~~United States~~

~~SECURITIES AND EXCHANGE COMMISSION~~

~~Washington, D.C. 20549~~

~~FORM 10-Q~~

~~[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

~~For the quarterly period ended:~~

~~September 30, 2017~~

~~[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934~~

~~For the transition period from _______________ to _______________~~


~~Commission~~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 ☐ 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, Wisconsin53788 ~~(608)~~ (608) 252-7000 \| mgeenergy.com	39-2040501
000-1125	Madison Gas and Electric Company (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin53788 ~~(608)~~ (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 ~~registrant was~~registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days: ~~Yes [X] No [ ]~~


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

Indicate by check mark whether the registrants have submitted electronically ~~and posted on their corporate Web sites, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files):


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

~~Yes [X] 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.	X☒	☐	☐	☐	☐
Madison Gas and Electric Company	☐	☐	X☒	☐	☐

If an emerging growth company, indicate by check mark if the ~~registrant has~~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 ~~registrant is a~~registrants are shell ~~company~~companies (as defined in Rule 12b-2 of the Exchange Act):

~~MGE Energy, Inc. and Madison Gas and Electric Company: Yes [ ] No [X]~~


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 ~~October 31, 2017~~April 30, 2022
MGE Energy, Inc.	Common stock, $1.00 par value, ~~34,668,370~~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


1PART 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.	17
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.	29
14. Segment Information.	30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	44
Item 4. Controls and Procedures.	47
PART II. OTHER INFORMATION.	48
Item 1. Legal Proceedings.	48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	48
Item 3. Defaults Upon Senior Securities.	48
Item 4. Mine Safety Disclosures.	48
Item 5. Other Information.	48
Item 6. Exhibits.	49
Signatures - MGE Energy, Inc.	50
Signatures - Madison Gas and Electric Company	51

~~Table of Contents~~

PART I. FINANCIAL INFORMATION.

Filing Format

~~Forward-Looking Statements~~

~~Where to Find More Information~~

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

~~Item 1. Financial Statements.~~

~~MGE Energy, Inc.~~

~~Consolidated Statements of Income (unaudited)~~

~~Consolidated Statements of Comprehensive Income (unaudited)~~

~~Consolidated Statements of Cash Flows (unaudited)~~

~~Consolidated Balance Sheets (unaudited)~~

~~Consolidated Statements of Common Equity (unaudited)~~

~~Madison Gas and Electric Company~~

~~Consolidated Statements of Income (unaudited)~~

~~Consolidated Statements of Comprehensive Income (unaudited)~~

~~Consolidated Statements of Cash Flows (unaudited)~~

~~Consolidated Balance Sheets (unaudited)~~

~~Consolidated Statements of Common Equity (unaudited)~~

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

~~Notes to Consolidated Financial Statements (unaudited)~~

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

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk.~~

~~Item 4. Controls and Procedures.~~

~~PART II. OTHER INFORMATION.~~

~~Item 1. Legal Proceedings.~~

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

~~Item 4. Mine Safety Disclosures.~~

~~Item 6. Exhibits.~~

~~Signatures - MGE Energy, Inc.~~

~~Signatures - Madison Gas and Electric Company~~

~~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, 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~~include: (a) those factors discussed in the registrants' ~~2016~~2021 Annual Report on Form ~~10-K:~~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 ~~17,~~16, as updated by Part I, Item 1. Financial Statements – Note 78 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 ~~public may read~~SEC maintains an internet site at www.sec.gov that contains reports, proxy and ~~copy any~~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 orand other information that ~~MGE Energy and MGE~~we file with the SEC at the SEC's public reference room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. These documents also are available to the public from commercial document retrieval services, the website maintained by the SEC at~~sec.gov, MGE Energy's website atmgeenergy.com,~~ ~~and MGE's website atmge.com. Copies~~ 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
~~NGV Fueling Services~~North Mendota	~~NGV Fueling Services,~~North Mendota Energy & Technology Park, LLC

Other Defined Terms:

~~AFUDC~~2017 Tax Act	Tax Cut and Jobs Act of 2017
2021 Annual Report on Form 10-K	MGE Energy’s and MGE’s Annual Report of Form 10-K for the year ended December 31, 2021
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
~~Blount~~Badger Hollow I	~~Blount Station~~Badger Hollow I Solar Farm
~~CAVR~~Badger Hollow II	~~Clean Air Visibility Rule~~Badger Hollow II Solar Farm
~~Codification~~Blount	~~Financial Accounting Standards Board Accounting Standards Codification~~Blount Station
~~Columbia~~BTA	~~Columbia Energy Center~~Best technology available
~~Cooling degree days~~CA	~~Measure~~Certificate of ~~the extent to which the average daily temperature is above 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide cooling~~Authority
~~CPP~~CBP	~~Clean Power Plan~~United States Customs and Border Protection
~~CSAPR~~CCR	Coal Combustion Residual
Columbia	Columbia Energy Center
COVID-19	Coronavirus Disease 2019
CSAPR	Cross-State Air Pollution Rule
Dth	Dekatherms, a quantity measure ~~used in respect of~~for natural gas
~~EGUs~~EGU	Electric ~~Generating Units~~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~~FERC	~~Financial Accounting Standards Board~~
~~FERC~~	Federal Energy Regulatory Commission
~~FTR~~FIP	~~Financial Transmission Rights~~Federal Implementation Plan
~~GAAP~~FTR	Financial Transmission Rights
GAAP	Generally Accepted Accounting Principles
~~GHG~~gas margin	~~Greenhouse~~ Gas revenues less cost of gas sold, a non-GAAP measure
~~Heating~~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
NO₂NOx	Nitrogen ~~Dioxide~~oxide
NOxPGA	~~Nitrogen Oxides~~
~~PGA~~	Purchased Gas Adjustment clause, a regulatory mechanism used to reconcile natural gas costs recovered in rates to actual costs
~~PJM~~PPA	~~PJM Interconnection, LLC (a regional transmission organization)~~
~~PPA~~	Purchased Power Agreement
~~PSCW~~	~~Public Service Commission of Wisconsin~~


~~Riverside~~PSCW	~~Riverside Energy Center~~Public Service Commission of Wisconsin
ROE	Return on ~~Equity~~equity
~~SCR~~Saratoga	~~Selective Catalytic Reduction~~Saratoga Wind Farm
~~SEC~~SCR	Selective Catalytic Reduction
SEC	Securities and Exchange Commission
SO2SIP	~~Sulfur Dioxide~~State Implementation Plan
~~Stock Plan~~SO2	Sulfur dioxide
Stock Plan	Direct Stock Purchase and Dividend Reinvestment Plan of MGE Energy
UWTwo Creeks	~~University of Wisconsin at Madison~~Two Creeks Solar Farm
~~VIE~~WCCF	~~Variable Interest Entity~~
~~WCCF~~	West Campus Cogeneration Facility
~~WEPCO~~WDNR	Wisconsin Department of Natural Resources
WEPCO	Wisconsin Electric Power Company ~~a subsidiary of WEC Energy Group, Inc.~~
~~Working capital~~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
~~XBRL~~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~~per share amounts)


