		(0.2	)			0				(0.3	)			(0.1	)			(0.2	)			(0.2	)			(0.3	)			(0.3	)
Effective income tax rate		18.6		%		1.3		%		17.9		%		(1.3	)	%		18.0		%		18.6		%		17.2		%		17.9		%

(a)

Included are impacts of the 2017 Tax Act for the regulated utility for excess deferred taxes recognized using a normalization method of accounting in recognition of IRS rules that restrict the rate at which the excess deferred taxes may be returned to utility customers. For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, MGE recognized $0.9 million and $1.0 million, ~~and $0.7~~ ~~million,~~ respectively. Included in the 2021 rate settlement was a one-time return to customers of the electric portion of excess deferred taxes related to the 2017 Tax Act not restricted by IRS normalization rules. For the three months ended March 31, 2021, MGE recognized $~~3.3~~ ~~million.~~ Included in the 2022 and 2023 rate settlement was a net collection from customers of the gas portion of deficient deferred taxes related to the 2017 Tax Act not restricted by IRS normalization rules. For both the three months ended March 31, 2023 and 2022, MGE recognized $0.3 million.

Pension and Other Postretirement Plans - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits and defined contribution 401(k) benefit plans for its employees and retirees.

The components of net periodic benefit cost, other than the service cost component, are recorded in "Other income, net" on the consolidated statements of income. The service cost component is recorded in "Other operations and maintenance" on the consolidated statements of income. MGE has regulatory treatment and recognizes regulatory assets or liabilities for timing differences between when net periodic benefit costs are recovered and when costs are recognized.

The following table presents the components of net periodic benefit costs recognized.


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(In thousands)	2022			2021			2023			2022
Pension Benefits
Components of net periodic benefit cost:
Service cost	$	1,337		$	1,422		$	752		$	1,337
Interest cost		2,796			2,272			4,322			2,796
Expected return on assets		(7,851	)		(7,375	)		(6,322	)		(7,851	)
Amortization of:
Prior service credit		(5	)		(31	)		—			(5	)
Actuarial loss		724			1,580			388			724
Net periodic benefit (credit) cost	$	(2,999	)	$	(2,132	)	$	(860	)	$	(2,999	)

Postretirement Benefits
Components of net periodic benefit cost:
Service cost	$	333		$	351		$	200		$	333
Interest cost		491			384			819			491
Expected return on assets		(843	)		(817	)		(651	)		(843	)
Amortization of:
Transition obligation		1			1			1			1
Prior service credit		(74	)		(380	)		—			(74	)
Actuarial loss		48			109
Actuarial (gain) loss								(30	)		48
Net periodic benefit (credit) cost	$	(44	)	$	(352	)	$	339		$	(44	)

As approved by the PSCW, MGE is allowed to defer differences between actual employee benefit plan costs and costs reflected in current rates. The deferred costs may be recovered or refunded in MGE's next rate filing. During the three months ended March 31, ~~2022 and 2021,~~2023, MGE ~~recovered~~deferred $~~0.3~~ ~~million and $3.4~~0.4 million of pension and other postretirement ~~costs, respectively. The recovery of these costs reduced the amount previously deferred and has not been reflected in the table above.~~

costs. During the three months ended March 31, 2022, MGE ~~returned~~recovered $~~1.0~~0.3 million of ~~savings from 2021 employee benefit plan costs. The deferred savings has~~pension and other postretirement costs previously deferred. These costs have not been reflected in the table above.

Equity and Financing Arrangements.

Common Stock - MGE Energy.

Shares of MGE Energy ~~sells shares of its~~ common stock are sold through ~~its~~MGE Energy's Direct Stock Purchase and Dividend Reinvestment Plan (the Stock Plan). Those shares may be newly issued shares or shares that are purchased in the open market by an independent agent for participants in the Stock Plan. ~~All sales~~Sales of newly issued shares under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, MGE Energy issued 0no new shares of common stock under the Stock Plan.

Dilutive Shares Calculation - MGE Energy.

As of March 31, ~~2022,~~2023, ~~7,492~~16,392 shares were included in the calculation of diluted earnings per share related to nonvested equity awards. See Footnote 7 for additional information on share-based compensation awards.

Long-Term Debt - MGE Energy and MGE.

In March 2023, $19.3 million of City of Madison, Wisconsin Industrial Development Revenue Refunding Bonds (Madison Gas and Electric Company Project), Series 2020A were remarketed. As a result of the remarketing, the Series 2020A Bonds will carry an interest rate of 3.75% per annum over its remaining

5-year life. The remarketed Series 2020A Bonds will not be subject to further remarketing or optional redemption prior to their maturity.

Share-Based Compensation - MGE Energy and MGE.

During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, MGE recorded $~~0.4~~1.1 million and $~~0.7~~0.4 million, respectively, in compensation expense related to share-based compensation ~~awards under the 2006 Performance Unit Plan, the 2020 Performance Unit Plan, the 2013 Director Incentive Plan, and the 2021 Long-Term Incentive Plan (2021 Plan).~~awards.

In ~~January 2022,~~the first quarter of 2023, cash payments of $~~1.8~~3.6 million were distributed related to awards that were granted in ~~2019, for~~2020 under the 2013 Director Incentive Plan, ~~and in 2017, for~~2018 under the 2006 Performance Unit Plan, and 2020 under the 2020 Performance Unit Plan.

In ~~February 2022,~~March 2023, MGE issued ~~10,395~~11,320 performance units and ~~15,931~~20,472 restricted stock units under the 2021 Plan to eligible employees and non-employee directors.

MGE recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Awards classified as equity awards are measured based on their grant-date fair value. Awards classified as liability awards are recorded at fair value each reporting period. The performance units can be paid out in either cash, shares of common stock or a combination of cash and stock and are classified as a liability award. The restricted stock units will be paid out in shares of common stock, and therefore are classified as equity awards.

Commitments and ~~Contingencies.~~Contingencies - MGE Energy and MGE.

~~Environmental - MGE Energy and MGE.~~Environmental.

In February 2021, MGE and the other co-owners of Columbia announced plans to retire that facility. The co-owners intend to retire Unit 1 ~~by the end of 2023~~ and Unit 2 by ~~the end of 2024.~~June 2026. Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors. Effects of environmental compliance requirements discussed below will depend upon the final retirement dates approved and compliance requirement dates.

MGE Energy and MGE are subject to frequently changing local, state, and federal regulations concerning air quality, water quality, land use, threatened and endangered species, hazardous materials handling, and solid waste disposal. These regulations affect the manner in which operations are conducted, the costs of operations, as well as capital and operating expenditures. Several of these environmental rules are subject to legal challenges, reconsideration and/or other uncertainties. Regulatory initiatives, proposed rules, and court challenges to adopted rules could have a material effect on capital expenditures and operating costs. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

These initiatives, proposed rules, and court challenges include:

•

The EPA's promulgated water Effluent Limitations Guidelines (ELG) and standards for steam electric power plants which focus on the reduction of metals and other pollutants in wastewater from new and existing power plants.

In July 2021, the PSCW approved a Certificate of Authority (CA) application filed by MGE and the other owners of Columbia. The CA application commits to close ~~Columbia~~'sColumbia's wet pond system (as described in further detail in the CCR section below). ~~By committing to close~~With the closure of the wet pond system, Columbia will be in compliance with ELG requirements.

The Elm Road Units must satisfy the ELG rule's requirements no later than December 2023, as determined by the permitting authority. In December 2021, the PSCW approved a CA application for installation of additional wastewater treatment equipment to comply with the ELG Rule. MGE's share of the ~~estimated~~ costs to comply with the rule is estimated to be approximately $4 million. Construction began in March ~~2022.~~2022 and is scheduled to be completed by the end of 2023.

In March 2023, the EPA published a proposed update to this rule that further regulates the wastewater discharges associated with coal-fired power plants. The proposed rule focuses on wastewater discharges from flue gas desulfurization, bottom ash transport water, and combustion residual leachate. The proposed rule includes some flexibility for plants that have already installed pollution controls based on previous versions of the rule, and flexibility for plants that will be retiring or switching to natural gas by certain dates. MGE expects this rule, if finalized as proposed, to impact our Elm Road Units. We are currently evaluating the proposed rule.

•

The EPA's cooling water intake rules require cooling water intake structures at electric power plants to meet best technology available (BTA) standards to reduce the mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens).

Blount's WPDES permit assumes that the plant meets BTA standards for the duration of ~~the~~its permit which expires in 2023. Before the next permit renewal, MGE is required to complete an entrainment study and recommend a BTA along with alternative technologies considered. MGE completed the entrainment study in 2021 and submitted the results to the WDNR. The WDNR will

~~make the final BTA determination and~~ include any BTA requirements in Blount's next permit renewal, which is expected to be completed ~~by the end of 2022~~ and effective in 2023. ~~Management believes that~~Once the WDNR determines the BTA ~~determination~~requirements at Blount, MGE will ~~not~~ be ~~material for MGE.~~able to determine any compliance costs of meeting Blount's permit requirements.

~~Columbia's river intakes~~Intakes at Columbia are subject to this rule. Columbia's operator received a permit in 2019 requiring studies of intake structures to be submitted to the WDNR by November 2023 to help determine BTA. BTA improvements may not be required given that the owners are planning to retire both units by ~~the end~~June of ~~2024.~~2026. MGE will continue to work with Columbia's operator to evaluate all regulatory requirements applicable to the planned retirements. MGE does not expect this rule to have a material effect on ~~its existing plants.~~Columbia.

•

Greenhouse Gas (GHG) reduction guidelines and approval criteria established under the Clean Air Act for states to use in developing plans to control GHG emissions from fossil fuel-fired electric generating units (EGUs), including existing and proposed regulations governing existing, new or modified fossil-fuel generating units.

~~In October 2021, as part~~WCCF, the Elm Road Units, Blount, and Columbia could be impacted by GHG reduction guidelines and approval criteria established under the Clean Air Act for the control of GHG emissions from fossil fuel-fired electric generating units (EGUs). The EPA is undertaking a new rulemaking under section 111(d) of the ~~Biden administration's Unified Agenda, the EPA announced their intention~~Clean Air Act to ~~introduce a new set of~~establish emission guidelines ~~for states to follow in submitting state plans to establish~~ and ~~implement standards of performance for greenhouse gas~~limit GHG emissions from existing fossil fuel-fired EGUs. ~~In late 2021,~~The EPA is also conducting a comprehensive review of the ~~US Supreme Court agreed to hear arguments regarding the extent of~~New Source Performance Standards (NSPS) and may set new emission standards for GHG emissions from new, modified, and/or reconstructed fossil fuel-fired power plants. The EPA'~~s authority to regulate greenhouse gases from electric generation units under the Clean Air Act.~~ anticipates issuing a proposed rule in 2023 and promulgating a final rule by summer 2024. MGE will continue to evaluate greenhouse gas rule developments, including any new EPA actions towards rule development, and any further ~~Supreme Court~~court decisions on the ~~EPA~~'sEPA's authority to regulate greenhouse gases.

•

The EPA's rule to regulate ambient levels of ozone through the 2015 Ozone National Ambient Air Quality Standards (NAAQS).

The Elm Road Units are located in Milwaukee County, Wisconsin, a "moderate" nonattainment area. The ~~Wisconsin Department of Natural Resources (WDNR) must develop a State Implementation Plan (SIP)~~deadline for ~~the area, which will likely result in more stringent requirements for both constructing new development and modifying or expanding existing plants in the area.~~moderate classified areas to meet attainment standards is August 2024. MGE will continue to monitor the ~~WDNR's SIP~~Wisconsin Department of Natural Resources State Implementation Plan development and the extent to which the requirements will impact the Elm Road Units. At this time, ~~MGE~~the operator of the Elm Road Units does not expect that the 2015 Ozone NAAQS will have a material effect on ~~its existing plants~~the Units based on final designations.

•

The EPA's proposed rule to regulate Fine Particulate Matter (PM2.5).

In January 2023, the EPA published a proposed rule to lower the average annual PM2.5 NAAQS from its current level. The EPA has also solicited comments on whether to lower the annual standard further than the proposed level, and whether or not to also lower the maximum 24-hour

limit to be consistent with recommendations from its Clean Air Scientific Advisory Committee (CASAC). As the rule is currently proposed, the annual PM2.5 NAAQS and the 24-hour limit recommended by the CASAC is not expected to impact the counties where Columbia and the Elm Road Units are located. However, if the annual PM2.5 NAAQS is lowered further than the EPA's currently proposed value, the county where the Elm Road Units are located may be in nonattainment with the standard. A nonattainment designation would require the State of Wisconsin to develop a plan to get into attainment. However, we will not know the impact of this rule with any certainty until it is finalized, EPA determines the attainment status of Wisconsin counties, and the State of Wisconsin develops an attainment implementation plan. MGE will continue to follow the rule's developments.

•

Rules regulating nitrogen oxide (NOx) and sulfur dioxide (SO2) emissions, including the Cross State Air Pollution Rule (CSAPR) and Clean Air Visibility Rule.

The EPA's CSAPR and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and ~~fine particulate (PM2.5)~~PM2.5 ambient air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states. This is accomplished in the CSAPR through a reduction in NOx and SO2 ~~and NO~~xfrom qualifying fossil-fuel fired power plants in upwind "contributing" states. NOxand SO2contribute to fine particulate pollution and NOx contributes to ozone formation in downwind areas. Reductions are generally achieved through a cap-and-trade system. Individual plants can meet their caps through reducing emissions and/or buying allowances on the market.

In ~~April 2022,~~March 2023, the EPA ~~published a proposed~~finalized its Federal Implementation Plan (FIP) to address state obligations under the Clean Air Act "good neighbor" provisions for the 2015 Ozone NAAQS. ~~This proposed~~The final rule impacts 2623 states, including ~~Wisconsin, and is designed to both revise the current NO~~x ~~CSAPR ozone season cap-and-trade obligations for fossil-fuel generated power plants and add NO~~x ~~limitations for certain industries in specified states.~~Wisconsin. For Wisconsin, the ~~proposed~~ rule includes revisions to the current obligations for fossil-fuel power generation, ~~as well as~~which includes Blount, Columbia, the ~~new limitations for certain industries.~~

~~If finalized, the proposed~~Elm Road Units, WCCF, West Riverside, and West Marinette. The final rule ~~would be~~is effective beginning with the 2023 ozone ~~season and start with emissions~~season. Emissions budgets ~~that~~ can be ~~achieved~~met with ~~what the EPA has defined as~~planned retirements, fuel switching, and immediately available measures, including consistently operating emissions controls already installed at power plants. MGE expects to meet the emission reductions with immediately available measures. In 2026, additional obligations would go into effect, including ~~potential daily~~a further reduction in emissions ~~limits and technology upgrades to coal-fired power plants without existing emission controls.~~

budgets. Wisconsin would need to submit a State Implementation Plan (SIP) to meet its obligations or accept the EPA's ~~proposed~~ FIP.

MGE is ~~currently evaluating~~reviewing the ~~proposed rule~~final rule. Based on our current evaluation, the 2026 additional emission reductions may impact the Elm Road Units and additional upgrades may be needed to ~~determine potential impacts to our business. MGE expects the rule, if finalized as written, to impact our fossil-fueled generation assets. However,~~comply, however, we will not know the final impact ~~of this rule with any certainty~~ until ~~it is finalized. We will continue to monitor rule developments.~~

MGE has met its current CSAPR obligations through a combination of reduced emissions through pollution control (e.g., SCR installation at Columbia), and owned, received, and purchased allowances. MGE expects to meet ongoing CSAPR obligations for the foreseeable future.evaluations are completed.