		Three Months Ended				Nine Months Ended			Three Months Ended
		September 30,				September 30,			March 31,
		2017		2016		2017		2016	2022			2021
Operating Revenues:
Electric revenues	$	120,761	$	119,147	$	321,540	$	313,452	$	110,127		$	100,645
Gas revenues		18,778		17,570		101,285		92,368		98,811			67,270
Total Operating Revenues		139,539		136,717		422,825		405,820		208,938			167,915

Operating Expenses:
Fuel for electric generation		15,829		20,505		39,938		47,567		13,485			13,171
Purchased power		15,984		9,167		48,058		38,698		12,543			9,355
Cost of gas sold		5,094		4,314		50,109		43,247		64,802			37,444
Other operations and maintenance		41,529		40,146		128,143		123,839		49,994			45,682
Depreciation and amortization		13,372		11,212		39,606		33,358		21,046			18,382
Other general taxes		4,730		4,846		14,509		14,841		5,205			4,827
Total Operating Expenses		96,538		90,190		320,363		301,550		167,075			128,861
Operating Income		43,001		46,527		102,462		104,270		41,863			39,054

Other income, net		3,939		2,105	��	9,004		6,726		6,972			2,078
Interest expense, net		(4,727)		(5,038)		(14,507)		(14,995)		(6,571	)		(5,740	)
Income before income taxes		42,213		43,594		96,959		96,001		42,264			35,392
Income tax provision		(15,584)		(15,714)		(35,487)		(34,943)		(7,844	)		(459	)
Net Income	$	26,629	$	27,880	$	61,472	$	61,058	$	34,420		$	34,933

Earnings Per Share of Common Stock
(basic and diluted)	$	0.77	$	0.80	$	1.77	$	1.76
Basic									$	0.95		$	0.97
Diluted									$	0.95		$	0.97

Dividends per share of common stock	$	0.323	$	0.308	$	0.938	$	0.898	$	0.388		$	0.370

Weighted Average Shares Outstanding
(basic and diluted)		34,668		34,668		34,668		34,668

The accompanying notes are an integral part of the above unaudited consolidated financial statements.
Basic										36,163			36,163
Diluted										36,171			36,165

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

MGE Energy, Inc.

~~Consolidated Statements of Comprehensive Income (unaudited)~~

~~(In thousands)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Net Income
$
26,629
$
27,880
$
61,472
$
61,058
Other comprehensive income, net of tax:

    Unrealized gain (loss) on available-for-sale

    securities, net of tax (($40) and ($8), and ($127) and

    $96, respectively)

60

11

189

(143)
Comprehensive Income
$
26,689
$
27,891
$
61,661
$
60,915

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)

Nine Months Ended

September 30,

2017

2016

Operating Activities:

    Net income
$
61,472
$
61,058

    Items not affecting cash:

        Depreciation and amortization

39,606

33,358

        Deferred income taxes

4,810

15,041

        Provision for doubtful receivables

650

583

        Employee benefit plan cost

778

165

        Equity earnings in ATC

(7,432)

(6,023)

        Gain on sale of property

(1,581)

-

        Other items

1,071

693

    Changes in working capital items:

        Decrease in current assets

18,161

33,740

        Decrease in current liabilities

(17,615)

(3,147)

    Dividends from ATC

6,142

4,214

    Cash contributions to pension and other postretirement plans

(9,717)

(13,134)

    Other noncurrent items, net

2,671

2,644

            Cash Provided by Operating Activities

99,016

129,192

Investing Activities:

    Capital expenditures

(66,286)

(62,273)

    Capital contributions to investments

(6,863)

(2,036)

    Proceeds from sale of property

2,399

-

    Other

(364)

(310)

            Cash Used for Investing Activities

(71,114)

(64,619)

Financing Activities:

    Cash dividends paid on common stock

(32,502)

(31,115)

    Repayment of long-term debt

(33,260)

(3,192)

    Issuance of long-term debt

40,000

-

    Proceeds from short-term debt

7,000

-

    Other

(366)

(65)

            Cash Used for Financing Activities

(19,128)

(34,372)

Change in cash and cash equivalents

8,774

30,201

Cash and cash equivalents at beginning of period

95,959

81,384

Cash and cash equivalents at end of period
$
104,733
$
111,585

Supplemental disclosures of cash flow information:

    Significant noncash investing activities:

        Accrued capital expenditures
$
12,469
$
10,603

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


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

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

Financing Activities:
Cash dividends paid on common stock		(14,013	)		(13,380	)
Repayments of long-term debt		(1,211	)		(1,182	)
(Repayments of) proceeds from short-term debt		(5,500	)		1,500
Other		(492	)		(523	)
Cash Used for Financing Activities		(21,216	)		(13,585	)

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

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

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

MGE Energy, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands)


		September 30,	December 31,		March 31,		December 31,
ASSETS		2017		2016	2022		2021
Current Assets:
Cash and cash equivalents	$	104,733	$	95,959	$	26,374	$	17,438
Accounts receivable, less reserves of $2,950 and $3,017, respectively		38,129		39,887
Other accounts receivable, less reserves of $372 and $426, respectively		7,588		8,530
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
Unbilled revenues		21,764		29,846		30,839		34,812
Materials and supplies, at average cost		21,835		18,561		30,951		29,863
Fossil fuel, at average cost		10,017		9,757
Fuel for electric generation, at average cost						6,331		6,429
Stored natural gas, at average cost		14,758		12,819		5,580		15,668
Prepaid taxes		12,406		26,636		15,487		20,214
Regulatory assets - current		7,377		6,414		2,205		1,465
Assets held for sale		6,707		14,813
Other current assets		10,043		12,293		11,255		11,183
Total Current Assets		255,357		275,515		194,433		199,371
Other long-term receivables						691		1,155
Regulatory assets		146,006		158,485		108,271		107,547
Pension and other postretirement benefit asset		3,471		2,020
Pension benefit asset						62,806		58,757
Other deferred assets and other		6,311		6,691		26,697		27,548
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,270,124		1,245,269		1,843,122		1,828,171
Construction work in progress		42,276		36,790		40,156		50,603
Total Property, Plant, and Equipment		1,312,400		1,282,059		1,883,278		1,878,774
Investments		86,455		76,290		101,365		98,754
Total Assets	$	1,810,000	$	1,801,060	$	2,377,541	$	2,371,906

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,428	$	4,333	$	4,920	$	4,889
Short-term debt		7,000		-		0		5,500
Accounts payable		31,519		47,799		44,690		64,149
Accrued interest and taxes		4,750		5,495		9,265		10,385
Accrued payroll related items		9,981		11,892		9,296		12,951
Regulatory liabilities - current		6,353		6,910		24,557		9,365
Derivative liabilities		8,288		7,620		130		2,140
Other current liabilities		12,263		19,456		5,246		8,468
Total Current Liabilities		84,582		103,505		98,104		117,847
Other Credits:
Deferred income taxes		389,179		383,813		233,146		231,149
Investment tax credit - deferred		885		947		48,773		44,836
Regulatory liabilities		28,253		22,173		155,096		154,298
Accrued pension and other postretirement benefits		65,616		74,347		72,881		73,085
Derivative liabilities		34,890		42,970
Finance lease liabilities						16,920		17,322
Other deferred liabilities and other		63,942		66,426		91,363		91,690
Total Other Credits		582,765		590,676		618,179		612,380
Capitalization:
Common shareholders' equity		753,247		724,088		1,048,153		1,027,468
Long-term debt		389,406		382,791		613,105		614,211
Total Capitalization		1,142,653		1,106,879		1,661,258		1,641,679
Commitments and contingencies (see Footnote 7)
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization	$	1,810,000	$	1,801,060	$	2,377,541	$	2,371,906

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

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~~per share amounts)

Accumulated

Additional

Other

Common Stock

Paid-in

Retained

Comprehensive

Shares

Value

Capital

Earnings

Income/(Loss)

Total

2016

Beginning balance - December 31, 2015
34,668
$
34,668
$
316,268
$
339,165
$
357
$
690,458

Net income

61,058

61,058

Other comprehensive loss

(143)

(143)

Common stock dividends declared

($0.898 per share)

(31,115)

(31,115)

Ending balance - September 30, 2016
34,668
$
34,668
$
316,268
$
369,108
$
214
$
720,258

2017

Beginning balance - December 31, 2016
34,668
$
34,668
$
316,268
$
372,950
$
202
$
724,088

Net income

61,472

61,472

Other comprehensive income

189

189

Common stock dividends declared

($0.938 per share)

(32,502)

(32,502)

Ending balance - September 30, 2017
34,668
$
34,668
$
316,268
$
401,920
$
391
$
753,247

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


										Accumulated
					Additional					Other
	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

Three Months Ended March 31, 2022
Beginning Balance		36,163	$	36,163	$	394,903	$	596,402		$	0	$	1,027,468
Net income								34,420					34,420
Common stock dividends declared ($0.388 per share)								(14,013	)				(14,013	)
Equity-based compensation plans and other						278							278
Ending Balance - March 31, 2022		36,163	$	36,163	$	395,181	$	616,809		$	0	$	1,048,153

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

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Operating Revenues:

    Electric revenues
$
120,760
$
119,152
$
321,543
$
313,470
    Gas revenues

18,779

17,576

101,294

92,390
        Total Operating Revenues

139,539

136,728

422,837

405,860

Operating Expenses:

    Fuel for electric generation

15,828

20,507

39,939

47,574
    Purchased power

15,985

9,171

48,061

38,709
    Cost of gas sold

5,094

4,320

50,117

43,269
    Other operations and maintenance

41,327

40,003

127,355

123,117
    Depreciation and amortization

13,372

11,212

39,606

33,334
    Other general taxes

4,730

4,846

14,509

14,841
    Income tax provision

14,059

14,934

32,080

32,488
        Total Operating Expenses

110,395

104,993

351,667

333,332
Operating Income

29,144

31,735

71,170

72,528

Other Income and Deductions:

    AFUDC - equity funds

310

253

875

777
    Equity earnings in MGE Transco

-

1,451

-

5,451
    Income tax provision

(663)

(606)

(754)

(2,315)
    Other expense, net

1,488

(62)

1,301

(298)
        Total Other Income and Deductions

1,135

1,036

1,422

3,615
    Income before interest expense

30,279

32,771

72,592

76,143

Interest Expense:

    Interest on long-term debt

4,995

5,079

15,051

15,284
    Other interest, net

54

112

150

163
    AFUDC - borrowed funds

(123)

(82)

(295)

(253)
        Net Interest Expense

4,926

5,109

14,906

15,194
Net Income
$
25,353
$
27,662
$
57,686
$
60,949
Less: Net Income Attributable to Noncontrolling

Interest, net of tax

(5,439)

(5,695)

(16,224)

(17,899)
Net Income Attributable to MGE
$
19,914
$
21,967
$
41,462
$
43,050

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


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

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

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

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

Madison Gas and Electric Company

~~Consolidated Statements of Comprehensive Income (unaudited)~~

~~(In thousands)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Net Income
$
25,353
$
27,662
$
57,686
$
60,949
Other comprehensive income, net of tax:

    Unrealized (loss) gain on available-for-sale

    securities, net of tax ($5 and ($5), and $26 and

    $21, respectively)

(7)

8

(38)

(31)
Comprehensive Income
$
25,346
$
27,670
$
57,648
$
60,918
    Less: Comprehensive Income Attributable to

    Noncontrolling Interest, net of tax

(5,439)

(5,695)

(16,224)

(17,899)
Comprehensive Income Attributable to MGE
$
19,907
$
21,975
$
41,424
$
43,019

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)

Nine Months Ended

September 30,

2017

2016

Operating Activities:

    Net income
$
57,686
$
60,949

    Items not affecting cash:

        Depreciation and amortization

39,606

33,334

        Deferred income taxes

2,255

13,997

        Provision for doubtful receivables

650

583

��      Employee benefit plan cost

778

165

        Equity earnings in MGE Transco

-

(5,451)

        Gain on sale of property

(1,581)

-

        Other items

1,344

1,056

    Changes in working capital items:

       Decrease in current assets

17,536

32,557

       Decrease in current liabilities

(16,670)

(1,783)

    Dividends from MGE Transco

-

4,214

    Cash contributions to pension and other postretirement plans

(9,717)

(13,134)

    Other noncurrent items, net

2,479

2,472

            Cash Provided by Operating Activities

94,366

128,959

Investing Activities:

    Capital expenditures

(66,286)

(62,273)

    Capital contributions to investments

-

(1,598)

    Proceeds from sale of property

1,751

-

    Other

(570)

(536)

            Cash Used for Investing Activities

(65,105)

(64,407)

Financing Activities:

    Cash dividends paid to parent by MGE

(35,000)

(40,000)

    Distributions to parent from noncontrolling interest

(16,500)

(18,113)

    Equity contribution received from noncontrolling interest

-

1,598

    Repayment of long-term debt

(33,260)

(3,192)

    Issuance of long-term debt

40,000

-

    Proceeds from short-term debt

7,000

-

    Other

(315)

(47)

            Cash Used for Financing Activities

(38,075)

(59,754)

Change in cash and cash equivalents

(8,814)

4,798

Cash and cash equivalents at beginning of period

10,768

26,760

Cash and cash equivalents at end of period
$
1,954
$
31,558

Supplemental disclosures of cash flow information:

    Significant noncash investing activities:

        Accrued capital expenditures
$
12,469
$
10,603

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


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

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

Financing Activities:
Cash dividends paid to parent by MGE		(5,000	)		0
Distributions to parent from noncontrolling interest		(9,000	)		(5,000	)
Repayments of long-term debt		(1,211	)		(1,182	)
(Repayments of) proceeds from short-term debt		(5,500	)		1,500
Other		(492	)		(523	)
Cash Used for Financing Activities		(21,203	)		(5,205	)

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

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

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)