•

The EPA's Coal Combustion Residuals ~~Rule~~ (CCR)~~, which~~ Rule.

The CCR rule regulates as a solid waste coal ash from burning coal for the purpose of generating electricity and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash. The CCR rule also regulates landfills, ash ponds, and other surface impoundments used for coal combustion residuals by regulating their design, location, monitoring, and operation. The CCR rule requires owners or operators of coal-fired power plants to stop transporting CCR and non-CCR wastewater to unlined surface impoundments. In addition, regulated entities must initiate impoundment closure as soon as feasible and in no event later than April 2021, unless the EPA grants an extension. ~~Columbia requested an~~A site-specific extension to initiate closure of the primary ash pond at Columbia by ~~October 2022.~~March 31, 2023 was requested, and was met. The EPA has ~~not formally approved~~confirmed that Columbia met the ~~extension. The~~required extension requirements, has documented that Columbia ~~owners anticipate~~ceased the receipt of waste on March 23, 2023, and has noted that ~~the EPA will approve the extension request. However, we will not know the outcome~~Columbia's obligations under this portion of the ~~extension request with any certainty until the EPA makes a final decision on this request.In the interim, the EPA determined that the extension demonstration is complete and confirmed that the deadline to cease placement of~~ CCR ~~and non-CCR wastewaters in the primary pond is tolled pending a final decision.~~Rule are now complete.

~~Review of the Elm Road Units has indicated that the costs to comply with the CCR rule are not expected to be significant.~~ In July 2021, the PSCW approved a CA application filed by MGE and the other owners of Columbia to install technology required to cease bottom ash transport water discharges rather than extend the longevity of the ash ponds. ~~Pending~~The coal combustion residuals system that replaced the ~~EPA’s final approval of closure plans at Columbia,~~unlined surface impoundment was placed in-service in March 2023. MGE's share of the ~~estimated~~ costs of the project ~~will be~~is approximately $4 million. ~~Construction is~~

Review of the Elm Road Units has indicated that the costs to comply with the CCR rule are not expected to be ~~completed by the end of 2022.~~significant.

Legal ~~Matters - MGE Energy and MGE.~~Matters.

MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE accrues for costs that are probable of being incurred and subject to reasonable estimation. The accrued amount for these matters is not material to the financial statements. MGE does not expect the resolution of these matters to have a material adverse effect on its consolidated results of operations, financial condition, or cash flows.

Certain environmental groups filed petitions against the PSCW regarding MGE's ~~two most recent~~ rate ~~settlements.~~settlement and electric limited reopener. MGE has intervened in the petitions in cooperation with the PSCW. See Footnote 9.a. for more information regarding this matter.

~~Purchase Contracts - MGE Energy and MGE.~~Purchase Contracts.

MGE Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet their obligations to deliver electricity and natural gas to customers. Management expects to recover these costs in future customer rates. The following table shows future commitments related to purchase contracts as of March 31, ~~2022:~~2023:


(In thousands)	2022		2023		2024		2025		2026		Thereafter		2023		2024		2025		2026		2027		Thereafter
Coal(a)	$	17,825	$	14,023	$	8,299	$	2,862	$	0	$	0	$	22,125	$	21,460	$	12,049	$	2,868	$	—	$	—

(a)

Total coal commitments for MGE's share of the Columbia and Elm Road Units, including transportation. Fuel procurement for MGE's jointly owned Columbia and Elm Road Units is handled by WPL and WEPCO, respectively, who are the operators of those facilities.

Rate Matters - MGE Energy and MGE.

Rate Proceedings.

~~In April 2022, MGE filed with the PSCW a proposed electric limited 2023 rate case reopener. The limited reopener proposes a~~ ~~4.38~~% increase for electric rates in 2023. The electric rate increase is driven by generation assets including our investments in Badger Hollow II (solar), Paris (solar and battery), Red Barn (wind), and West Riverside (natural gas). In addition, the reopener request includes a reduction in fuel costs, which MGE has partially offset with the recovery of deferred 2021 fuel costs. The reopener also revises the depreciation schedule for Columbia Unit 2 and shared equipment to 2029 to align with the depreciation schedule for Columbia Unit 1. PSCW approval of the 2023 limited reopener is pending. A final order is expected before the end of the year.


	Rate increase	Return on Common Equity	Common Equity Component of Regulatory Capital Structure	Effective Date
Approved 2022/2023 settlement(a)
Electric	8.81%	9.8%	55.6%	1/1/2022
Gas	2.15%	9.8%	55.6%	1/1/2022
Gas	0.96%	9.8%	55.6%	1/1/2023
Approved limited 2023 reopener(b)
Electric	9.01%	9.8%	55.6%	1/1/2023
Proposed 2024/2025 rate proceeding(c)
Electric(d)	3.75%	9.8%	56.1%	1/1/2024
Gas(d)	2.56%	9.8%	56.1%	1/1/2024
Electric(e)	3.41%	9.8%	56.1%	1/1/2025
Gas(e)	1.66%	9.8%	56.1%	1/1/2025

~~In December 2021, the PSCW approved a settlement agreement for MGE's 2022 rate case. The settlement agreement provides for an~~ (a)~~8.81% increase for electric rates and a~~ ~~2.15% increase for gas rates in 2022.~~

The electric and gas rate increases were driven by an increase in rate base including our investments in Badger Hollow I and a new customer information system. Also driving the requested electric increase were higher fuel and purchased power costs as well as the completion in 2021 of the one-time return of the electric excess deferred tax credit related to the 2017 Tax Act not restricted by IRS normalization rules. Included in the electric residential rate is a reduction in the customer charge. ~~As part of the settlement agreement, for 2023, the PSCW approved a~~

(b)~~0.96% increase in gas rates and to address a potential electric rate change through a limited rate case reopener. The return on common stock equity for 2022 and 2023 is~~ ~~9.8% based on a capital structure consisting of~~ ~~55.6% common equity.~~

~~In December 2020, the PSCW approved a settlement agreement for MGE's 2021 rate case. The settlement agreement provided for a~~ 0 ~~percent increase for electric rates and an approximately~~ 4~~% increase for gas rates in 2021.~~

The electric rate ~~settlement~~increase was driven by generation assets including our investments in Badger Hollow II (solar), Paris (solar and battery), Red Barn (wind), and West Riverside (natural gas). In addition, the reopener request included an increase in fuel costs and the recovery of deferred 2021 fuel costs. The reopener also revised the depreciation schedule for Columbia Unit 2 and shared equipment to 2029 to align with the depreciation schedule for Unit 1.

(c)

In April 2023, MGE filed a proposed 2-year rate case and PSCW approval is pending. A final order is expected before the end of the year.

(d)

The proposed electric rate increase is driven by an increase in rate base ~~but~~including our investments made in West Riverside, local solar, and continued investment in grid modernization. Also driving the ~~associated rate~~requested electric increase ~~was primarily~~is higher costs for transmission, pension and OPEB, and uncollectible costs (including costs previously deferred from prior years). This increase in electric costs is offset by ~~lower~~a decrease in fuel ~~and purchased power~~ costs and ~~a one-time $18.2~~ ~~million return to customers of~~benefit from lower tax expense (including impacts from the ~~portion of excess deferred taxes related to the 2017 Tax Act not restricted by IRS normalization rules. As part of the settlement, the fuel rules bandwidth was set at plus or minus~~ 1~~% for 2021. When compared to the 2020 rate case, the settlement included lower forecasted electric sales for 2021 to reflect changes to customer usage during the COVID-19 pandemic.~~Inflation Reduction Act). The proposed gas rate increase ~~covered infrastructure costs~~is also attributable to our investment made in grid modernization and ~~technology improvements. The settlement agreement also included escrow accounting treatment for~~higher pension and ~~other postretirement~~OPEB and uncollectible costs (including costs previously deferred from prior years). The proposed gas increase is offset by a tax benefit ~~costs, bad debt expense,~~related to excess deferred taxes.

(e)

The proposed electric and ~~customer credit card fees. Escrow accounting treatment allows MGE to defer any difference between estimated costs~~gas rate increases are driven by an increase in ~~rates~~rate base for our continued investment in grid modernization projects and ~~actual costs incurred until a future rate filing. Any difference would be recorded as a regulatory asset or regulatory liability. The return on common stock equity for 2021 was~~ ~~9.8% based on a capital structure of~~ ~~55.8% common equity~~an increase in ~~2021.~~

labor costs.

Sierra Club and Vote Solar have filed petitions with the Dane County Circuit Court seeking review of the PSCW decision approving MGE's ~~two most recent~~electric and gas 2022/2023 rate ~~settlements (2021~~settlement and 2023 electric limited reopener. The Dane County Circuit Court affirmed the PSCW's decision to approve the 2022/~~2023).~~2023 rate settlement, and Sierra Club and Vote Solar have now appealed that decision to the Wisconsin Court of Appeals. The PSCW is named as the responding party; MGE is not named as a party. The petitions challenge the ~~process the PSCW used to approve the portion~~amount of ~~the settlements relating to electric rates and the electric~~ customer fixed charge that does not vary with usage. The requested relief is unclear. The revenue requirement approved by the PSCW in the ~~settlements~~settlement and limited reopener have not been challenged. The PSCW is expected to vigorously defend its approval of the rate case ~~settlements.~~settlement and limited reopener. MGE has intervened in the proceedings to further defend the PSCW's decision.

~~Fuel~~Fuel Rules.

Fuel rules require 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 set at plus or minus 2% in 2023 and 1%~~. Under fuel rules, MGE defers~~ in 2022. The electric fuel-related costs ~~less any~~are subject to an excess revenues ~~if its actual electric fuel costs exceed~~ ~~101% of the electric fuel costs allowed in its latest rate order.~~test. 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 recovery of under-collected electric fuel-related costs would be reduced by the ~~benefit of lower costs if actual electric~~

~~fuel costs were less than~~ 99~~% of~~amount that exceeds the ~~electric fuel costs allowed in that order.~~excess revenue test. These costs are subject to the PSCW's annual review of fuel costs completed in the year following the deferral. The following table summarized deferred electric fuel-related costs:


	Fuel Costs (in millions)	Refund or Recovery Period
2021 deferred fuel costs	$3.3(a)	January 2023 through December 2023(b)
2022 deferred fuel costs	$8.8	(c)

~~The PSCW issued a final decision in the 2019 fuel rules proceedings regarding $~~

~~1.5~~(a)

~~million of deferred savings giving MGE the option either to use the $1.5~~ million as part of the settlement to MGE's 2021 rate case or to refund the balance to customers in October 2020. MGE elected to include the savings as part of the 2021 rate change settlement as described above, reducing electric retail rates as opposed to a one-time credit back to retail customers. There was no change to the ~~refund~~recovery in the fuel rules proceedings from the amount MGE deferred ~~in the previous year.~~

(b)

In ~~September 2021,~~August 2022, the PSCW issued a final decision in the ~~2020~~2021 fuel rules proceedings for MGE to ~~refund $3.2~~ ~~million~~include the recovery of ~~additional fuel savings realized during 2020 plus accrued interest to its retail~~these costs as part of the 2023 electric ~~customers over a one-month period in October 2021. There was no change to the refund in the fuel rules proceedings from the amount MGE deferred in the previous year.~~limited reopener.

(c)

~~MGE has under recovered fuel costs in 2021. As of December 31, 2021, MGE had deferred $3.3~~ ~~million of 2021 fuel costs.~~

These costs will be subject to the PSCW's annual review of ~~2021~~2022 fuel costs, expected to be completed in ~~2022.~~2023. MGE has proposed to ~~include~~recover these costs ~~as part of the~~over a 12-month period from October 2023 ~~electric limited reopener.~~

~~As of March 31, 2022, MGE had~~ 0 ~~deferred 2022 fuel savings or costs.~~

through September 2024.

10.

Derivative and Hedging Instruments - MGE Energy and MGE.

Purpose.

As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, the derivatives are recognized in the consolidated balance sheets at fair value. MGE's financial commodity derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability depending on whether the derivative is in a net loss or net gain position, respectively. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for

regulatory treatment are recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism.

Notional Amounts.

The gross notional volume of open derivatives is as follows:

March 31, 2022

December 31, 2021

March 31, 2023

December 31, 2022

Commodity derivative contracts

369,960

MWh

278,000

MWh

381,960

MWh

353,600

MWh

Commodity derivative contracts

3,260,000

Dth

5,735,000

Dth

7,370,000

Dth

8,070,000

Dth

FTRs

858

2,127

759

1,945

PPA

100

250

Financial Statement Presentation.

MGE purchases and sells exchange-traded and over-the-counter options, swaps, and future contracts. These arrangements are primarily entered into to help stabilize the price risk associated with gas or power purchases. These transactions are employed by both MGE's gas and electric segments. Additionally, as a result of the firm transmission agreements that MGE holds on electricity transmission paths in the MISO market, MGE holds financial transmission rights (FTRs). An FTR is a financial instrument that entitles the holder to a stream of revenues or charges based on the differences in

hourly day-ahead energy prices between two points on the transmission grid. The fair values of these instruments are offset with a corresponding regulatory asset/liability depending on whether they are in a net loss/gain position. Depending on the nature of the instrument, the gain or loss associated with these transactions will be reflected as cost of gas sold, fuel for electric generation, or purchased power expense in the delivery month applicable to the instrument. As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, the ~~fair value~~cost basis of exchange traded derivatives and FTRs exceeded their ~~cost basis~~fair value by $~~9.8~~7.8 million and $~~2.8~~5.1 million, respectively.

MGE iswas a party to a purchased power agreement that ~~provides~~provided MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. The agreement iswas accounted for as a derivative contract and iswas recognized at its fair value on the consolidated balance sheets. However, the derivative ~~qualifies~~qualified for regulatory deferral and iswas recognized with a corresponding regulatory asset or liability depending on whether the fair value iswas in a loss or gain position. The ~~fair value of the contract as of March 31, 2022, and December 31, 2021, reflected a loss position of $0.1~~ ~~million and $2.1~~ ~~million, respectively. The~~ actual cost ~~will be~~was recognized in purchased power expense in the month of purchase.

The following table summarizes the fair value of the derivative instruments on the consolidated balance sheets. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, instruments are netted with the same counterparty under a master netting agreement as well as the netting of collateral.


	Derivative		Derivative			Derivative		Derivative
(In thousands)	Assets		Liabilities		Balance Sheet Location	Assets		Liabilities		Balance Sheet Location
March 31, 2022
Commodity derivative contracts(a)	$	9,518	$	325	Other current assets
Commodity derivative contracts(a)		626		32	Other deferred charges
FTRs(a)		0		16	Derivative liability (current)
PPA	N/A			130	Derivative liability (current)

December 31, 2021
March 31, 2023
Commodity derivative contracts(a)	$	2,959	$	811	Other current assets	$	945	$	8,413	Other current liabilities
Commodity derivative contracts(a)		420		38	Other deferred charges		94		443	Other deferred liabilities and other
FTRs		227		0	Other current assets		4		—	Other current assets
PPA	N/A			2,140	Derivative liability (current)

December 31, 2022
Commodity derivative contracts(a)						$	2,164	$	7,687	Other current liabilities
Commodity derivative contracts(a)							802		476	Other deferred liabilities and other
FTRs							103		—	Other current assets

(a)

As of March 31, ~~2022~~2023, and December 31, ~~2021, MGE received~~2022, collateral of $~~6.9~~7.8 million and $~~1.3~~5.2 million, respectively, ~~from counterparties under a master netting agreement for outstanding exchange traded~~was posted against and netted with derivative ~~positions.~~liability positions on the consolidated balance sheets. The fair value of the derivative ~~asset~~liability disclosed in this table has not been reduced for the collateral ~~received.~~posted.

The following tables show the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the consolidated balance sheets.

Offsetting of Derivative Assets


(In thousands)	Gross Amounts		Gross Amounts Offset in Balance Sheets			Collateral Posted Against Derivative Positions			Net Amount Presented in Balance Sheets		Gross Amounts		Gross Amounts Offset in Balance Sheets			Collateral Posted Against Derivative Positions		Net Amount Presented in Balance Sheets
March 31, 2022
Commodity derivative contracts	$	10,144	$	(357	)	$	(6,911	)	$	2,876

December 31, 2021
March 31, 2023
Commodity derivative contracts	$	3,379	$	(849	)	$	(1,254	)	$	1,276	$	1,039	$	(1,039	)	$	—	$	—
FTRs		227		0			0			227		4		—			—		4

December 31, 2022
Commodity derivative contracts											$	2,966	$	(2,966	)	$	—	$	—
FTRs												103		—			—		103

Offsetting of Derivative Liabilities

(In thousands)

Gross Amounts

Gross Amounts Offset in Balance Sheets

Collateral Posted Against Derivative Positions

Net Amount Presented in Balance Sheets

March 31, 2022

Commodity derivative contracts

$
357

$
(357
)

$
0

$
0

FTRs

16

0

(16
)

0

PPA

130

0

0

130

December 31, 2021

Commodity derivative contracts

$
849

$
(849
)

$
0

$
0

PPA

2,140

0

0

2,140


(In thousands)	Gross Amounts		Gross Amounts Offset in Balance Sheets			Collateral Posted Against Derivative Positions			Net Amount Presented in Balance Sheets
March 31, 2023
Commodity derivative contracts	$	8,856	$	(1,039	)	$	(7,817	)	$	—

December 31, 2022
Commodity derivative contracts	$	8,163	$	(2,966	)	$	(5,197	)	$	—

The following tables summarize the unrealized and realized gains/losses related to the derivative instruments on the consolidated balance sheets and the consolidated statements of income.


	2022						2021						2023						2022
(In thousands)	Current and Long-Term Regulatory Asset (Liability)			Other Current Assets			Current and Long-Term Regulatory Asset (Liability)			Other Current Assets			Current and Long-Term Regulatory Asset (Liability)			Other Current Assets			Current and Long-Term Regulatory Asset (Liability)			Other Current Assets
Three Months Ended March 31:
Balance as of January 1,	$	(617	)	$	770		$	13,989		$	1,162		$	5,094		$	2,747		$	(617	)	$	770
Unrealized gain		(11,333	)		0			(3,588	)		0
Realized gain (loss) reclassified to a deferred account		1,279			(1,279	)		(50	)		50
Realized gain (loss) reclassified to income statement		1,030			776			708			(1,039	)
Unrealized (loss) gain														14,303			—			(11,333	)		—
Realized (loss) gain reclassified to a deferred account														(6,917	)		6,917			1,279			(1,279	)
Realized (loss) gain reclassified to income statement														(4,667	)		(9,209	)		1,030			776
Balance as of March 31,	$	(9,641	)	$	267		$	11,059		$	173		$	7,813		$	455		$	(9,641	)	$	267


	Realized Losses (Gains)											Realized Losses (Gains)
	2022						2021					2023					2022
(In thousands)	Fuel for Electric Generation/ Purchased Power			Cost of Gas Sold			Fuel for Electric Generation/ Purchased Power			Cost of Gas Sold		Fuel for Electric Generation/ Purchased Power			Cost of Gas Sold		Fuel for Electric Generation/ Purchased Power			Cost of Gas Sold
Three Months Ended March 31:
Commodity derivative contracts	$	(312	)	$	(881	)	$	(195	)	$	1,022	$	7,445		$	6,451	$	(312	)	$	(881	)
FTRs		3			0			(256	)		0		(20	)		—		3			—
PPA		(616	)		0			(240	)		0		—			—		(616	)		—

MGE's commodity derivative contracts, FTRs, and PPA are subject to regulatory deferral. These derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Realized gains and losses are deferred on the consolidated balance sheets and are recognized in earnings in the delivery month applicable to the instrument. As a result of the treatment described above, there are no unrealized gains or losses that flow through earnings.

The PPA has a provision that may require MGE to post collateral if MGE's debt rating falls below investment grade (i.e., below BBB-). The amount of collateral that it may be required to post varies from $

~~20.0~~ ~~million to $40.0~~ ~~million, depending on MGE's nominated capacity amount. As of March 31, 2022,~~ 0 ~~collateral was required to be, or had been, posted.~~ Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of March 31, ~~2022~~2023, and December 31, ~~2021,~~2022, 0no counterparties were in a net liability position.

Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss. However, MGE enters into transactions only with companies that meet or exceed strict credit guidelines, and it monitors these counterparties on an ongoing basis to mitigate nonperformance risk in its portfolio. As of March 31, ~~2022,~~2023, 0no counterparties had defaulted.

11.

Fair Value of Financial Instruments - MGE Energy and MGE.

Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The accounting standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability including assumptions about risk. The standard also establishes a three-level fair value hierarchy based upon the observability of the assumptions used and requires the use of observable market data when available. The levels are:

Level 1 - Pricing inputs are quoted prices within active markets for identical assets or liabilities.

Level 2 - Pricing inputs are quoted prices within active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations that are correlated with or otherwise verifiable by observable market data.

Level 3 - Pricing inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability.

Fair Value of Financial Assets and Liabilities Recorded at the Carrying Amount.

The carrying amount of cash, cash equivalents, and outstanding commercial paper approximates fair market value due to the short maturity of those investments and obligations. The estimated fair market value of long-term debt is based on quoted market prices for similar financial instruments. Since long-term debt is not traded in an active market, it is classified as Level 2. The estimated fair market value of financial instruments are as follows:


	March 31, 2022				December 31, 2021				March 31, 2023				December 31, 2022
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt(a)		622,238		643,259		623,449		729,914	$	692,319	$	639,555	$	643,560	$	571,374

(a)

Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $~~4.2~~4.5 million and $~~4.3~~4.0 million as of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, respectively.

Recurring Fair Value Measurements.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.


	Fair Value as of March 31, 2022								Fair Value as of March 31, 2023
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	10,144	$	3,183	$	0	$	6,961	$	1,043	$	794	$	—	$	249
Exchange-traded investments		1,443		1,443		0		0		1,659		1,659		—		—
Total Assets	$	11,587	$	4,626	$	0	$	6,961	$	2,702	$	2,453	$	—	$	249
Liabilities:
Derivatives, net(b)	$	503	$	321	$	0	$	182	$	8,856	$	4,867	$	—	$	3,989
Deferred compensation		3,613		0		3,613		0		4,759		—		4,759		—
Total Liabilities	$	4,116	$	321	$	3,613	$	182	$	13,615	$	4,867	$	4,759	$	3,989

MGE
Assets:
Derivatives, net(b)	$	10,144	$	3,183	$	0	$	6,961	$	1,043	$	794	$	—	$	249
Exchange-traded investments		177		177		0		0		130		130		—		—
Total Assets	$	10,321	$	3,360	$	0	$	6,961	$	1,173	$	924	$	—	$	249
Liabilities:
Derivatives, net(b)	$	503	$	321	$	0	$	182	$	8,856	$	4,867	$	—	$	3,989
Deferred compensation		3,613		0		3,613		0		4,759		—		4,759		—
Total Liabilities	$	4,116	$	321	$	3,613	$	182	$	13,615	$	4,867	$	4,759	$	3,989


	Fair Value as of December 31, 2021								Fair Value as of December 31, 2022
(In thousands)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	3,606	$	1,170	$	0	$	2,436	$	3,069	$	1,353	$	—	$	1,716
Exchange-traded investments		1,296		1,296		0		0		1,516		1,516		—		—
Total Assets	$	4,902	$	2,466	$	0	$	2,436	$	4,585	$	2,869	$	—	$	1,716
Liabilities:
Derivatives, net(b)	$	2,989	$	731	$	0	$	2,258	$	8,163	$	5,581	$	—	$	2,582
Deferred compensation		3,653		0		3,653		0		4,743		—		4,743		—
Total Liabilities	$	6,642	$	731	$	3,653	$	2,258	$	12,906	$	5,581	$	4,743	$	2,582

MGE
Assets:
Derivatives, net(b)	$	3,606	$	1,170	$	0	$	2,436	$	3,069	$	1,353	$	—	$	1,716
Exchange-traded investments		230		230		0		0		115		115		—		—
Total Assets	$	3,836	$	1,400	$	0	$	2,436	$	3,184	$	1,468	$	—	$	1,716
Liabilities:
Derivatives, net(b)	$	2,989	$	731	$	0	$	2,258	$	8,163	$	5,581	$	—	$	2,582
Deferred compensation		3,653		0		3,653		0		4,743		—		4,743		—
Total Liabilities	$	6,642	$	731	$	3,653	$	2,258	$	12,906	$	5,581	$	4,743	$	2,582

(b)

As of March 31, ~~2022~~2023, and December 31, ~~2021 MGE received~~2022, collateral of $7.8 million and $~~6.9~~ ~~million and $1.3~~5.2 million, respectively, ~~from counterparties under a master netting agreement for outstanding exchange traded~~was posted against and netted with derivative ~~positions.~~liability positions on the consolidated balance sheets. The fair value of the derivative ~~asset~~liability disclosed in this table has not been reduced for the collateral ~~received.~~posted.

Exchange-traded Investments.Investments include exchange-traded investment securities valued using quoted prices on active exchanges and are therefore classified as Level 1.

Deferred Compensation.The deferred compensation ~~plan allows~~plans allow participants to defer certain cash compensation into a notional investment ~~account.~~accounts. These amounts are included within other deferred liabilities in the consolidated balance sheets. The value of certain deferred compensation obligations is based on the market value of the participants' notional investment accounts. The underlying notional

investments are comprised primarily of equities, mutual funds, and fixed income securities which are based on directly and indirectly observable market prices. Since the deferred compensation obligations themselves are not exchanged in an active market, they are classified as Level 2.

The value of legacy deferred compensation obligations are based on notional investments that earn interest based upon the semiannual rate of U.S. Treasury Bills having a 26-week maturity increased by 1% compounded monthly with a minimum

annual rate of 7%, compounded monthly. The notional investments are based upon observable market data, however, since the deferred compensation obligations themselves are not exchanged in an active market, they are classified as Level 2.

Derivatives.Derivatives include exchange-traded derivative contracts, over-the-counter transactions, a purchased power agreement, and FTRs. Most exchange-traded derivative contracts are valued based on unadjusted quoted prices in active markets and are therefore classified as Level 1. A small number of exchange-traded derivative contracts are valued using quoted market pricing in markets with insufficient volumes and are therefore considered unobservable and classified as Level 3. Transactions done with an over-the-counter party are on inactive markets and are therefore classified as Level 3. These transactions are valued based on quoted prices from markets with similar exchange-traded transactions. FTRs are priced based upon monthly auction results for identical or similar instruments in a closed market with limited data available and are therefore classified as Level 3.

The purchased power agreement, with a term ended May 2022, (see Footnote ~~10)~~10) was valued using an internal pricing model and therefore iswas classified as Level 3. ~~The~~See the 2022 Annual Report on Form 10-K for details on the internal pricing model ~~projects future market energy prices~~ and compares those prices to the projected power costs to be incurred under the contract. Inputs to the model require significant management judgment and estimation. Future energy prices are based on a forward power pricing curve using exchange-traded contracts in the electric futures market. A basis adjustment is applied to the market energy price to reflect the price differential between the market price delivery point and the counterparty delivery point. The historical relationship between the delivery points is reviewed and a discount (below 100%) or premium (above 100%) is derived. This comparison is done for both peak times when demand is high and off-peak times when demand is low. If the basis adjustment is lowered, the fair value measurement will decrease, and if the basis adjustment is increased, the fair value measurement will increase.

The projected power costs anticipated to be incurred under the purchased power agreement are determined using many factors, including historical generating costs, future prices, and expected fuel mix of the counterparty. An increase in the projected fuel costs would result in a decrease in the fair value measurement of the purchased power agreement. A significant input that MGE estimates is the counterparty's fuel mix in determining the projected power cost. MGE also considers the assumptions that market participants would use in valuing the asset or liability. This consideration includes assumptions about market risk such as liquidity, volatility, and contract duration. The fair value model uses a discount rate that incorporates discounting, credit, and model risks.

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

Model Input

March 31,

December 31,
Significant Unobservable Inputs

2022

2021
Basis adjustment:

On peak

92.1%

94.1%
Off peak

90.0%

92.4%
Counterparty fuel mix:

Internal generation - range

41%-66%

41%-66%
Internal generation - weighted average

49.5%

56.6%
Purchased power - range

59%-34%

59%-34%
Purchased power - weighted average

50.5%

43.4%

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				Three Months Ended
	March 31,				March 31,
(In thousands)	2022		2021		2023		2022
Beginning balance	$	178	$	(14,055)	$	(866)	$	178
Realized and unrealized gains (losses):
Included in regulatory assets		0		2,688		(2,874)		—
Included in regulatory liability		6,600		0		—		6,600
Included in other comprehensive income		0		0		—		—
Included in earnings		855		307		(4,671)		855
Included in current assets		73		355		—		73
Purchases		7,026		5,884		—		7,026
Sales		0		0		—		—
Issuances		0		0		—		—
Settlements		(7,953)		(6,546)		4,671		(7,953)
Balance as of March 31,	$	6,779	$	(11,367)	$	(3,740)	$	6,779
Total gains (losses) included in earnings attributed to the change in unrealized gains (losses) related to assets and liabilities held as of March 31,(c)	$	0	$	0	$	—	$	—

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				Three Months Ended
	March 31,				March 31,
(In thousands)	2022		2021		2023		2022
Purchased power expense	$	973	$	702	$	(4,671)	$	973
Cost of gas sold expense		(118)		(395)		—		(118)
Total	$	855	$	307	$	(4,671)	$	855

(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.

12.

Joint Plant Construction Project Ownership - MGE Energy and MGE

MGE ~~currently~~ has purchased, completed, or ongoing jointly-owned ~~solar~~ generation construction projects, as shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" or "Construction work in progress" on the consolidated balance sheets.

Project

Ownership Interest

Source

Share of Generation

Share of Estimated Costs(a)

Costs incurred
as of
March 31,

Estimated Date of
Commercial

~~Project~~

~~Interest~~

~~Generation~~

~~Estimated Costs~~ 2023(a)

~~2022(a)~~

Date of Commercial Operation

Red Barn(b)(c)

10%

Wind

9.16 MW

$18 million

$~~0.6~~0.4 million

~~December 2022~~April 2023

Badger Hollow II~~(c)~~(d)

33%

Solar

50 MW

$6576 million

$~~23.8~~52.1 million~~(d)~~(g)

~~First Half~~Second half of 2023(h)

Paris(e)

10%

Solar/Battery

20 MW/11 MW

$51 million

$24.0 million

2023(h)(i)

Darien(f)

10%

Solar/Battery

25 MW/ 7.5 MW

$45 million

$1.1 million

2024(h)(i)

West Riverside

3.4%

Natural Gas

25 MW

$25 million

$24.8 million

(j)

(a)

Excluding AFUDC.

(b)

The Red Barn Wind Farm is located in the Towns of Wingville and Clifton in Grant County, Wisconsin.