		September 30,	December 31,		March 31,		December 31,
ASSETS		2017		2016	2022		2021
Current Assets:
Cash and cash equivalents	$	1,954	$	10,768	$	17,159	$	6,401
Accounts receivable, less reserves of $2,950 and $3,017, respectively		38,129		39,887
Accounts receivable, less reserves of $8,952 and $6,940, respectively						50,167		46,205
Affiliate receivables		683		539		530		558
Other accounts receivable, less reserves of $372 and $426, respectively		7,529		6,363
Other accounts receivable, less reserves of $1,213 and $1,364, respectively						15,242		16,092
Unbilled revenues		21,764		29,846		30,839		34,812
Materials and supplies, at average cost		21,835		18,561		30,951		29,863
Fossil fuel, at average cost		10,017		9,757
Fuel for electric generation, at average cost						6,331		6,429
Stored natural gas, at average cost		14,758		12,819		5,580		15,668
Prepaid taxes		12,524		25,798		15,193		19,379
Regulatory assets - current		7,377		6,414		2,205		1,465
Assets held for sale		6,707		14,813
Other current assets		10,010		12,268		11,152		11,071
Total Current Assets		153,287		187,833		185,349		187,943
Affiliate receivable long-term		3,839		4,236		1,456		1,589
Regulatory assets		146,006		158,485		108,271		107,547
Pension and other postretirement benefit asset		3,471		2,020
Pension benefit asset						62,806		58,757
Other deferred assets and other		4,066		4,353		26,806		27,907
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,270,153		1,244,648		1,843,150		1,828,199
Construction work in progress		42,276		36,790		40,156		50,603
Total Property, Plant, and Equipment		1,312,429		1,281,438		1,883,306		1,878,802
Investments		423		487		177		230
Total Assets	$	1,623,521	$	1,638,852	$	2,268,171	$	2,262,775

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	4,428	$	4,333	$	4,920	$	4,889
Short-term debt		7,000		-		0		5,500
Accounts payable		31,508		47,790		44,672		64,130
Accrued interest and taxes		5,717		5,440		9,417		10,649
Accrued payroll related items		9,981		11,892		9,296		12,951
Regulatory liabilities - current		6,353		6,910		24,557		9,365
Derivative liabilities		8,288		7,620		130		2,140
Other current liabilities		12,079		19,347		5,324		5,968
Total Current Liabilities		85,354		103,332		98,316		115,592
Other Credits:
Deferred income taxes		346,278		343,117		200,507		198,885
Investment tax credit - deferred		885		947		48,773		44,836
Regulatory liabilities		28,253		22,173		155,096		154,298
Accrued pension and other postretirement benefits		65,616		74,347		72,881		73,085
Derivative liabilities		34,890		42,970
Finance lease liabilities						16,920		17,322
Other deferred liabilities and other		63,942		66,426		92,126		92,152
Total Other Credits		539,864		549,980		586,303		580,578
Capitalization:
Common shareholder's equity		493,508		487,084		826,104		803,807
Noncontrolling interest		115,389		115,665		144,343		148,587
Total Equity		608,897		602,749		970,447		952,394
Long-term debt		389,406		382,791		613,105		614,211
Total Capitalization		998,303		985,540		1,583,552		1,566,605
Commitments and contingencies (see Footnote 7)
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization	$	1,623,521	$	1,638,852	$	2,268,171	$	2,262,775

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

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

Madison Gas and Electric Company

Consolidated Statements of ~~Common~~ Equity (unaudited)

(In thousands)

Accumulated

Additional

Other

Non-

Common Stock

Paid-in

Retained
Comprehensive
Controlling

Shares

Value

Capital

Earnings
Income/(Loss)
Interest

Total
2016

Beginning balance - Dec. 31, 2015
17,348
$
17,348
$
192,417
$
291,888
$
23
$
140,308
$
641,984
Net income

43,050

17,899

60,949
Other comprehensive loss

(31)

(31)
Cash dividends paid to parent

by MGE

(40,000)

(40,000)
Equity contribution received from

noncontrolling interest

1,598

1,598
Distributions to parent from

noncontrolling interest

(18,113)

(18,113)
Deconsolidation of

noncontrolling interest

(25,486)

(25,486)
Ending balance - September 30, 2016
17,348
$
17,348
$
192,417
$
294,938
$
(8)
$
116,206
$
620,901

2017

Beginning balance - Dec. 31, 2016
17,348
$
17,348
$
192,417
$
277,300
$
19
$
115,665
$
602,749
Net income

41,462

16,224

57,686
Other comprehensive loss

(38)

(38)
Cash dividends paid to parent

by MGE

(35,000)

(35,000)
Distributions to parent from

noncontrolling interest

(16,500)

(16,500)
Ending balance - September 30, 2017
17,348
$
17,348
$
192,417
$
283,762
$
(19)
$
115,389
$
608,897

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


										Accumulated
					Additional					Other		Non-
	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

Three Months Ended March 31, 2022
Beginning balance		17,348	$	17,348	$	252,917	$	533,542		$	0	$	148,587		$	952,394
Net income								27,297					4,756			32,053
Cash dividends paid to parent by MGE								(5,000	)							(5,000	)
Distributions to parent from noncontrolling interest													(9,000	)		(9,000	)
Ending Balance - March 31, 2022		17,348	$	17,348	$	252,917	$	555,839		$	0	$	144,343		$	970,447

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)

~~September 30, 2017~~March 31, 2022

~~Basis~~

Summary of ~~Presentation -~~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 23 of Notes to Consolidated Financial Statements under Item 8, Financial Statements and Supplementary Data, of MGE Energy's and MGE's ~~2016~~2021 Annual Report on Form 10-K (the ~~2016~~2021 Annual Report on Form 10-K).

Prior to December 1, 2016, MGE Transco was jointly owned by MGE Energy and MGE. MGE's ownership interest in MGE Transco declined below a majority in July 2016. As a result of the change in majority ownership in MGE Transco in July 2016, MGE deconsolidated MGE Energy's proportionate share of the equity in MGE Transco. The change in consolidation was applied prospectively by reducing its investment and noncontrolling interest on MGE's consolidated financial statements. On December 1, 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy. See Footnote 3 for further discussion.

The accompanying consolidated financial statements as of ~~September 30, 2017,~~March 31, 2022, and ~~for~~during the three ~~and nine~~ months ended March 31, 2022, 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 ~~2016~~2021 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 5461 through ~~104~~115 of the ~~2016~~2021 Annual Report on Form 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
	March 31,		December 31,		March 31,		December 31,
(In thousands)	2022		2021		2022		2021
Cash and cash equivalents	$	26,374	$	17,438	$	17,159	$	6,401
Restricted cash		641		847		641		847
Receivable - margin account		534		550		534		550
Cash, cash equivalents, and restricted cash	$	27,549	$	18,835	$	18,334	$	7,798

Cash Equivalents

~~Equity~~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 ~~Financing Arrangements - MGE Energy.~~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.

a.14

Property, Plant, and Equipment.

~~Common Stock.~~Columbia.

~~MGE Energy sells shares~~An asset that will be retired in the near future and substantially in advance of its ~~common stock through~~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. Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors. As of March 31, 2022, early retirement of Columbia was probable.

The net book value of our ownership share of this generating unit was $156.7 million as of March 31, 2022. 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 ~~Stock Plan. Those shares may~~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.

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 ~~newly issued shares or shares~~required. An impairment loss would be recorded for the difference of the remaining net book value of the generating unit that ~~MGE Energy has purchased in~~is greater than the ~~open market for resale~~present value of the amount expected to participants in the Stock Plan. All sales under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC. For both the three and nine months ended September 30, 2017 and 2016, MGE Energy did not issue any new sharesbe recovered from ratepayers. NaN impairment was recorded as of ~~common stock under the Stock Plan.~~March 31, 2022.

~~Dilutive Shares Calculation.~~

~~MGE Energy does not have any stock option or stock award programs or any dilutive securities.~~

~~Long-term Debt~~

New Accounting Standards - MGE Energy and MGE.

~~On January 13, 2017,~~ MGE Energy and MGE reviewed FASB authoritative guidance recently issued, ~~$40 million~~none of ~~3.76% senior unsecured notes due January 15, 2052. MGE used the net proceeds from the sale~~which are expected to have a material impact on their consolidated results of senior notes to refinance $30 million of medium-term notes, which matured in January 2017, and assist with the financing of additional capital expenditures. The long-term debt carries an interest rate of 3.76% per annum over its 35-year term. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt.

On October 2, 2017, MGE issued $30 million of 3.11% senior unsecured notes due October 1, 2027. MGE will use the net proceeds from the sale of senior notes to cover capital expenditures and other corporate obligations. The long-term debt carries an interest rate of 3.11% per annum over its 10-year term. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt.

operations, financial condition, or cash flows.

~~Investment~~

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, ~~which, as~~a subsidiary of ~~December 1, 2016, is owned solely by~~ 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 ~~wholly-owned~~ subsidiary of MGE Energy.

MGE Transco and MGEE Transco have accounted for their ~~investment~~investments in ATC and ATC Holdco, respectively, under the equity method of accounting. Equity earnings from investments are recorded as "Other income" on ~~MGE Energy's~~the consolidated statements of ~~income. For the three and nine months ended September 30, 2017 and 2016,~~income of MGE Energy. MGE Transco recorded the ~~following:~~following amounts related to its investment in ATC:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2017

2016

2017

2016

Equity earnings from investment in ATC
$
2,338
$
2,023
$
7,432
$
6,023

Dividends from ATC^(a)

2,070

1,486

4,070

4,214

Capital contributions to ATC

710

888

3,018

1,598


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

~~(a)~~

~~As of~~ATC Holdco was formed in December ~~31, 2016,~~2016. ATC Holdco's transmission development activities have been suspended for the near term.

In April 2022, MGE Transco ~~recorded~~made a ~~$2.1~~$0.5 million ~~receivable from ATC for a cash dividend received in January 2017.~~capital contribution to ATC.

~~ATC Holdco's activities commenced in late December 2016 and had an immaterial impact on results of operations, cash flows, and financial condition.~~

At September 30, 2017, and December 31, 2016, MGE Transco held a 3.6% ownership interest in ATC. At September 30, 2017, and December 31, 2016, MGEE Transco held a 4.4% and 4.0% ownership interest in ATC Holdco, respectively.

In June 2016, the PSCW required MGE to transfer its interest in ATC to MGE Energy, which was to be completed by December 31, 2022. The requirement arose in the context of requests for regulatory approvals by several owners of ATC in connection with a reorganization of ATC. MGE's ownership interest in ATC, held through MGE Transco, was transferred net of deferred tax liabilities to MGE Energy by way of a dividend in kind of $15.8 million as of December 1, 2016. As a result of the transfer, MGE's ownership interest in MGE Transco was completely eliminated in favor of MGE Energy. The change had no effect on MGE Energy's consolidated financial statements.

ATC's summarized financial data ~~for the three and nine months ended September 30, 2017 and 2016,~~ is as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2017

2016

2017

2016

Operating revenues
$
171,123
$
158,126
$
522,402
$
476,591

Operating expenses

(85,063)

(80,271)

(250,116)

(241,034)

Other income, net

796

1,128

1,615

2,563

Interest expense, net

(28,273)

(24,624)

(81,188)

(73,714)

Earnings before members' income taxes
$
58,583
$
54,359
$
192,713
$
164,406


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

MGE receives transmission and other related services from ATC. During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 and 2021, MGE recorded ~~$7.3~~$7.9 million and ~~$21.9~~$8.0 million, respectively, for transmission ~~services received compared to $7.4 million and $22.1 million for the comparable periods in 2016.~~services. MGE also provides a variety of operational, maintenance, and project management ~~services~~work for ATC, which is reimbursed by ATC. As of ~~September 30, 2017,~~March 31, 2022, and December 31, ~~2016,~~2021, MGE had a receivable due from ATC of ~~$0.1 million.~~

$8.1 million and $7.0 million, respectively. The receivable is primarily related to Badger Hollow I and II. MGE is reimbursed for these costs after the new generation assets are placed into service.

Taxes - MGE ~~Energy~~Energy and MGE.

Effective Tax Rate.

~~MGE Energy's effective~~

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

(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 ~~September 30,~~March 31, 2022 and 2021, MGE recognized $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 ~~and 2016, was 36.9% and 36.1%, respectively. MGE's effective income tax rate for~~Tax Act not restricted by IRS normalization rules. For the three months ended ~~September 30, 2017 and 2016, was 36.7% and 36.0%, respectively. For both~~March 31, 2021, MGE ~~Energy and MGE, the increase~~recognized $3.3 million. Included in the ~~effective tax~~2022 and 2023 rate ~~is due in part~~settlement was a net collection from customers of the gas portion of deficient deferred taxes related to ~~lower estimated federal tax credits.~~

~~MGE Energy's effective income tax rate for~~ the ~~nine~~2017 Tax Act not restricted by IRS normalization rules. For the three months ended ~~September 30, 2017 and 2016, was 36.6% and 36.4%, respectively. MGE's effective income tax rate for the nine months ended September 30, 2017 and 2016, was 36.3% and 36.4%, respectively.~~

March 31, 2022, MGE recognized $0.3 million.

~~Pension~~

Pension and Other Postretirement Plans - MGE Energy and MGE.

MGE maintains qualified and nonqualified pension plans, health care, and life insurance ~~benefits. Additionally, MGE has~~benefits and defined contribution 401(k) benefit ~~plans.~~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 for~~recognized.


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

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

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 ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016. A portion~~2021, MGE recovered $0.3 million and $3.4 million of pension and other postretirement costs, respectively. The recovery of these costs reduced the ~~net periodic~~amount previously deferred and has not been reflected in the table above.

During the three months ended March 31, 2022, MGE returned $1.0 million of savings from 2021 employee benefit ~~cost is capitalized within~~plan costs. The deferred savings has not been reflected in the ~~consolidated balance sheets.~~table above.

Equity and Financing Arrangements.