(c)

In April 2023, the Red Barn Wind Farm was placed in-service. MGE acquired its share of the project upon in-service date. MGE's share of the total costs incurred for Red Barn was $16.4 million after the April closing.

(d)

The Badger Hollow II solar farm is located in southwestern Wisconsin in Iowa County, near the villages of Montfort and Cobb.

~~(d)~~(e)

Paris Solar-Battery Park is located in the Town of Paris in Kenosha County, Wisconsin.

(f)

Darien Solar Energy Center is located in Walworth and Rock Counties in southern Wisconsin.

(g)

Includes an allocation of common facilities at Badger Hollow placed in service in November 2021.

(h)

Estimated date of commercial operation.

(i)

Battery storage timing to be determined.

(j)

In March 2023, MGE purchased an ownership interest in West Riverside, a natural gas-fired facility located in Beloit, WI, from WPL, operator and co-owner of the plant. West Riverside was placed in-service in 2020.

MGE received specific approval to recover 100% AFUDC on Badger Hollow ~~II.~~II, Paris, and Darien. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, MGE recognized $~~0.4~~1.4 million and $~~0.1~~0.4 million, respectively, after tax, in AFUDC for ~~Badger Hollow II.~~these projects.

13.

Revenue - MGE Energy and MGE.

Revenues disaggregated by revenue source were as follows:


	Three Months Ended				Three Months Ended
(In thousands)	March 31,				March 31,
Electric revenues	2022		2021		2023		2022
Residential	$	40,474	$	36,694	$	41,220	$	40,474
Commercial		54,449		47,883		59,537		54,449
Industrial		3,147		3,001		3,286		3,147
Other-retail/municipal		8,829		8,170		9,619		8,829
Total retail		106,899		95,748		113,662		106,899
Sales to the market		2,882		4,639		2,758		2,882
Other		308		222		824		308
Total electric revenues		110,089		100,609		117,244		110,089

Gas revenues
Residential		56,683		39,758		55,724		56,683
Commercial/Industrial		40,251		25,507		41,503		40,251
Total retail		96,934		65,265		97,227		96,934
Gas transportation		1,876		2,002		2,532		1,876
Other		1		3		203		1
Total gas revenues		98,811		67,270		99,962		98,811

Non-regulated energy revenues		38		36		47		38
Total Operating Revenue	$	208,938	$	167,915	$	217,253	$	208,938

~~Performance Obligations~~

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of contracts have a single performance obligation.

~~Retail Revenue (Residential, Commercial, Industrial, and Other Retail/Municipal)~~

Providing electric and gas utility service to retail customers represents MGE's core business activity. Tariffs are approved by the PSCW through a rate order and provide MGE's customers with the standard terms and conditions, including pricing terms. The performance obligation to deliver electricity or gas is satisfied over time as the customer simultaneously receives and consumes the commodities provided by MGE. MGE recognizes revenues as the commodity is delivered to customers. Meters are read on a systematic basis throughout the month based on established meter-reading schedules and customers are subsequently billed for services received. At the end of the month, MGE accrues an estimate for unbilled commodities delivered to customers. The unbilled revenue estimate is based on daily system demand volumes, weather factors, estimated line losses, estimated customer usage by class, and applicable customer rates.

~~Utility Cost Recovery Mechanisms~~

MGE's tariff rates include a provision for fuel cost recovery. The PSCW allows Wisconsin utilities to defer electric fuel-related costs, less excess revenues, that fall outside a symmetrical cost tolerance band. Any over- or under-recovery of the actual costs in a given year is determined in the following year and is then reflected in future billings to electric retail customers. Over-collection of fuel-related costs that are outside the approved range will be recognized as a reduction of revenue. Under-collection of these costs will be recognized in "Purchased power" expense in the consolidated statements of income. The cumulative effects of these deferred amounts will be recorded in "Regulatory assets" or "Regulatory liabilities" on the consolidated balance sheets until they are reflected in future billings to customers. See Footnote 9.b. for further information.

MGE also has other cost recovery mechanisms. For example, any over-collection of the difference between actual costs incurred and the amount of costs collected from customers is recorded as a reduction of revenue in the period incurred.

2928

~~Sales to the Market~~

Sales to the market include energy charges, capacity or demand charges, and ancillary charges represented by wholesale sales of electricity made to third parties who are not ultimate users of the electricity. Most of these sales are spot market transactions on the markets operated by MISO. Each transaction is considered a performance obligation and revenue is recognized in the period in which energy charges, capacity or demand charges, and ancillary services are sold into MISO. MGE reports, on a net basis, transactions on the MISO markets in which it buys and sells power within the same hour to meet electric energy delivery requirements.

~~Transportation of Gas~~

MGE has contracts under which it provides gas transportation services to customers who have elected to purchase gas from a third party. MGE delivers this gas via pipelines within its service territory. Revenue is recognized as service is rendered or gas is delivered to customers. Tariffs are approved by the PSCW through a rate order and provide gas transportation customers with standard terms and conditions, including pricing terms.

14.

Segment Information - MGE Energy and MGE.

MGE Energy operates in the following business segments: electric utility, gas utility, nonregulated energy, transmission investment, and all other. See the ~~2021~~2022 Annual Report on Form 10-K for additional discussion of each of these segments.


(In thousands) MGE Energy	Electric		Gas		Non-Regulated Energy		Transmission Investment		All Others			Consolidation/ Elimination			Consolidated Total		Electric			Gas		Non-Regulated Energy		Transmission Investment		All Others			Consolidation/ Elimination			Consolidated Total
Three Months Ended March 31, 2023
Operating revenues																	$	117,244		$	99,962	$	47	$	—	$	—		$	—		$	217,253
Interdepartmental revenues																		(52	)		6,661		10,550		—		—			(17,159	)		—
Total operating revenues																		117,192			106,623		10,597		—		—			(17,159	)		217,253
Equity in earnings of investments																		—			—		—		2,611		—			—			2,611
Net income (loss)																		13,314			10,759		5,570		1,899		(464	)		—			31,078

Three Months Ended March 31, 2022
Operating revenues	$	110,089	$	98,811	$	38	$	0	$	0		$	—		$	208,938	$	110,089		$	98,811	$	38	$	—	$	—		$	—		$	208,938
Interdepartmental revenues		118		6,121		10,315		0		0			(16,554	)		—		118			6,121		10,315		—		—			(16,554	)		—
Total operating revenues		110,207		104,932		10,353		0		0			(16,554	)		208,938		110,207			104,932		10,353		—		—			(16,554	)		208,938
Equity in earnings of investments		0		0		0		2,504		0			0			2,504		—			—		—		2,504		—			—			2,504
Net income		14,617		12,084		5,352		1,822		545			0			34,420		14,617			12,084		5,352		1,822		545			—			34,420

Three Months Ended March 31, 2021
Operating revenues	$	100,609	$	67,270	$	36	$	0	$	0		$	—		$	167,915
Interdepartmental revenues		273		4,811		10,173		0		0			(15,257	)		—
Total operating revenues		100,882		72,081		10,209		0		0			(15,257	)		167,915
Equity in earnings of investments		0		0		0		2,444		0			0			2,444
Net income (loss)		18,024		10,556		5,194		1,778		(619	)		0			34,933


(In thousands) MGE	Electric		Gas		Non-Regulated Energy		Consolidation/ Elimination			Consolidated Total		Electric			Gas		Non-Regulated Energy		Consolidation/ Elimination			Consolidated Total
Three Months Ended March 31, 2023
Operating revenues												$	117,244		$	99,962	$	47	$	—		$	217,253
Interdepartmental revenues													(52	)		6,661		10,550		(17,159	)		—
Total operating revenues													117,192			106,623		10,597		(17,159	)		217,253
Net income attributable to MGE													13,314			10,759		5,570		(5,520	)		24,123

Three Months Ended March 31, 2022
Operating revenues	$	110,089	$	98,811	$	38	$	—		$	208,938	$	110,089		$	98,811	$	38	$	—		$	208,938
Interdepartmental revenues		118		6,121		10,315		(16,554	)		—		118			6,121		10,315		(16,554	)		—
Total operating revenues		110,207		104,932		10,353		(16,554	)		208,938		110,207			104,932		10,353		(16,554	)		208,938
Net income attributable to MGE		14,617		12,084		5,352		(4,756	)		27,297		14,617			12,084		5,352		(4,756	)		27,297

Three Months Ended March 31, 2021
Operating revenues	$	100,609	$	67,270	$	36	$	—		$	167,915
Interdepartmental revenues		273		4,811		10,173		(15,257	)		—
Total operating revenues		100,882		72,081		10,209		(15,257	)		167,915
Net income attributable to MGE		18,024		10,556		5,194		(5,501	)		28,273

3029

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

General

MGE Energy is an investor-owned public utility holding company operating through subsidiaries in five business segments:

•

Regulated electric utility operations, conducted through MGE,

•

Regulated gas utility operations, conducted through MGE,

•

Nonregulated energy operations, conducted through MGE Power and its subsidiaries,

•

Transmission investments, representing our equity investment in ATC and ATC Holdco, and

•

All other, which includes corporate operations and services.

Our principal subsidiary is MGE, which generates and distributes electric energy, distributes natural gas, and represents a majority portion of our assets, liabilities, revenues, and expenses. MGE generates, purchases, and distributes electricity to approximately ~~159,000~~161,000 customers in Dane County, Wisconsin, including the city of Madison, and purchases and distributes natural gas to approximately ~~169,000~~173,000 customers in the Wisconsin counties of Columbia, Crawford, Dane, Iowa, Juneau, Monroe, and Vernon.

Our nonregulated energy operations own interests in electric generating capacity that is leased to MGE. The ownership/leasing structure was adopted under applicable state regulatory guidelines for MGE's participation in these generation facilities, consisting principally of a stable return on the equity investment in the new generation facilities over the term of the related leases. The nonregulated energy operations include an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin and a partial ownership of a cogeneration project on the UW-Madison campus. A third party operates the units in Oak Creek, and MGE operates the cogeneration project. Due to the nature of MGE's participation in these facilities, the results of MGE Energy's nonregulated operations are also consolidated into MGE's consolidated financial position and results of operations under applicable accounting standards.

Executive Overview

Our primary focus today and for the foreseeable future is our core utility customers at MGE as well as creating long-term value for our shareholders. MGE continues to face the challenge of providing its customers with reliable power at competitive prices. MGE works on meeting this challenge by investing in more efficient generation projects, including renewable energy sources. As we work toward achieving 80% carbon reduction by 2030 (from 2005 levels), MGE continues to examine and pursue opportunities to reduce the proportion that coal generation represents in its generation mix, as evidenced by its most recent announcements of the retirement of Columbia (a coal generation plant), the planned change in the Elm Road Units fuel source from coal to natural gas, and its growing ownership of renewable generation sources. MGE will continue to focus on growing earnings while controlling operating and fuel costs. MGE's goal is to provide safe and efficient operations in addition to providing customer value. We believe it is critical to maintain a strong credit rating consistent with financial strength in MGE ~~as well as the parent company~~ in order to accomplish these goals.

We principally earn revenue and generate cash from operations by providing electric and natural gas utility services, including electric power generation and electric power and gas distribution. The earnings and cash flows from the utility business are sensitive to various external factors, including:

•

Weather, and its impact on customer sales,

•

Economic conditions, including current business activity and employment and their impact on customer demand,

•

Regulation and regulatory issues, and their impact on the timing and recovery of costs,

•

Energy commodity prices, including natural gas prices,

•

Equity price risk pertaining to pension related assets,

•

Credit market conditions, including interest rates and our debt credit rating,

•

Environmental laws and regulations, including adopted and pending environmental rule changes, and

•

~~Governmental efforts to address the COVID-19 pandemic, including restrictions on activity, increased~~

~~employee health and welfare costs, and precautions for dealing with members of the public, and~~

•

Other factors listed in "Item 1A. Risk Factors" in our ~~2021~~2022 Annual Report on Form ~~10-K.~~10-K.

During the three months ended March 31, ~~2022,~~2023, MGE Energy's earnings were ~~$34.4~~$31.1 million or ~~$0.95~~$0.86 per share compared to ~~$34.9~~$34.4 million or ~~$0.97~~$0.95 per share during the same period in the prior year. MGE's earnings during the three months ended March 31, ~~2022,~~2023, were ~~$27.3~~$24.1 million compared to ~~$28.3~~$27.3 million during the same period in the prior year.

MGE Energy's net income was derived from our business segments as follows:


	Three Months Ended				Three Months Ended
(In millions)	March 31,				March 31,
Business Segment:	2022		2021		2023		2022
Electric Utility	$	14.6	$	18.0	$	13.3	$	14.6
Gas Utility		12.1		10.5		10.8		12.1
Nonregulated Energy		5.4		5.2		5.6		5.4
Transmission Investments		1.8		1.8		1.9		1.8
All Other		0.5		(0.6)		(0.5)		0.5
Net Income	$	34.4	$	34.9	$	31.1	$	34.4

Our net income during the three months ended March 31, ~~2022,~~2023, compared to the same periods in the prior year primarily reflects the effects of the following factors:

Electric Utility

~~An increase in~~Lower electric ~~investments contributed~~retail sales attributable to warmer than normal weather and higher fuel costs are the primary drivers of lower electric earnings for ~~2022. Timing of 2021 depreciation and other operations and maintenance costs contributed to higher earnings in~~the three months ended March 31, 2023. Electric retail sales decreased approximately 3% during the first quarter of ~~2021. Depreciation and operations and maintenance costs increased during~~2023 compared to the ~~remainder of 2021 after significant capital projects were completed. The new customer information system went live~~same period in ~~September 2021 and Badger Hollow I was completed in November 2021. MGE received approval to recover 100% AFUDC during construction of these projects.~~the prior year.

Gas Utility

~~An increase in gas investments contributed to increased earnings for 2022. Higher~~Lower gas retail sales resulting from ~~colder~~warmer than normal weather in the first quarter of ~~2022~~2023 contributed to ~~higher~~lower gas earnings for the three months ended March 31, ~~2022.~~2023. Gas retail sales decreased approximately 14%. Heating degree days (a measure for determining the impact of weather during the heating season) ~~increased~~decreased by approximately 4%14% in the first quarter ~~2022~~of 2023 compared to the same period in the prior year.

All Other

A decrease in investment distribution gains resulted in lower earnings in 2023 compared to the same period in the prior year.

The following developments affected the first three months of ~~2022:~~2023:

2022/2023 Rate Settlement ~~Agreement:~~Agreement and 2023 Electric Limited Rate Case Reopener: In December 2021, the PSCW approved a settlement agreement for MGE's 2022 rate case. ~~The settlement agreement provides for an 8.81% increase to electric rates and a 2.15% increase to gas rates for 2022.~~ As part of ~~the~~that settlement agreement, ~~for 2023,~~ the PSCW approved a 0.96% increase in 2023 gas rates and ~~to address~~ a ~~potential~~2023 electric rate change to be addressed through a limited rate case reopener. In December 2022, the PSCW approved an 9.01% increase to electric rates for 2023. See ~~"Other Matters"~~"Other Matters" below for additional information on the 2022/2023 rate case ~~settlement.~~settlement and 2023 Electric Limited Rate Case reopener.

Utility Solar: Large solar generation projects ~~were~~ recently purchased or completed or ~~are~~ under construction, asare shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" for projects placed in service, or "Construction work in progress" for projects under construction on the consolidated balance sheets.

Project

Ownership Interest

Source

Share of Generation

Share of
Estimated Costs(a)

Costs ~~Incurred~~ incurred
as of
March 31, ~~2022~~2023(a)

~~Estimated~~ Date of
Commercial Operation

Red Barn(b)

10%

~~9.16MW~~Wind

9.16 MW

$18 million

$~~0.6~~0.4 million

~~December 2022~~April 2023

Badger Hollow II

33%

Solar

50 MW

$6576 million

$~~23.8~~52.1 million~~(b)~~(c)(d)

Second half of 2023(e)

Paris

10%

Solar/Battery

20 MW/11 MW

$51 million

$24.0 million(c)

~~First Half of~~ 2023(e)(f)

Darien

10%

Solar/Battery

25 MW/ 7.5 MW

$45 million

$1.1 million(c)

2024(e)(f)

(a)

Excluding AFUDC.

(b)

In April 2023, the Red Barn Wind Farm was placed in-service. MGE acquired its share of the project upon in-service date. MGE's

share of the total costs incurred for Red Barn was $16.4 million after the April closing.

(c)

MGE received specific approval to recover 100% ~~AFUDC on Badger Hollow II.~~AFUDC. After tax, MGE recognized $3.3 million, $0.9 million, and $0.1 million of AFUDC equity through March 31, ~~2022,~~2023, on Badger Hollow II, Paris, and Darien, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.

~~(c)~~(d)

Includes an allocation of common facilities at Badger Hollow placed in service in November 2021.

32(e)

Estimated date of commercial operation.

(f)

Battery storage timing to be determined.

West Riverside: In March 2023, MGE purchased a 3.4% ownership interest in West Riverside a natural gas-fired facility from WPL, operator of the plant for approximately $25 million. MGE's share of the generation capacity of West Riverside is 25 MW.

In the near term, several items may affect us, including:

~~2021~~2022 Annual Fuel Proceeding: MGE ~~under recovered~~under-recovered fuel costs in ~~2021.~~2022. As of December 31, ~~2021,~~2022, MGE had deferred ~~$3.3~~$8.8 million of ~~2021~~2022 fuel costs. These costs will be subject to the PSCW's annual review of ~~2021~~2022 fuel costs, expected to be completed during ~~2022.~~2023. MGE has proposed to ~~include~~recover these costs ~~as part of the~~over a 12-month period from October 2023 ~~electric limited reopener.~~through September 2024.

~~2023 Electric Limited~~2024/2025 Rate ~~Case Reopener:~~Proceeding: In April ~~2022,~~2023, MGE filed with the PSCW a proposed 2024/2025 rate application. MGE has proposed for a 3.75% increase for electric ~~limited rate case reopener. The limited rate case reopener proposes~~rates and a ~~4.38%~~2.56% increase to gas rates for 2024. The proceeding addresses rates for 2025 proposing a 3.41% increase for electric rates and a 1.66% increase to gas rates for ~~2023.~~2025. A final order is expected before the end of the year. See ~~"Other Matters"~~"Other Matters" below for additional information on the ~~2023 electric limited reopener.~~2024/2025 rate proceeding.

ATC Return on Equity: As discussed in ~~"Other Matters"~~"Other Matters" below, ATC's authorized ROE, which is used in calculating its rates and revenues, is the subject of a challenge before FERC. A decrease in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately ~~5.1%~~5.9% and ~~5.0%~~5.1% of our net income during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, from our investment in ATC.

Environmental Initiatives: There are proposed legislative rules and initiatives involving matters related to air emissions, water effluent, hazardous materials, and greenhouse gases, all of which affect generation plant capital expenditures and operating costs as well as future operational planning. Legislation and rulemaking addressing climate change and related matters could significantly affect the costs of owning and operating fossil-fueled generating plants. We would expect to seek and receive recovery of any such costs in rates. However, it is difficult to estimate the amount of such costs due to the uncertainty as to the timing and form of any legislation or rules, and the scope and time of the recovery of costs in rates, which may occur after those costs have been incurred and paid.

Future Generation – 80% carbon reduction target by ~~2030:~~2030 (from 2005 levels): MGE has outlined initiatives to achieve our ~~new~~ target.

•

Transitioning away from coal. Columbia: ~~In February 2021,~~ MGE, along with the other plant co-owners, announced plans to retire ~~the two-unit coal-fired~~ Columbia ~~generating plant near Portage, Wisconsin. MGE currently owns 19% of the facility. The co-owners intend to retire~~ Unit 1 ~~by the end of 2023~~ and Unit 2 by ~~the end of 2024.~~June 2026. Final timing and retirement dates for Units 1 and 2 are subject to change depending on operational, regulatory, and other factors. MGE continues to evaluate additional investments to replace the generation from Columbia while maintaining electric service reliability. These investments include cost-effective, clean energy projects to help achieve MGE's carbon reduction goals.

Elm Road Units: ~~In November 2021,~~ MGE, along with the plant co-owners, announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. ~~MGE is a minority owner of Elm Road, owning 8.33%. The approximately 1,230 MW coal-fired plant is co-owned by WEC Energy Group, whose subsidiary serves as operator, and by WPPI Energy, Inc.~~ Transition plans and costs will be subject to PSCW approval. MGE's remaining use of coal is expected to be further reduced as the Elm Road Units transition to natural gas. By the end of 2030, MGE expects coal to be used only as a backup fuel at the Elm Road Units. This transition will help MGE meet its 2030 carbon reduction goals. By 2035, MGE expects that the Elm Road Units will be fully transitioned away from coal, which will eliminate coal as an internal generation source for MGE.

•

Growing renewable generation. ~~In addition to current projects under construction,~~ MGE ~~is seeking to acquire a joint interest~~has forecasted over 40% of capital expenditures for 2023 through 2027 in several renewable generation projects. These projects include announced projects such as ~~described below.~~Red

Project

Source

Ownership Interest

Share of
Generation/
Battery Storage

Share of
Estimated
Costs(c)(d)

Estimated Date of
Commercial Operation
Paris(a)

Solar/Battery

10%

20MW/11MW

$43 million

2023
Darien(b)

Solar/Battery

10%

25MW/7.5MW

$45 million

2023
Koshkonong(b)

Solar/Battery

10%

30MW/16.5MW

$65 million

2024(e)

~~(a)~~

~~Approved by the PSCW.~~

~~(b)~~

~~Pending approval by the PSCW. There is no certainty that this project will be approved by the PSCW.~~

~~(c)~~

~~Excluding AFUDC~~

3332

~~(d)~~

~~Requested,~~Barn (Wind; 9.16 MW), Badger Hollow II (Solar; 50 MW), Paris (Solar and Battery; 20 MW/11 MW), Darien (Solar and Battery; 25 MW/7.5 MW), recently PSCW approved solar project Koshkonong (Solar/Battery; 30 MW/16.5 MW), and other projects to be announced in the ~~case~~future. See the 2023-2027 capital expenditures forecast disclosed in Item 7. Management's Discussion and Analysis of ~~projects pending PSCW approval, or received,~~Financial Condition and Results of Operations in ~~the case of Paris, approval to recover 100% AFUDC.~~our 2022 Annual Report on Form 10-K.

~~(e)~~

~~Construction of the project is expected to be completed in phases ranging from May 2024 through December 2024.~~

•

Natural gas as a fuel source. West Riverside: In ~~2016,~~March 2023, MGE ~~entered into an agreement with WPL under which MGE may acquire up to 50~~purchased 25 MW of capacity in a gas-fired generating plant constructed by WPL at its West Riverside Energy Center in Beloit, Wisconsin, during the five-year period following the in-service date of the plant. The plant was placed in service in May 2020. In January 2022, MGE, along with joint applicants, filed an application with the PSCW requesting approval for a sale and purchase of ownership interests in West Riverside. If approved, MGE's share of West Riverside ~~will be 25 MW at a purchase price of approximately $25 million. The closing~~ and ~~actual transfer of ownership is expected to occur in March 2023. MGE also~~ retains the option to purchase an additional 25 MW of capacity from West Riverside until May 2025. MGE currently expects to exercise this option in a future period.

Environmental Initiatives – Natural gas distribution: Building upon our long-standing commitment to providing affordable, sustainable energy, MGE has set a goal to achieve net-zero methane emissions from its natural gas distribution system by 2035. If MGE can accelerate plans to achieve net-zero methane emissions from its natural gas system—through the evolution of new technologies, such as renewable natural gas—it will. MGE is working to reduce overall emissions from its natural gas distribution system cost-effectively as quickly as possible.

Solar Procurement ~~Disruptions – In June 2021,~~Disruptions: MGE is monitoring import regulations under the ~~U.S. Customs~~Uyghur Forced Labor Protection Act and Border Protection (CBP) issued a Withhold Release Order (WRO) against silica-based products made by Hoshine Silicon Industry Co. Ltd., a company located in China's Xinjiang Uyghur Autonomous Region. As a result of this WRO, CBP is holding many solar panels imported into the United States until importers can prove that the panels do not contain materials originating from this region. Additionally, in March 2022, the U.S. Department of Commerce ~~announced a solar tariff~~ investigation on whether to impose new solar ~~panels from four Southeast Asian countries. This investigation could result in additional tariffs on solar panels. MGE is currently assessing the~~tariffs. These disruptions have a potential to impact ~~of these disruptions on~~ current and future solar projects which may result in an increase in costs or delays in construction timelines. ~~Any delays or increase in~~In the event that such disruptions cause costs ~~will be filed~~to exceed the levels approved for specific projects, we expect to file a notification with the ~~PSCW.~~PSCW and expect to request recovery of any increases in MGE's next rate proceeding. See "Other Matters" below for additional information on the solar procurement disruptions.

~~COVID-19 Update –~~Financing Plans: As of March 31, 2023, MGE ~~Energy continues~~has $86 million of remaining regulatory authority from the PSCW to ~~provide safe~~issue long-term debt to finance authorized utility capital expenditures and ~~reliable service~~maturing long-term debt. MGE expects to ~~our customers despite~~use a portion of the ~~challenges presented by~~remaining authority during the ~~Coronavirus Disease 2019 (COVID-19) pandemic. We have operated continuously throughout the pandemic and suffered no material disruptions~~second half of 2023 to refinance $30 million long-term debt maturing in service or employment. We continue to monitor potential disruptions or constraints in materials and supplies from key suppliers and as well as macroeconomic trends, such as inflation. We could experience increased costs and delays in our ability to perform certain maintenance and capital project activities. We cannot estimate with any degree of certainty the actual impact of COVID-19 and associated governmental regulations may have on future results of operations, financial position, and liquidity. See Item 1A. "Risk Factors" "Pandemic virus or diseases, including COVID-19, could have a material adverse effect on our business, financial condition and liquidity" in our 2021 Annual Report on Form 10-K for a description of risk.September 2023.

The following discussion is based on the business segments as discussed in Footnote 14 of the Notes to Consolidated Financial Statements in this Report.

~~Results of Operations~~

Results of operations include financial information prepared in accordance with GAAP and electric and gas margins, both which are non-GAAP measures. Electric margin (electric revenues less fuel for electric generation and purchased power costs) and gas margin (gas revenues less cost of gas sold) are non-GAAP measures because they exclude items used in the calculation of the most comparable GAAP measure, operating income. These exclusions consist of nonregulated operating revenues, other operations and maintenance expense, depreciation and amortization expense, and other general taxes expense. Thus, electric and gas margin are not measures determined in accordance with GAAP.Operations

Management believes that electric and gas margins provide a meaningful basis for evaluating and managing utility operations since fuel for electric generation, purchased power costs, and cost of gas sold are passed through without mark-up to customers in current rates. As a result, management uses electric and gas margins internally when assessing the operating performance of our segments. The presentation of utility electric and gas margins herein is intended to provide supplemental information for investors regarding operating performance. These electric and gas margins may not be comparable to how other entities calculate utility electric and gas margin or similar measures. Furthermore, these measures are not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022

~~The following table provides a calculation of electric and gas margins (both non-GAAP measures), along with a reconciliation to the most comparable GAAP measure, operating income:~~

Three Months Ended March 31,
(In millions)
2022

2021

$ Change
Electric revenues
$
110.1

$
100.6

$
9.5
Fuel for electric generation

  (13.5)

  (13.2)

  (0.3)
Purchased power

  (12.5)

  (9.4)

  (3.1)
Total Electric Margins (non-GAAP)

  84.1

  78.0

  6.1

Gas revenues

  98.8

  67.3

  31.5
Cost of gas sold

  (64.8)

  (37.4)

  (27.4)
Total Gas Margins (non-GAAP)

  34.0

  29.9

  4.1

Other operating revenues

  —

  0.1

  (0.1)
Other operations and maintenance

  (50.0)

  (45.7)

  (4.3)
Depreciation and amortization

  (21.0)

  (18.4)

  (2.6)
Other general taxes

  (5.2)

  (4.8)

  (0.4)
Operating Income
$
41.9

$
39.1

$
2.8

~~Operating income during the three months ended March 31, 2022, compared to the same period in the prior year, primarily reflects the effects of the following factors:~~

•

~~Electric revenues and fuel costs~~

A $9.5 million increase in electric revenues primarily driven by higher electric retail rates to recover higher fuel and purchased power costs and other items described in the "Other Matters" section below.

~~A $0.3 million increase in fuel for electric generation reflecting higher market costs offset by lower internal generation.~~

~~A $3.1 million increase in purchased power driven by higher market purchases as a result of lower internal generation.~~

•

~~Gas revenues and cost of gas sold~~

A $31.5 million increase in gas revenue driven by higher cost of gas, which is recovered on a pass-through basis in revenues and increase in retail gas deliveries related to favorable weather conditions in the current year.

A $27.4 million increase in cost of gas sold driven by higher cost per therm of gas. Average cost per therm increased approximately 56%. An increase in volume of approximately 11% also contributed to the increase in cost.

•

~~A $4.3 million increase in other operations and maintenance. See "Consolidated operations and maintenance expenses" section below for a description of the factors contributing to the decrease.~~

•

~~A $2.6 million increase in depreciation and amortization expense. See "Consolidated depreciation expense" section below for a description of the factors contributing to the increase.~~

Electric sales and revenues

The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the periods indicated:

Revenues

Sales (kWh)

Three Months Ended March 31,

Three Months Ended March 31,
(In thousands)

2022

2021

% Change

2022

2021

% Change
Residential

$
  40,474

$
  36,694

10.3%

  221,884

  219,770

1.0%
Commercial

  54,449

  47,883

13.7%

  426,529

  414,337

2.9%
Industrial

  3,147

  3,001

4.9%

  39,261

  39,005

0.7%
Other-retail/municipal

  8,829

  8,170

8.1%

  80,610

  76,356

5.6%
Total retail

  106,899

  95,748

11.6%

  768,284

  749,468

2.5%
Sales to the market

  2,882

  4,639

(37.9)%

  51,152

  95,872

(46.6)%
Other

  308

  222

38.7%

  —

  —

—%
Total

$
  110,089

$
  100,609

9.4%

  819,436

  845,340

(3.1)%


	Revenues					Sales (kWh)
	Three Months Ended March 31,					Three Months Ended March 31,
(In thousands)	2023		2022		% Change	2023	2022	% Change
Residential	$	41,220	$	40,474	1.8%	206,190	221,884	(7.1)%
Commercial		59,537		54,449	9.3%	421,172	426,529	(1.3)%
Industrial		3,286		3,147	4.4%	36,252	39,261	(7.7)%
Other-retail/municipal		9,619		8,829	8.9%	79,679	80,610	(1.2)%
Total retail		113,662		106,899	6.3%	743,293	768,284	(3.3)%
Sales to the market		2,758		2,882	(4.3)%	3,616	51,152	(92.9)%
Other		824		308	n.m.%	—	—	—%
Total	$	117,244	$	110,089	6.5%	746,909	819,436	(8.9)%

n.m. not meaningful

Electric ~~margin, a non-GAAP measure,~~revenue increased ~~$6.1~~$7.2 million during the three months ended March 31, ~~2022,~~2023, compared to the same period in ~~2021,~~the prior year, due to the following:

(In millions)

Rate changes

$
11.3

Customer fixed and demand charges

0.6

Increase in commercial, industrial and other-retail/municipal volume

0.6

Increase in residential volume

0.2

Other

0.2

Increased fuel costs

(4.8
)
Revenue subject to refund, net

(2.0
)
Total

$
6.1


(In millions)
Rate changes	$	10.1
Revenue subject to refund, net		0.9
Other		0.5
Decrease in residential volume		(2.3	)
Net decrease in commercial, industrial and other-retail/municipal volume		(1.0	)
Customer fixed and demand charges		(0.9	)
Sales to the market		(0.1	)
Total	$	7.2

•

Rate changes. In December ~~2021,~~2022, the PSCW authorized MGE to increase ~~2022~~2023 rates for retail electric customers by approximately ~~8.81%~~9.01%. Rates charged to retail customers during the three months ended March 31, ~~2022,~~2023 were ~~$11.3~~$10.1 million higher than those charged during the same period in the prior year. See

Footnote 9

•

~~Fuel costs.~~ ~~Fuel~~of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs ~~increased during the three months ended March 31, 2022, primarily as~~are generally offset in fuel and purchased power costs and do not have a ~~result of higher costs to generate electricity in the market and higher customer demand.~~significant impact on net income.