Common Stock - MGE Energy.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2017

2016

2017

2016

Pension Benefits

Components of net periodic benefit cost:

    Service cost
$
1,351
$
1,413
$
4,043
$
4,358

    Interest cost

3,168

3,161

9,481

9,744

    Expected return on assets

(5,762)

(5,724)

(17,244)

(17,646)

Amortization of:

    Prior service (credit) cost

(4)

3

(12)

8

    Actuarial loss

1,594

1,388

4,769

4,278

Net periodic benefit cost
$
347
$
241
$
1,037
$
742

Postretirement Benefits

Components of net periodic benefit cost:

    Service cost
$
315
$
361
$
944
$
1,084

    Interest cost

678

753

2,034

2,258

    Expected return on assets

(722)

(787)

(2,165)

(2,360)

Amortization of:

    Transition obligation

1

1

2

3

    Prior service credit

(667)

(744)

(2,001)

(2,233)

    Actuarial loss

190

178

570

533

Net periodic benefit credit
$
(205)
$
(238)
$
(616)
$
(715)

MGE Energy sells shares of its common stock through its 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 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 and 2021, MGE Energy issued 0 new shares of common stock under the Stock Plan.

Dilutive Shares Calculation - MGE Energy.

As of March 31, 2022, 7,492 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.

Share-Based ~~Compensation~~Compensation - MGE Energy and MGE.

Under MGE Energy's Director Incentive Plan and its Performance Unit Plan, non-employee directors and eligible employees may receive performance units that entitle the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the set performance period.

In January 2017, 4,032 units were granted under the Director Incentive Plan and are subject to a three-year graded vesting schedule. In March 2017, 14,704 units were granted under the Performance Unit Plan and are subject to a five-year graded vesting schedule. On the grant date, MGE Energy and MGE measure the cost of the director or employee services received in exchange for a performance unit award based on the current market value of MGE Energy common stock. The fair value of the awards is re-measured quarterly, including at September 30, 2017, as required by applicable accounting standards. Changes in fair value as well as the original grant are recognized as compensation cost. Since this amount is re-measured throughout the vesting period, the compensation cost is subject to variability.

For nonretirement eligible employees under the Performance Unit Plan, stock based compensation costs are accrued and recognized using the graded vesting method. Compensation cost for retirement eligible employees or employees that will become retirement eligible during the vesting schedule are recognized on an abridged horizon.

During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 and 2021, MGE recorded ~~$0.3~~$0.4 million and ~~$1.0~~$0.7 million, respectively, in compensation expense ~~as a result of~~related to share-based compensation awards under the ~~plans compared to $0.2 million~~2006 Performance Unit Plan, the 2020 Performance Unit Plan, the 2013 Director Incentive Plan, and ~~$2.0 million for~~ the ~~comparable periods in 2016.~~ 2021 Long-Term Incentive Plan (2021 Plan).

In January ~~2017,~~2022, cash payments of ~~$2.0~~$1.8 million were distributed ~~according~~related to awards that were granted in 2019, for the ~~terms of~~2013 Director Incentive Plan, and in 2017, for the ~~awards granted earlier~~2006 Performance Unit Plan.

In February 2022, MGE issued 10,395 performance units and 15,931 restricted stock units under the ~~plans that had reached their payment dates. No forfeitures of units occurred during~~2021 Plan to eligible employees and non-employee directors.

MGE recognizes stock-based compensation expense on a straight-line basis over the ~~three and nine months ended September 30, 2017 and 2016. At September 30, 2017, $5.1 million of outstanding~~requisite service period. Awards classified as equity awards are ~~vested,~~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 ~~this amount, no cash settlements have occurred.~~common stock, and therefore are classified as equity awards.

~~Commitments~~

Commitments and Contingencies.

Environmental - MGE Energy and MGE.

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. 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 ~~they conduct their~~ operations are conducted, the costs of ~~those~~ 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 ~~have the potential to~~could have a material effect on ~~our~~ 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 ~~published~~promulgated water ~~effluent limitations guidelines~~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, such as~~plants.

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

The Elm Road ~~Units.~~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.

•

The EPA's cooling water intake rules ~~which~~ require cooling water intake structures at electric power plants ~~such as our WCCF, Blount, and Columbia plants,~~to meet best technology available ~~technology~~(BTA) standards ~~so that~~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 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 the BTA determination at Blount will not be material for MGE.

Columbia's river intakes are ~~reduced.~~subject to this rule. BTA improvements may not be required given that the owners are planning to retire both units by the end of 2024. 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.

•

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 ~~existing~~ fossil fuel-fired electric generating units (EGUs), including existing and ~~systems (the Clean Power Plan,~~proposed regulations governing existing, new or ~~CPP). Implementation~~modified fossil-fuel generating units.

In October 2021, as part of the ~~rule is expected to have a direct impact on existing coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs. In May 2017,~~Biden administration's Unified Agenda, the EPA requested the U.S. Court of Appeals for the D.C. Circuit to put on hold, indefinitely, any ongoing challenges to the rules while the EPA reviews the rule and undertakes any potential rulemaking. In October 2017, the EPA published a proposed rule announcing the EPA'sannounced their intention to ~~repeal the CPP~~introduce a new set of emission guidelines for states to follow in submitting state plans to establish and ~~has sought public comment on whether to replace the rule, and if so how. Given the pending legal proceedings, and the EPA's recent proposal, the nature and timing~~implement standards of ~~any final requirements to control GHG~~performance for greenhouse gas emissions from existing fossil fuel-fired ~~EGUs is subject~~EGUs. In late 2021, the US Supreme Court agreed to ~~uncertainty. If a rule is implemented substantially in its present form, it is expected~~hear arguments regarding the extent of EPA's authority to ~~have a material impact on MGE.~~regulate greenhouse gases from electric generation units under the Clean Air Act. MGE will continue to ~~monitor~~evaluate greenhouse gas rule developments, ~~with this proposed rule.~~including any further Supreme Court decisions on the EPA's authority to regulate greenhouse gases.

•

~~Federal and state air quality regulations impose restrictions on various emissions including emissions of sulfur dioxide (SO~~₂~~), nitrogen dioxide (NO~~₂~~), and other pollutants, and may require permits for operation of emission sources.~~

•

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

The Elm Road Units are located in Milwaukee County, Wisconsin, a nonattainment area. The Wisconsin Department of Natural Resources (WDNR) must develop a State ~~of Wisconsin has joined a lawsuit filed by several states challenging~~Implementation Plan (SIP) for the ~~EPA's~~area, which will likely result in more stringent requirements for both constructing new ~~ozone standard, alleging that~~development and modifying or expanding existing plants in the new standard is not attainable and the EPA is not properly considering background levels in setting its ozone attainment levels. Oral arguments in this case were delayed following a request by the EPA. The EPA missed its regulatory deadline to

~~designate areas as attainment or nonattainment under the 2015 standard.~~area. MGE will continue to monitor the ~~EPA's progress on attainment designations~~WDNR's SIP development and the extent to ~~assess potential impacts at our facilities, particularly our~~which the requirements will impact the Elm Road Units. At this time, MGE does not expect that the 2015 Ozone NAAQS will have a material effect on its existing plants based on final designations.