•

Revenue subject to refund. For cost recovery mechanisms, any over-collection of revenues resulting from ~~the amount of~~ costs authorized to be collected from customers in rates exceeding actual costs is recorded as a reduction of revenue in the period incurred, as the over-collection is expected to be refunded to customers in a subsequent period. In the year the over-collection is refunded, rates are reduced and offset as revenue subject to refund. There is no ~~margin~~net income impact in the year the costs are refunded.

•

Residential volume. During the three months ended March 31, 2023, residential sales decreased by approximately 7% compared to the same period in the prior year. This decrease was driven by warmer than normal weather in the first quarter of 2023.

•

Commercial, industrial and other-retail/municipal volume. During the three months ended March 31, 2023, sales decreased by approximately 2% compared to the same period in the prior year driven by warmer weather in the first quarter of 2023.

•

Sales to the market. Sales to the market typically occur when MGE has more generation and purchases in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During the three months ended March 31, 2023, market volumes decreased reflecting a decrease in sales partially offset by sales made at higher market prices compared to the same period in the prior year. The revenue generated from these sales is included in fuel rules monitored costs. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements.

Electric fuel and purchased power


	Three Months Ended March 31,
(In millions)	2023		2022		$ Change
Fuel for electric generation	$	13.8	$	13.5	$	0.3
Purchased power		15.4		12.5		2.9

The $0.3 million increase in fuel for electric generation was due to an approximately 28% increase in the average cost offset by an approximately 20% decrease in internal generation. Columbia generation was lower during the three months ended March 31, 2023, compared to the same period in the prior year as a result of market prices.

The $2.9 million increase in purchased power was due to an approximately 21% increase in market purchases as a result of lower internal generation.

Fuel and purchased power costs are generally offset by electric revenue and do not have a significant impact on net income. MGE expects to seek and receive recovery of fuel and purchased power costs that exceed the fuel

rules bandwidth in customer rates. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the fuel rules bandwidth.

Gas deliveries and revenues

The following table compares MGE's gas revenues and gas therms delivered by customer class for each of the periods indicated:


	Revenues					Therms Delivered				Revenues				Therms Delivered
(In thousands, except HDD and average	Three Months Ended March 31,					Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,
rate per therm of retail customer)	2022		2021		% Change	2022	2021	% Change		2023		2022	% Change	2023	2022	% Change
Residential	$	56,683	$	39,758	42.6%	55,661	50,305	10.6%	$	55,724	$	56,683	(1.7)%	47,153	55,661	(15.3)%
Commercial/Industrial		40,251		25,507	57.8%	47,892	42,254	13.3%		41,503		40,251	3.1%	42,455	47,892	(11.4)%
Total retail		96,934		65,265	48.5%	103,553	92,559	11.9%		97,227		96,934	0.3%	89,608	103,553	(13.5)%
Gas transportation		1,876		2,002	(6.3)%	26,067	23,308	11.8%		2,532		1,876	35.0%	22,273	26,067	(14.6)%
Other		1		3	(66.7)%	—	—	—%
Other revenues										203		1	n.m.	—	—	—%
Total	$	98,811	$	67,270	46.9%	129,620	115,867	11.9%	$	99,962	$	98,811	1.2%	111,881	129,620	(13.7)%

Heating degree days (normal 3,529)						3,718	3,593	3.5%
Heating degree days (normal 3,553)														3,190	3,718	(14.2)%

Average rate per therm of retail customer	$	0.936	$	0.705	32.8%				$	1.085	$	0.936	15.9%

n.m. not meaningful

Gas ~~margin, a non-GAAP measure,~~revenue increased ~~$4.1~~$1.2 million during the three months ended March 31, ~~2022, compared to the same period in 2021, due to the following:~~

(In millions)

Increase in volume

$
1.9

Rate changes

1.7

Other

0.5

Total

$
4.1

•

~~Volume.~~ ~~For 2022, retail gas deliveries increased 11.9%~~2023, compared to the same period in the prior year, ~~primarily related~~due to ~~favorable weather conditions in~~ the ~~current year.~~following:


(In millions)
Rate changes	$	8.5
Other		0.4
Decrease in volume		(7.7	)
Total	$	1.2

•

Rate changes. In December 2021, the PSCW authorized MGE to increase ~~2022~~2023 rates for retail gas customers by approximately ~~2.15%~~0.96%.

MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. Changes in PGA recoveries affect revenues but do not change net ~~income.~~income in view of the pass-through treatment of the costs. Payments for natural gas increased driving higher rates during the three months ended March 31, ~~2022.~~2023.

The average retail rate per therm for the three months ended March 31, 2023, increased approximately 16% compared to the same period in the prior year, reflecting an increase in natural gas commodity costs (recovered through the PGA).

•

Volume. For the three months ended March 31, 2023, retail gas deliveries decreased approximately 14% compared to the same period in the prior year primarily attributable to warmer than normal weather in the first quarter of 2023. First quarter of 2022 weather was slightly colder than normal.

Cost of gas sold

Cost of gas sold increased $3.0 million during the three months ended March 31, 2023, compared to the same period in the same period in the prior year. Average cost per therm increased approximately 21% partially offset

by an approximately 14% decrease in therms delivered. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenue above.

Consolidated operations and maintenance expenses

During the three months ended March 31, ~~2022,~~2023, operations and maintenance expenses ~~increased $4.3 million,~~remained flat, compared to the same period in the prior year. The following contributed to the net change:

(In millions)

Increased administrative and general costs

$
2.3

Increased electric production expenses

1.1

Increased customer accounts costs

1.0

Increased other expenses

0.1

Decreased electric distribution expenses

(0.2
)
Total

$
4.3

•

~~Increase in administration and general costs are primarily related to increase in pension and OPEB service costs.~~

•

~~Increased electric production expenses are primarily related to increased maintenance costs for Saratoga, Two Creeks, and Badger Hollow I.~~

•

~~Increased customer accounts costs are related to increased costs associated with the new customer information system, which went live in September 2021.~~


(In millions)
Decreased customer accounts costs	$	(0.7	)
Increased administrative and general costs		0.3
Increased electric distribution expenses		0.3
Increased electric production expenses		0.1
Total	$	—

Consolidated depreciation expense

Electric depreciation expense increased ~~$2.0~~$3.5 million and gas depreciation expense increased ~~$0.7~~$0.1 million during the three months ended March 31, ~~2022,~~2023, compared to the same period in the prior year. ~~MGE placed in service Badger Hollow I in November 2021. The timing~~As part of the ~~in-service date~~PSCW approved electric limited reopener for 2023, MGE accelerated the depreciation schedule for Columbia Unit 2 from 2038 to 2029 to align with the depreciation schedule for Columbia Unit 1. The accelerated depreciation schedule, which began in 2023, for Columbia Unit 2 contributed to the increase in electric depreciation expense. ~~The new customer information system went live in September 2021 increasing depreciation costs for both electric and gas in 2022.~~

~~Electric and gas other income~~

Electric and gas other income increased $2.3 million and $1.3 million, respectively, during the three months ended March 31, 2022, compared to the same period in the prior year, primarily related to the collection in 2021 of the deferred pension and other postretirement other than service costs from 2019.

Nonregulated Energy Operations - MGE Energy and MGE

The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, net income at the nonregulated energy operations segment was ~~$5.4~~$5.6 million and ~~$5.2~~$5.4 million, respectively.

Transmission Investment Operations - MGE Energy

The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. ATC Holdco's transmission development activities have been suspended for the near term. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, other income at the transmission investment segment primarily reflects ATC's operations and was ~~$2.5~~$2.6 million and ~~$2.4~~$2.5 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and ~~"Other Matters"~~"Other Matters" below for additional information concerning ~~ATC and summarized financial information regarding~~ ATC.

Consolidated Income Taxes - MGE Energy and MGE

In 2022, the effective electric tax rate increased as a result of the return of electric excess deferred taxes related to the 2017 Tax Act not governed by IRS normalization rules in 2021. These costs were recorded as a regulatory liability in the year of remeasurement. See Footnote 4 of the Notes to Consolidated Financial Statements in this Report for the effective tax rate reconciliation.

Noncontrolling Interest, Net of Tax - MGE

Noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus. They are not owned by MGE. Due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with

those of MGE, the primary beneficiary of the VIEs. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:

Three Months Ended

March 31,

(In millions)

2022

2021

MGE Power Elm Road

$
3.0

$
3.7

MGE Power West Campus

1.8

1.8


	Three Months Ended
	March 31,
(In millions)	2023		2022
MGE Power Elm Road	$	3.7	$	3.0
MGE Power West Campus		1.8		1.8

Contractual Obligations and Commercial Commitments - MGE Energy and MGE

There were no material changes, other than from the normal course of business, to MGE Energy's and MGE's contractual obligations (representing cash obligations that are considered to be firm commitments) and commercial commitments (representing commitments triggered by future events) during the three months ended March 31, ~~2022,~~2023, except as noted below. Further discussion of the contractual obligations and commercial commitments is included in Footnote 16 of the Notes to Consolidated Financial Statements and "Contractual Obligations and Commercial Commitments for MGE Energy and MGE" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the ~~2021~~2022 Annual Report on Form ~~10-K.~~10-K.

Purchase Contracts – MGE Energy and MGE

See ~~item c. within~~ Footnote 88.c. of Notes to Consolidated Financial Statements in this Report for a description of commitments as of March 31, ~~2022,~~2023, that MGE Energy and MGE have entered with respect to various commodity supply and transportation contracts to meet their obligations to deliver electricity and natural gas to customers.

Long-term Debt – MGE Energy and MGE

In March 2023, $19.3 million of City of Madison, Wisconsin Industrial Development Revenue Refunding Bonds, Series 2020A were remarketed. See Footnote 6.c. of Notes to Consolidated Financial Statements in this Report for further information.

Liquidity and Capital Resources

~~Subject to the duration and severity of the COVID-19 pandemic,~~ MGE Energy and MGE expect to have adequate liquidity to support future operations and capital expenditures over the next twelve months. Available resources include cash and cash equivalents, operating cash flows, liquid assets, borrowing working capacity under revolving credit facilities, and access to equity and debt capital markets. MGE Energy expects to generate funds from operations and both long-term ~~debt financing,~~and short-term debt ~~financing, and if needed, could issue new shares through our Direct Stock Purchase and Dividend Reinvestment Plan.~~financing. See "Credit Facilities" under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the ~~2021~~2022 Annual Report on Form 10-K for information regarding MGE Energy's and MGE's credit facilities.

Cash Flows

The following summarizes cash flows for MGE Energy and MGE during the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


	MGE Energy				MGE				MGE Energy				MGE
(In thousands)	2022		2021		2022		2021		2023		2022		2023		2022
Cash provided by (used for):
Operating activities	$	62,099	$	43,883	$	62,681	$	41,981	$	56,003	$	62,099	$	55,979	$	62,681
Investing activities		(32,169)		(35,835)		(30,942)		(35,208)		(49,566)		(32,169)		(47,943)		(30,942)
Financing activities		(21,216)		(13,585)		(21,203)		(5,205)		(4,774)		(21,216)		(8,538)		(21,203)

Cash Provided by Operating Activities

Cash flows from operating activities for MGE Energy and MGE principally reflect the receipt of customer payments for electric and gas service and outflows related to fuel for electric generation, purchased power, gas, and operation and maintenance expenditures.

MGE Energy

MGE Energy's consolidated net cash provided by operating activities is derived mainly from the electric and gas operations of its principal subsidiary, MGE.

Cash provided by operating activities during the three months ended March 31, ~~2022,~~2023, was ~~$62.1~~$56.0 million, ~~an increase~~a decrease of ~~$18.2~~$6.1 million when compared to the same period in the prior year.

MGE Energy's net income decreased ~~$0.5~~$3.3 million during the three months ended March 31, ~~2022,~~2023, when compared to the same period in the prior year.

~~MGE Energy's federal~~Working capital accounts (excluding prepaid and ~~state taxes paid increased $1.0~~accrued taxes) resulted in $3.3 million in cash used for operating activities during the three months ended March 31, ~~2022, when compared~~2023. Working capital accounts were impacted by decreased accounts payable and by a $2.0 million contribution to the ~~prior year.~~MGE Foundation in 2023 partially offset by decreased unbilled revenues and decreased gas inventory.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $0.2 million in cash provided by operating activities during the three months ended March 31, 2022. Actual purchased gas costs were $5.9 million

lower than the amount collected in rates. MGE Energy paid a $2.5 million contribution to the MGE Foundation in 2022. In addition, working capital accounts were impacted by decreased inventories and decreased unbilled revenues, partially offset by increased accounts receivable and decreased accounts payable.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $11.4 million in cash used for operating activities during the three months ended March 31, 2021. Actual purchased gas costs were $13.0 million higher than the amount collected in rates primarily due to the extreme cold weather experienced in the U.S. in February 2021. These costs were deferred as a regulatory asset and will be recovered in a future period. In addition, working capital accounts were impacted by increased accounts receivable and decreased other current liabilities, partially offset by decreased gas inventories and decreased unbilled revenues.

~~Hosted software asset expenditures during the three months ended March 31, 2022, were $0.1 million. This amount represents a decrease of $1.2 million of cash used when compared to the prior year.~~

MGE

Cash provided by operating activities during the three months ended March 31, ~~2022,~~2023, was ~~$62.7~~$56.0 million, ~~an increase~~a decrease of ~~$20.7~~$6.7 million when compared to the same period in the prior year.

Net income decreased ~~$1.7~~$2.4 million during the three months ended March 31, ~~2022,~~2023, when compared to the same period in the prior year.

MGE's federal and state taxes paid ~~increased~~decreased $1.0 million during the three months ended March 31, ~~2022,~~2023, when compared to the prior year.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $1.4 million in cash used for operating activities during the three months ended March 31, 2023. Working capital accounts were impacted by decreased accounts payable, partially offset by decreased unbilled revenues and decreased gas inventory.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $2.8 million in cash provided by operating activities during the three months ended March 31, 2022. Actual purchased gas costs were $5.9 million lower than the amount collected in rates. In addition, working capital accounts were impacted by decreased inventories and decreased unbilled revenues, partially offset by increased accounts receivable and decreased accounts payable.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $11.3 million in cash used for operating activities during the three months ended March 31, 2021. Actual purchased gas costs were $13.0 million higher than the amount collected in rates primarily due to the extreme cold weather experienced in the U.S. in February 2021. These costs were deferred as a regulatory asset and will be recovered in a future period. In addition, working capital accounts were impacted by increased accounts receivable and decreased other current liabilities, partially offset by decreased gas inventories and decreased unbilled revenues.

~~Hosted software asset expenditures during the three months ended March 31, 2022, were $0.1 million. This amount represents a decrease of $1.2 million of cash used when compared to the prior year.~~

Capital Requirements and Investing Activities

MGE Energy

MGE Energy's cash used for investing activities ~~decreased $3.7~~increased $17.4 million during the three months ended March 31, ~~2022,~~2023, when compared to the same period in the prior year.

Capital expenditures during the three months ended March 31, 2023, were $47.6 million. This amount represents an increase of $16.8 million from the expenditures made in the same period in the prior year. This increase primarily reflects the purchase of 25 MW of West Riverside.

MGE

MGE's cash used for investing activities increased $17.0 million during the three months ended March 31, 2023, when compared to the same period in the prior year.

Capital expenditures during the three months ended March 31, ~~2022,~~2023, were ~~$30.8~~$47.6 million. This amount represents ~~a decrease~~an increase of ~~$4.0~~$16.8 million from the expenditures made in the same period in the prior year. This ~~decrease~~increase primarily reflects the ~~reduction~~purchase of ~~utility expenditures.~~

~~MGE~~

~~MGE's cash used for investing activities decreased $4.3 million during the three months ended March 31, 2022, when compared to the same period in the prior year.~~

~~Capital expenditures during the three months ended March 31, 2022, were $30.8 million. This amount represents a decrease~~25 MW of ~~$4.0 million from the expenditures made in the same period in the prior year. This decrease primarily reflects the reduction of utility expenditures.~~West Riverside.

MGE Energy's and MGE's Capital Requirements

MGE Energy's and MGE's liquidity are primarily affected by their capital expenditure requirements. During the three months ended March 31, ~~2022,~~2023, capital expenditures for MGE Energy and MGE totaled ~~$30.8~~$47.6 million, which included ~~$30.2~~$46.5 million of utility capital expenditures. The primary driver of the increased utility capital expenditures in the first quarter of 2023 was the purchase of 25 MW of West Riverside.

MGE does not currently expect any material changes ~~resulting from the COVID-19 pandemic and associated governmental regulations~~ to its construction plans as presented in the ~~2022~~2023 through ~~2025~~2027 capital expenditure forecast included under Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the ~~2021~~2022 Annual Report on Form ~~10-K.~~10-K.

Cash Used for Financing Activities

MGE Energy

Cash used for MGE Energy's financing activities was ~~$21.2~~$4.8 million during the three months ended March 31, ~~2022,~~2023, compared to ~~$13.6~~$21.2 million for the same period in the prior year.

During the three months ended March 31, ~~2022,~~2023, dividends paid were ~~$14.0~~$14.7 million compared to ~~$13.4~~$14.0 million in the prior year. The increase reflected a higher dividend rate per share ($~~0.388~~0.408 vs. ~~$0.370)~~$0.388).

During the three months ended March 31, ~~2022,~~2023, MGE borrowed $50 million through the issuance of senior unsecured notes which was used to assist with financing additional capital expenditures and other corporate obligations. In addition, $19.3 million of Industrial Development Revenue Bonds was tendered by their holders as required by the terms of the bonds and remarketed as permitted by those terms. There were no long-term debt borrowings during the three months ended March 31, 2022.

During the three months ended March 31, 2023, net short-term debt repayments were ~~$5.5~~$37.5 million, compared to ~~$1.5~~$5.5 million of ~~net short-term debt borrowings~~repayments in the same period in the prior year.

MGE

During the three months ended March 31, ~~2022,~~2023, cash used for MGE's financing activities was ~~$21.2~~$8.5 million, compared to ~~$5.2~~$21.2 million for the same period in the prior year.

~~Cash~~During the three months ended March 31, 2023, cash dividends to parent (MGE Energy) were $12.5 million, compared to $5.0 million ~~during~~in the ~~three months ended March 31, 2022. There were no cash dividends to parent~~same period in the prior year.

Distributions to parent from noncontrolling interest, which represent distributions from MGE Power Elm Road and MGE Power West Campus to MGE Energy, were ~~$9.0~~$6.0 million during the three months ended March 31, ~~2022,~~2023, compared to ~~$5.0~~$9.0 million in the same period in the prior year.

obligations. In addition, $19.3 million of Industrial Development Revenue Bonds was tendered by their holders as required by the terms of the bonds and remarketed as permitted by those terms. There were no long-term debt borrowings during the three months ended March 31, 2022.

Capitalization Ratios

MGE Energy's capitalization ratios were as follows:


	MGE Energy		MGE Energy
	March 31, 2022	December 31, 2021	March 31, 2023	December 31, 2022
Common shareholders' equity	62.9%	62.2%	60.4%	60.4%
Long-term debt(a)	37.1%	37.5%	37.8%	35.7%
Short-term debt	—%	0.3%	1.8%	3.9%

(a)

Includes the current portion of long-term debt.

Credit Ratings

MGE Energy's and MGE's access to the capital markets, including, in the case of MGE, the commercial paper market, and their respective financing costs in those markets, may depend on the credit ratings of the entity that is accessing the capital markets.

None of MGE Energy's or MGE's borrowing is subject to default or prepayment as a result of a downgrading of credit ratings, although a downgrading of MGE's credit ratings would increase fees and interest charges under both MGE Energy's and MGE's credit agreements.

Environmental Matters

~~The following discussion is limited to updates or developments in environmental matters that occurred during~~See the ~~three months ended March 31, 2022. Further~~ discussion of environmental matters is included in the ~~2021~~2022 Annual Report on Form 10-K ~~and~~ , as updated by Footnote 8.a. of Notes to Consolidated Financial Statements in this Report.

~~Rules regulating nitrogen oxide (NO~~x~~) and sulfur dioxide (SO~~2~~) emissions, including the Cross State Air Pollution Rule (CSAPR) and Clean Air Visibility Rule~~

The EPA's CSAPR and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and fine particulate (PM2.5) air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states. This is accomplished in the CSAPR through a reduction in SO2 ~~and NO~~x ~~from qualifying fossil-fuel fired power plants in upwind "contributing" states. NO~~x ~~and SO~~2 ~~contribute to fine particulate pollution and NO~~x contributes to ozone formation in downwind areas. Reductions are achieved through a cap-and-trade system. Individual plants can meet their caps through emission reductions and/or buying allowances on the market.

In April 2022, the EPA published a proposed federal implementation plan (FIP) to address state obligations under the Clean Air Act "good neighbor" provisions for the 2015 Ozone NAAQS. This proposed rule impacts 26 states, including Wisconsin, and is designed to both revise the current NOx ~~CSAPR ozone season cap-and-trade obligations for fossil-fuel generated power plants and add NO~~x limitations for certain industries in specified states. For Wisconsin, the proposed rule includes revisions to the current obligations for fossil-fuel power generation as well as the new limitations for certain industries.

If finalized, the proposed rule would be effective beginning with the 2023 ozone season and start with emissions budgets that can be achieved with what the EPA has defined as immediately available measures, including consistently operating emissions controls already installed at power plants. In 2026, additional obligations would go into effect, including potential daily emissions limits and technology upgrades to coal-fired power plants without existing emission controls. Wisconsin would need to submit a State Implementation Plan (SIP) to meet its obligations or accept the EPA's proposed FIP.

MGE is currently evaluating the proposed rule to determine potential impacts to our business. MGE expects the rule, if finalized as written, to impact our fossil-fueled generation assets. However, MGE will not know the impacts of this rule with any certainty until the rule is finalized. We will continue to monitor rule developments.

Other Matters

Rate Matters

In December 2021, the PSCW approved a settlement agreement ~~for MGE's 2022 rate case. The settlement agreement provides for an 8.81%~~to increase ~~to electric~~gas rates 0.96% in 2023 and a 2.15% increase to gas rates for 2022. The electric and gas rate increases are driven by an increase in rate base including our investments in Badger Hollow I and a new customer information system. Also driving the electric increase are higher fuel and purchased power costs as well as the completion in 2021 of the one-time return of the electric excess deferred tax credit related to the 2017

~~Tax Act not restricted by IRS normalization rules. Included in the electric residential rate is a reduction in the customer charge. As part of the settlement agreement for~~potential 2023 ~~the PSCW approved a 0.96% increase in gas rates and to address a potential~~ electric rate change to be addressed through a limited ~~rate case~~ reopener.

In ~~April~~December 2022, ~~MGE filed~~the PSCW approved the electric rate case limited reopener. The reopener provides for a ~~limited reopener with a proposed a 4.38%~~9.01% increase to electric rates for 2023.

In April 2023, MGE filed a 2024/2025 rate application with a proposed increase of 3.75% for electric rates and a 2.56% increase for gas rates in 2024. The application addresses rates for 2025 proposing a 3.41% increase for

electric ~~rate~~rates and a 1.66% increase is driven by generation assets including our investments in Badger Hollow II (solar), Paris (solar and battery), Red Barn (wind), and West Riverside (natural gas). In addition, the reopener request includes a reduction in fuel costs, which MGE has partially offset with the recovery of deferred 2021 fuel costs. The reopener also revises the depreciation scheduleto gas rates for ~~Columbia Unit 2 and shared equipment to 2029 to align with the depreciation schedule for Columbia Unit 1.~~2025. PSCW approval ~~of the limited reopener~~ is pending. A final order is expected before the end of the year.

Details related to MGE's ~~2022/~~2023 approved settlement agreement and ~~pending~~2023 electric limited ~~reopener:~~reopener, and 2024/2025 proposed rate proceeding are as follows:

(Dollars in thousands)

Authorized Average Rate Base(a)

Authorized Average CWIP(b)

Authorized Return on Common Equity(c)

Common Equity Component of Regulatory Capital Structure

Effective Date
Electric (2022 Test Period)

$
  1,044,362

$
  19,976

9.8%

55.63%

1/1/2022
Gas (2022 Test Period)

$
  299,319

$
  11,410

9.8%

55.63%

1/1/2022
Electric (2023 Test Period)(d)

$
  1,159,155

$
  19,976

9.8%

55.63%

1/1/2023
Gas (2023 Test Period)

$
  312,270

$
  8,228

9.8%

55.63%

1/1/2023


(Dollars in thousands)	Authorized Average Rate Base(a)		Authorized Average CWIP(b)		Authorized Return on Common Equity(c)	Common Equity Component of Regulatory Capital Structure	Effective Date
Electric (2023 Test Period)	$	1,162,516	$	19,976	9.8%	55.63%	1/1/2023
Gas (2023 Test Period)	$	312,270	$	8,228	9.8%	55.63%	1/1/2023
Electric (2024 Test Period)(d)	$	1,202,123	$	13,995	9.8%	56.12%	1/1/2024
Gas (2024 Test Period)(d)	$	338,417	$	3,701	9.8%	56.12%	1/1/2024
Electric (2025 Test Period)(d)	$	1,281,236	$	13,871	9.8%	56.05%	1/1/2025
Gas (2025 Test Period)(d)	$	345,463	$	3,341	9.8%	56.05%	1/1/2025

(a)

Average rate base amounts reflect MGE's allocated share of rate base and do not include construction work in progress (CWIP) or a cash working capital allowance and were calculated using a forecasted 13-month average for the test periods. The PSCW provides a return on selected CWIP and a cash working capital allowance by adjusting the percentage return on rate base.

(b)

50% of the forecasted 13-month average CWIP for the test periods which earns an AFUDC return. Projects eligible to earn 100% AFUDC are excluded from this balance and discussed further in the Management Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview section.

(c)

Authorized returns on common equity may not be indicative of actual returns earned or projections of future returns, as actual returns will be affected by the volume of electricity or gas sold.

(d)

Pending approval by the PSCW.

See Footnote 9 of Notes to Consolidated Financial Statements in this Report for further discussion of rate proceedings.

ATC

~~2013 FERC Complaint -~~ ~~In 2013, several parties filed a complaint with the FERC seeking to reduce the base return on equity (ROE) used by~~ MISO transmission owners, including ~~ATC. The~~ATC, are involved in two complaints filed at FERC by several parties challenging that the base ROE in effect for MISO transmission owners, including ATC, was no longer just and reasonable. Each complaint provided for a 15-month statutory refund ~~period of~~period: November 12, 2013 through February ~~2015. The complaint asserted that the MISO ROE should not exceed 9.15%, that the equity components of hypothetical capital structures should be restricted to 50%,~~11, 2015 (the "First Complaint Period") and ~~that the relevant incentive ROE adders should be discontinued. At the time, MISO's base ROE was 12.38% and ATC's base ROE was 12.2%. On September 28,~~February 12, 2015 through May 11, 2016 ~~FERC issued an order, for the period November 2013 through February 2015, reducing ATC's base ROE to 10.32%~~(the "Second Complaint Period"). ~~In November 2019, FERC issued an order to further reduce ATC's base ROE to 9.88%.~~

In May 2020, ~~the~~ FERC issued an order further refining the methodology for setting ~~the ROE that electric utilities are~~ authorized ~~to earn.~~ROE. This refined methodology increased the authorized ROE from 9.88% to 10.02%. This base ROE is effective for the ~~2013 FERC complaint period~~First Complaint Period and for all periods following September 2016. This order also dismissed the second complaint. Accordingly, no refunds were ordered for the Second Complaint Period.

~~2015 FERC Complaint -~~ In February 2015, several parties filed a complaint with the FERC seeking to reduce the base ROE used by MISO transmission owners, including ATC, to 8.67%. The complaint provided for a statutory refund period of February 2015 through May 2016 with a refund effective date retroactive to the complaint filing date. In June 2016, an administrative law judge issued an initial decision for the complaint that would reduce the transmission owner's base ROE to 9.7%. In November 2019, FERC issued an order dismissing the complaint with the determination that the ROE was reasonable. As a result of this order and the methodology FERC used to determine the applicable ROE in the 2013 FERC complaint, several parties have requested a rehearing by FERC. If FERC denies these requests, the complainants are likely to file an appeal with the appellate court. Any downward change to ATC's ROE could result in lower equity earnings and distributions from ATC in the future.

As of December 31, 2018, our share of the estimated refund recorded was $2.5 million, including interest. Following the November 2019 FERC order, our share of ATC's earnings reflects a pre-tax adjustment of $2.0

~~million, including interest, related to the 2013 complaint refund period and from September 28, 2016 through December 31, 2019.~~ As a result of the May 2020 FERC order, our share of ATC's earnings ~~reflects~~reflected a $0.6 million reduction of our reserve. Additionally, our share of ATC's earnings ~~reflects~~reflected the derecognition of a possible refund related to the ~~2015 complaint~~Second Complaint Period as ATC ~~considers~~considered such a refund to be no longer ~~considered probable due to FERC's November 2019 dismissal of that complaint.~~probable. However, due to pending requests for rehearing, a loss related to the 2015 complaint remains possible. Our share of the estimated refund for the ~~2015 complaint~~Second Complaint Period is approximately $2.3 million. AsMGE has not recorded a possible loss for the Second Complaint Period.