•

Rules regulating nitrogen oxide (NOx) and SO_{sulfur dioxide (SO}2) emissions, including the Cross State Air Pollution Rule (CSAPR) and Clean Air Visibility ~~Rule (CAVR). At this time, regulatory obligations, compliance strategies, and costs remain uncertain due to uncertainties surrounding the ongoing implementation of Phase II of~~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 ~~continued legal challenges surrounding~~EPA has determined as being significantly impacted by pollution from upwind states. This is accomplished in the CSAPR through a reduction in SO2and ~~CAVR.~~NOx from qualifying fossil-fuel fired power plants in upwind "contributing" states. NOx and SO2 contribute 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, 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 NOx 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, we will not know the 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.

•

The EPA's Coal Combustion Residuals Rule (CCR), which regulates ~~coal ash~~ 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 extension to initiate closure by October 2022. The EPA has not formally approved the extension. The Columbia owners anticipate that the EPA will approve the extension request. However, we will not know the outcome 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.

Review of ~~our~~the Elm Road Units has indicated that the costs to comply with ~~this~~the CCR rule are not expected to be significant. ~~Columbia's operator has developed~~In July 2021, the PSCW approved a ~~preliminary implementation schedule for meeting~~CA application filed by MGE and the ~~various deadlines spelled out in~~other owners of Columbia to install technology required to cease bottom ash transport water discharges rather than extend the ~~rule. Costs~~longevity of the ash ponds. Pending the EPA’s final approval of closure plans at Columbia, MGE's share of the estimated costs of the project will be ~~dependent on what~~approximately $4 million. Construction is ~~determined during~~expected to be completed by the ~~evaluation stage.~~

~~The matters in the bullet points above are discussed further in Footnote 17.c. in the Financial Statements~~end of ~~the 2016 Annual Report on Form 10-K.~~2022.

Legal Matters - MGE Energy and MGE.

MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE ~~maintains accruals~~accrues for ~~such~~ 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. 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.

MGE ~~has~~Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet ~~its obligation~~their obligations to deliver electricity and natural gas to customers. Management expects to recover these costs in future customer rates. ~~As of September 30, 2017, the~~The following table shows future commitments related to ~~these~~ purchase contracts ~~were~~ as ~~follows:~~of March 31, 2022:

(In thousands)

2017

2018

2019

2020

2021

Thereafter

Coal^(a)
$
6,402
$
19,685
$
13,497
$
3,445
$
-
$
-

Natural gas

Transportation & storage^(b)

6,073

20,839

19,680

15,423

8,660

24,373

Supply^(c)

11,243

11,817

-

-

-

-

$
23,718
$
52,341
$
33,177
$
18,868
$
8,660
$
24,373


(In thousands)	2022		2023		2024		2025		2026		Thereafter
Coal(a)	$	17,825	$	14,023	$	8,299	$	2,862	$	0	$	0

(a)

Total coal commitments for 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.

~~(b)~~

MGE's natural gas transportation and storage contracts require fixed monthly payments for firm supply pipeline transportation and storage capacity. The pricing components of the fixed monthly payments for the transportation and storage contracts are established by FERC but may be subject to change.

~~(c)~~

~~These commitments include market-based pricing.~~

~~Other Commitments - MGE Energy.~~

In May 2017, MGE Energy entered into a subscription agreement to invest in a nonpublic venture capital fund. From time to time, this entity will require capital infusions from its investors. MGE Energy has committed to contribute $5 million in capital for such infusions. The timing of these infusions is dependent on the needs of the investee and is therefore uncertain at this time.

Rate ~~Matters~~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.

In December ~~2016,~~2021, the PSCW ~~authorized MGE, effective January 1, 2017, to decrease 2017 rates~~approved a settlement agreement for ~~retail electric customers by 0.8% or $3.3 million on~~MGE's 2022 rate case. The settlement agreement provides for an ~~annual basis and to~~8.81% increase ~~rates~~ for ~~retail gas customers by 1.9% or $3.1 million on an annual basis. The decrease in retail~~ electric rates ~~is attributable to declining~~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. The~~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 0.96% increase in ~~retail~~ gas rates ~~covers costs associated with MGE's natural gas system infrastructure improvements.~~and to address a potential electric rate change through a limited rate case reopener. The ~~authorized~~ return on common stock equity for ~~2017~~2022 and 2023 is ~~9.8%~~9.8% based on a capital structure consisting of ~~57.2%~~55.6% common equity.

In December 2020, the PSCW approved a settlement agreement for MGE's 2021 rate case. The ~~PSCW~~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 included an increase in rate base but the associated rate increase was primarily offset by lower fuel and purchased power costs and a one-time $18.2 million return to customers of 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. The gas rate increase covered infrastructure costs and technology improvements. The settlement agreement also ~~approved MGE's request to extend the current~~included escrow accounting treatment for ~~transmission related~~pension and other postretirement benefit costs, ~~through 2018. This~~bad debt expense, and customer credit card fees. Escrow accounting treatment allows MGE to ~~reflect~~defer any ~~differential~~difference between ~~transmission~~estimated costs ~~reflected~~ in rates 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 in 2021.

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 rate settlements (2021 and 2022/2023). 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 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 have not been challenged. The PSCW is expected to vigorously defend its ~~next~~approval of the rate case ~~filing.~~

~~In July 2015,~~settlements. MGE has intervened in the ~~PSCW approved MGE's request~~proceedings to ~~extend~~further defend the ~~current accounting treatment for transmission related costs through 2016, conditioned upon MGE not filing a base rate case for 2016. MGE did not file a base rate case for 2016.~~PSCW's decision.

Fuel Rules.

Fuel rules require ~~the PSCW and~~ Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any ~~over/under recovery~~over- or under-recovery of the actual costs is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is ~~currently~~ set at plus or minus 2%1%. Under fuel rules, MGE ~~would defer~~defers costs, less any excess revenues, if its actual electric fuel costs ~~exceeded 102%~~exceed 101% of the electric fuel costs allowed in its latest rate order. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. Conversely, MGE is required to defer the benefit of lower costs if actual electric

fuel costs were less than ~~98%~~99% of the electric fuel costs allowed in that order. These costs are subject to the PSCW's annual review of fuel costs completed in the year following the deferral.

~~In August 2015,~~The PSCW issued a final decision in the ~~PSCW approved a $0.00256/kWh~~2019 fuel ~~credit that began on September 1, 2015, and continued throughout 2016. MGE returned $2.6~~rules proceedings regarding $1.5 million of ~~electric fuel-related~~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 ~~through bill credits during~~in October 2020. MGE elected to include the ~~period~~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 in the fuel rules proceedings from the amount MGE deferred in the previous year.

In September ~~1, 2015, through December 31, 2015. MGE returned $8.3 million of electric fuel-related savings during the year ended December 31, 2016.~~

~~In July 2016,~~2021, the PSCW issued a final ~~order~~decision in the 2020 fuel rules proceedings ~~requiring~~for MGE to refund ~~additional fuel savings realized during 2015 and 2016 to its retail electric customers over a one-month period. In September 2016, MGE returned $15.5 million to customers through bill credits.~~

~~In July 2017, the PSCW issued a final order in the fuel rules proceedings requiring MGE to refund $6.0~~$3.2 million of additional fuel savings realized during ~~2015 and 2016~~2020 plus accrued interest to its retail electric customers over a one-month period in October ~~2017.~~2021. There was no change to the refund in the fuel rules proceedings from the amount MGE deferred in the previous year.