Several petitions for review of ~~December 31, 2020,~~FERC’s prior orders were filed with the U.S. Court of Appeals for the D.C. Circuit (the "Court") and an oral argument was held in November 2021. In August 2022, the Court ruled that four of the five arguments made by the complaining parties were unpersuasive. However, the Court agreed that FERC’s decision to reintroduce a risk-premium model into its ROE methodology was arbitrary and capricious. The Court vacated the underlying orders for the First Complaint Period and remanded to FERC for further proceedings. In 2022, our share of ~~the estimated refund amount reflected a net increase in~~ ATC's earnings ~~with a pre-tax adjustment~~reflected an estimated possible loss of ~~$0.6~~approximately $0.9 million, inclusive of ~~interest.~~interest and net of tax, for a possible additional refund for the First Complaint Period and for the period following the Second Complaint Period. Although the Court agreed that FERC was correct to use the base ROE established in the first

complaint to adjudicate the second, and that FERC was right to dismiss the second complaint, the second complaint was also remanded for FERC to reopen proceedings. Any reduction in ATC's ROE could result in lower equity earnings and distributions from ATC in the future.

We derived approximately ~~5.1%~~5.9% and ~~5.0%~~5.1% of our net income during the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, from our investment in ATC.

Uyghur Forced Labor Protection Act

In June 2021, the U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) against silica-based products made by Hoshine Silicon Industry Co. Ltd., a company located in China's Xinjiang Uyghur Autonomous Region. As a result of this WRO, CBP is holding many solar panels imported into the United States until importers can prove that the panels do not contain materials originating from this region. The Uyghur Forced Labor Protection Act, a federal law that became effective on June 21, 2022, further established that all goods mined, produced, or manufactured wholly or in part in Xinjiang or by certain defined entities are prohibited from U.S. importation. Suppliers for MGE's current solar projects were able to provide the CBP sufficient documentation to meet WRO compliance requirements, and MGE expects the same will be true for UFLPA purposes, however we cannot currently predict what, if any, impact the UFLPA will have on the overall supply of solar panels into the United States and the related impact to timing and cost of solar projects included in our capital plan. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we expect to file a notification with the PSCW and expect to request recovery of any increases in MGE's next rate proceeding.

U.S. Department of Commerce Investigation

In March 2022, the U.S. Department of Commerce (USDOC) announced a solar tariff investigation on solar panels from four Southeast Asian countries. This investigation could result in additional tariffs on solar panels. In June 2022, the USDOC issued a 24-month exemption from tariffs for solar panel and module imports from these four countries. MGE is currently assessing the potential impact of these disruptions on current and future solar projects which may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we expect to file a notification with the PSCW and expect to request recovery of any increases in MGE's next rate proceeding.

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements

See Footnote 2 of Notes to Consolidated Financial Statements in this Report for discussion of new accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~MGE Energy and MGE are potentially exposed~~There were no material changes to market risk associated with interest rates, commodity prices, and equity returns. MGE currently has no exposure to foreign currency risk. MGE manages some risk exposure through risk management policies and the use of derivative instruments. MGE's risk management policy prohibits speculative trading transactions.

~~Commodity Price Risk~~

MGE has commodity price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE's electric operations burn natural gas in several of its peaking power plants and, in many cases, the cost of purchased power is tied to the cost of natural gas. MGE employs established policies and procedures to reduce the market risks ~~associated with changing commodity prices. MGE's commodity risks are substantially mitigated by the current ratemaking process~~disclosed in ~~place for recovering electric fuel cost, purchased energy costs,~~Item 7A. Quantitative and ~~the cost of natural gas.~~Qualitative Disclosures About Market Risk in our 2022 Annual Report on Form 10-K.

The recovery of MGE's electric fuel costs is subject to fuel rules established by the PSCW. Fuel rules require Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band. 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. Under the electric fuel rules, MGE would defer the benefit of lower costs if the actual electric fuel costs fall outside the lower end of the range and is required to defer costs, less any excess revenues, if the actual electric fuel costs exceed the upper end of the range. 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. The range is defined by the PSCW and has been modified throughout the years based on market conditions and other relevant factors. MGE is subject to a plus or minus 1% range. MGE assumes the risks and benefits of variances that are within the cost tolerance band. For 2022, $82.7 million in fuel and purchased power costs will be recovered in rates and are subject to this rule and included in MGE's fuel monitoring level rates. See Footnote 9.b. of the Notes to Consolidated Financial Statements in this Report for additional information.

MGE recovers the cost of natural gas in its gas utility segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. If the commodity costs of gas exceed a monthly benchmark amount, the excess amount is subject to a prudence review and approval by the PSCW before it can be passed through to customers.

MGE also reduces price risk caused by market fluctuations via physical contracts and financial derivative contracts, including futures, swaps, options, forwards, and other contractual commitments. The maximum length of time over which cash flows related to energy commodities can be hedged under applicable PSCW approvals is four years.

MGE has financial gas and electric commodity contracts to hedge commodity price risk in the gas and electric utility segments. These contracts are primarily comprised of exchange-traded option and future contracts. MGE

also holds financial transmission rights (FTRs), which are used to hedge the risk of increased transmission congestion charges. As of March 31, 2022, the fair value of exchange traded derivatives and FTRs exceeded their cost basis by $9.8 million. Under the PGA clause and electric fuel rules, MGE may include the costs and benefits of the aforementioned fuel price risk management tools in the costs of fuel (natural gas or power). Because these costs or benefits are recoverable, the related unrealized loss or gain has been deferred on the consolidated balance sheets as a regulatory asset or liability, respectively.

MGE has also entered into a purchased power agreement that provides MGE with firm capacity and energy that began on June 1, 2012, and ends on May 31, 2022 (the "base term"). The agreement is considered a derivative contract and is recognized at its fair value on the consolidated balance sheets. However, the derivative qualifies for regulatory deferral and is recognized with a corresponding regulatory asset or liability depending on whether the fair value is in a loss or gain position. The fair value of the contract as of March 31, 2022, reflected a loss position of $0.1 million.

~~Interest Rate Risk~~

Both MGE Energy and MGE may have short-term borrowings at varying interest rates. MGE issues commercial paper for its short-term borrowings, while MGE Energy draws from its current credit facility to meet our short-term borrowing needs. Borrowing levels vary from period to period depending upon capital investments and other factors. Future short-term interest expense and payments will reflect both future short-term interest rates and borrowing levels. MGE Energy and MGE manage interest rate risk by limiting their variable rate exposure and continually monitoring the effects of market changes on interest rates. MGE is not exposed to changes in interest rates on a substantial portion of its long-term debt until that debt matures and is refinanced at market rates.

~~Equity Price Risk - Pension-Related Assets~~

MGE currently funds its liabilities related to employee benefits through trust funds. These funds, which include investments in debt and equity securities, are managed by various third-party investment managers. Changes in the market value of these investments can have an impact on the future expenses related to these liabilities. The value of employee benefit plan assets has declined by approximately 7% during the three months ended March 31, 2022.

~~Credit Risk - Counterparty~~

Credit risk is the loss that may result from counterparty nonperformance. MGE is exposed to credit risk primarily through its merchant energy business. MGE uses credit policies to manage credit risk, which include an established credit approval process, counterparty limits, credit mitigation measures such as collateral or prepayment arrangements, and using netting agreements.

Due to the possibility of extreme volatility in the prices of energy commodities and derivatives, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If such a counterparty were then to fail to perform its obligations under its contract (for example, fail to deliver the electricity MGE originally contracted for), MGE could sustain a loss that could have a material impact on its financial results.

Additionally, if a counterparty were to default and MGE were to liquidate all contracts with that entity, MGE's credit loss could include: the loss in value of mark-to-market contracts, the amount owed for settled transactions, and additional payments to settle unrealized losses. As of March 31, 2022, no counterparties had defaulted.

MGE is obligated to provide service to all electric and gas customers within its franchised territories. MGE's franchised electric territory includes a 264 square-mile area in Dane County, Wisconsin, and MGE's franchised gas territory includes a service area covering 1,684 square miles in Wisconsin. Based on results for the year ended December 31, 2021, no one customer constituted more than 10% of total operating revenues for MGE Energy and MGE. Credit risk for electric and gas is managed by MGE's credit and collection policies, which are consistent with state regulatory requirements.

Cash, cash equivalents, and customer accounts receivable are the financial instruments that potentially subject MGE Energy and MGE to concentrations of credit risk. MGE Energy and MGE place their cash and cash equivalents

with high credit-quality financial institutions. MGE has limited concentrations of credit risk from customer accounts receivable because of the large number of customers and relatively strong economy in its service territory.

Item 4. Controls and Procedures.

During the first quarter of ~~2022,~~2023, each registrant's management, including the principal executive officer and principal financial officer, evaluated its disclosure controls and procedures related to the recording, processing, summarization, and reporting of information in its periodic reports that it files with the SEC. These disclosure controls and procedures have been designed to ensure that material information relating to that registrant, including its subsidiaries, is accumulated and made known to that registrant's management, including these officers, by other employees of that registrant and its subsidiaries as appropriate to allow timely decisions regarding required disclosure, and that this information is recorded, processed, summarized, evaluated, and reported, as applicable, within the time periods specified in the SEC's rules and forms. The evaluations take into account changes in the internal and external operating environments that may impact those controls and procedures. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision making can be faulty and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Also, MGE Energy does not control or manage certain of its unconsolidated entities and thus, its access and ability to apply its procedures to those entities is more limited than is the case for its consolidated subsidiaries.

As of March 31, ~~2022,~~2023, each registrant's principal executive officer and principal financial officer concluded that its disclosure controls and procedures were effective. Each registrant intends to strive continually to improve its disclosure controls and procedures to enhance the quality of its financial reporting.

During the quarter ended March 31, ~~2022,~~2023, there were no changes in either registrant's internal controls over financial reporting that materially affected, or are reasonably likely to affect materially, that registrant's internal control over financial reporting.

4743

PART II. OTHER INFORMATION.

Item 1. Legal Proceedings.

MGE Energy and MGE

MGE Energy and its subsidiaries, including MGE, from time to time are involved in various legal proceedings that are handled and defended in the ordinary course of business. See Footnote 8.a. and 8.b. of Notes to Consolidated Financial Statements in this Report for more information.

Item 1A Risk Factors.

There were no material changes from the risk factors disclosed in Item 1A. Risk Factors in our 2022 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~Issuer Purchases of Equity Securities~~

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs(a)

Maximum number (or
Approximate Dollar
Value) of Shares That
May Yet Be Purchased
Under the Plans or
Programs(a)
January 1-31, 2022

7,264

$

79.44

—

—
February 1-28, 2022

7,020

74.05

—

—
March 1-31, 2022

39,234

76.76

—

—
Total

53,518

$

76.77

—

—

~~(a)~~

Under the MGE Energy, Inc. Direct Stock Purchase and Dividend Reinvestment Plan (Stock Plan), common stock shares ~~deliverable to~~purchased by plan participants may be either ~~newly~~shares issued ~~shares~~by MGE Energy or shares purchased on the open market, as determined from time to time by MGE Energy. ~~During 2022,~~Shares issued by MGE ~~Energy's~~Energy are covered by an existing registration statement. Shares purchased in the open market are purchased at the direction of the plan participants by MGE Energy's transfer agent ~~used~~'s securities broker-dealer for the accounts of those plan participants. Subject to the plan's restrictions, the timing and amount of open market purchases ~~to provide shares to meet obligations to~~is determined by the plan participants inand the ~~Stock Plan. The shares are purchased on~~broker-dealer. MGE Energy is not involved in the open market ~~through the transfer agent's securities broker-dealer and then are reissued~~purchases. During 2023, shares purchased under the Stock Plan ~~as needed to meet share delivery requirements. The volume and timing of share repurchases~~have been purchased in the open market depends upon the level of dividend reinvestment and optional share purchases being made from time to time by plan participants. As a result, there is no specified maximum number of shares to be repurchased and no specified termination date for the repurchases. All shares issued through the Stock Plan, whether newly issued or open market purchases, are sold pursuant to a registration statement that was filed with the SEC and is currently effective.

market.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable to MGE Energy and MGE.

Item 5. Other Information.

None.

4844

Item 6. Exhibits.



Ex. No.		Exhibit Description
31.1	*	Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jeffrey M. Keebler for MGE Energy, Inc.

31.2	*	Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jared J. Bushek for MGE Energy, Inc.

31.3	*	Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jeffrey M. Keebler for Madison Gas and Electric Company

31.4	*	Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jared J. Bushek for Madison Gas and Electric Company

32.1	**	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jeffrey M. Keebler for MGE Energy, Inc.

32.2	**	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jared J. Bushek for MGE Energy, Inc.

32.3	**	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jeffrey M. Keebler for Madison Gas and Electric Company

32.4	**	Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jared J. Bushek for Madison Gas and Electric Company

101.INS		XBRL Instance
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation
101.DEF		XBRL Taxonomy Extension Definition
101.LAB		XBRL Taxonomy Extension Labels
101.PRE		XBRL Taxonomy Extension Presentation
104.1		Included in the cover page, formatted in Inline XBRL

*		Filed herewith.
**		Furnished herewith.

4945

Signatures - MGE Energy, Inc.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	MGE ENERGY, INC.



Date: May ~~5, 2022~~4, 2023	/s/ Jeffrey M. Keebler
	Jeffrey M. Keebler Chairman, President and Chief Executive Officer (Duly Authorized Officer)



Date: May ~~5, 2022~~4, 2023	/s/ Jared J. Bushek
	Jared J. Bushek Vice President - ~~Finance,~~ Chief ~~Information~~Financial Officer and Treasurer (Chief Financial Officer)



Date: May ~~5, 2022~~4, 2023	/s/ Tamara J. Johnson
	Tamara J. Johnson Vice President - Chief Accounting Officer and Controller (Chief Accounting Officer)

5046

Signatures – Madison Gas and Electric Company

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	MADISON GAS AND ELECTRIC



Date: May ~~5, 2022~~4, 2023	/s/ Jeffrey M. Keebler
	Jeffrey M. Keebler Chairman, President and Chief Executive Officer (Duly Authorized Officer)



Date: May ~~5, 2022~~4, 2023	/s/ Jared J. Bushek
	Jared J. Bushek Vice President - ~~Finance,~~ Chief ~~Information~~Financial Officer and Treasurer (Chief Financial Officer)



Date: May ~~5, 2022~~4, 2023	/s/ Tamara J. Johnson
	Tamara J. Johnson Vice President - Chief Accounting Officer and Controller (Chief Accounting Officer)

5147


	Model Input
	March 31,	December 31,
Significant Unobservable Inputs	2022	2021
Basis adjustment:
On peak	92.1%	94.1%
Off peak	90.0%	92.4%
Counterparty fuel mix:
Internal generation - range	41%-66%	41%-66%
Internal generation - weighted average	49.5%	56.6%
Purchased power - range	59%-34%	59%-34%
Purchased power - weighted average	50.5%	43.4%


(In millions)
Rate changes	$	11.3
Customer fixed and demand charges		0.6
Increase in commercial, industrial and other-retail/municipal volume		0.6
Increase in residential volume		0.2
Other		0.2
Increased fuel costs		(4.8	)
Revenue subject to refund, net		(2.0	)
Total	$	6.1


(In millions)
Increase in volume	$	1.9
Rate changes		1.7
Other		0.5
Total	$	4.1


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(a)	Maximum number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs(a)
January 1-31, 2022		7,264	$	79.44	—	—
February 1-28, 2022		7,020		74.05	—	—
March 1-31, 2022		39,234		76.76	—	—
Total		53,518	$	76.77	—	—