MGE has under recovered fuel costs in 2021. As of ~~September 30, 2017,~~December 31, 2021, MGE ~~has~~had deferred ~~$3.3~~$3.3 million of ~~2017~~2021 fuel ~~savings. The 2017 fuel savings~~costs. These costs will be subject to the PSCW's annual review of ~~2017~~2021 fuel costs, expected to be completed in ~~2018.~~2022. MGE has proposed to include these costs as part of the 2023 electric limited reopener.

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

~~Derivative~~

10.

Derivative and Hedging Instruments - MGE Energy and MGE.

Purpose.

~~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.~~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:


	~~September 30, 2017~~	~~December 31, 2016~~
~~Commodity derivative contracts~~	~~634,605 MWh~~	~~393,395 MWh~~
~~Commodity derivative contracts~~	~~7,924,500 Dth~~	~~4,195,000 Dth~~
~~FTRs~~	~~3,552 MW~~	~~2,251 MW~~
~~PPA~~	~~2,800 MW~~	~~3,250 MW~~

March 31, 2022

December 31, 2021

Commodity derivative contracts

369,960

MWh

278,000

MWh

Commodity derivative contracts

3,260,000

Dth

5,735,000

Dth

FTRs

858

2,127

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 ~~FTRs.~~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. ~~At September 30, 2017,~~As of March 31, 2022, and December 31, ~~2016,~~2021, the fair value of exchange traded derivatives and FTRs exceeded their cost basis by ~~$0.9~~$9.8 million and ~~$1.3~~$2.8 million, respectively.

MGE is a party to a purchased power agreement that provides MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. ~~The agreement also allows MGE an option to extend the contract after the base term.~~ The agreement is accounted for as 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 ~~at September 30, 2017,~~as of March 31, 2022, and December 31, ~~2016, reflects~~2021, reflected a loss position of ~~$43.1~~$0.1 million and ~~$50.6~~$2.1 million, respectively. The actual cost will be 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~~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
(In thousands)	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
Commodity derivative contracts(a)	$	2,959	$	811	Other current assets
Commodity derivative contracts(a)		420		38	Other deferred charges
FTRs		227		0	Other current assets
PPA	N/A			2,140	Derivative liability (current)

(a)

As of ~~September 30, 2017,~~March 31, 2022 and December 31, ~~2016, the receivable – margin account balance~~2021, MGE received collateral of ~~$1.5~~$6.9 million and ~~$1.3~~$1.3 million, respectively, ~~is shown net~~from counterparties under a master netting agreement for outstanding exchange traded derivative positions. The fair value of ~~any~~the derivative asset disclosed in this table has not been reduced for the collateral ~~posted against derivative positions.~~received.

Derivative

Derivative

(In thousands)

Assets

Liabilities

Balance Sheet Location

September 30, 2017

Commodity derivative contracts^(a)
$
857
$
560

Other current assets^(b)

Commodity derivative contracts^(a)

112

122

Other deferred charges

FTRs

567

-

Other current assets

PPA

N/A

8,240

Derivative liability (current)

PPA

N/A

34,890

Derivative liability (long-term)

December 31, 2016

Commodity derivative contracts^(a)
$
1,227
$
164

Other current assets

Commodity derivative contracts^(a)

157

54

Other deferred charges

FTRs

143

-

Other current assets

PPA

N/A

7,620

Derivative liability (current)

PPA

N/A

42,970

Derivative liability (long-term)

~~(a)~~

~~As of September 30, 2017, and December 31, 2016, no collateral was posted against and netted with derivative liability positions on the consolidated balance sheets.~~

~~(b)~~

~~As of September 30, 2017, $0.1 million was presented as current derivative liabilities on the consolidated balance sheets.~~

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

September 30, 2017

Commodity derivative contracts
$
969
$
(634)
$
-
$
335

FTRs

567

-

-

567

December 31, 2016

Commodity derivative contracts
$
1,384
$
(218)
$
-
$
1,166

FTRs

143

-

-

143

Offsetting of Derivative Assets

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

September 30, 2017

Commodity derivative contracts
$
682
$
(634)
$
-
$
48

PPA

43,130

-

-

43,130

December 31, 2016

Commodity derivative contracts
$
218
$
(218)
$
-
$
-

PPA

50,590

-

-

50,590


(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	$	10,144	$	(357	)	$	(6,911	)	$	2,876

December 31, 2021
Commodity derivative contracts	$	3,379	$	(849	)	$	(1,254	)	$	1,276
FTRs		227		0			0			227

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

The following tables summarize the unrealized and realized ~~gains (losses)~~gains/losses related to the derivative instruments on the consolidated balance sheets ~~at September 30, 2017 and 2016,~~ and the consolidated ~~income~~ statements ~~for the three and nine months ended September 30, 2017 and 2016.~~of income.

2017

2016
(In thousands)

Current and Long-Term Regulatory Asset

Other Current Assets

Current and Long-Term Regulatory Asset

Other Current Assets
Three Months Ended September 30:

Balance at July 1,
$
45,316
$
618

$
50,521
$
659
Unrealized gain

(1,277)

-

(663)

-
Realized (loss) gain reclassified to a deferred account

(313)

313

17

(17)
Realized (loss) gain reclassified to income statement

(1,450)

(57)

(304)

46
Balance at September 30,
$
42,276
$
874

$
49,571
$
688

Nine Months Ended September 30:

Balance at January 1,
$
49,281
$
230

$
54,082
$
1,208
Unrealized (gain) loss

(3,698)

-

1,128

-
Realized (loss) gain reclassified to a deferred account

(935)

935

(1,417)

1,417
Realized loss reclassified to income statement

(2,372)

(291)

(4,222)

(1,937)
Balance at September 30,
$
42,276
$
874

$
49,571
$
688


	2022						2021
(In thousands)	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
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	)
Balance as of March 31,	$	(9,641	)	$	267		$	11,059		$	173


	Realized Losses (Gains)
	2022						2021
(In thousands)	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
FTRs		3			0			(256	)		0
PPA		(616	)		0			(240	)		0

Realized Losses (Gains)

2017

2016
(In thousands)

Fuel for Electric Generation/ Purchased Power

Cost of Gas Sold

Fuel for Electric Generation/ Purchased Power

Cost of Gas Sold
Three Months Ended September 30:

Commodity derivative contracts
$
362
$
18

$
45
$
-
FTRs

(224)

-

(703)

-
PPA

1,351

-

916

-

Nine Months Ended September 30:

Commodity derivative contracts
$
764
$
227

$
1,469
$
1,814
FTRs

(1,349)

-

(635)

-
PPA

3,021

-

3,511

-

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 ~~above~~treatment described ~~treatment,~~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~~$20.0 million to ~~$40.0~~$40.0 million, depending on MGE's nominated capacity amount. As of ~~September 30, 2017, no~~March 31, 2022, 0 collateral iswas required to be, or ~~has~~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 ~~September 30, 2017, certain~~March 31, 2022 and December 31, 2021, 0 counterparties were in a net liability ~~position of less than $0.1 million. As of December 31, 2016, no 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 ~~September 30, 2017, no~~March 31, 2022, 0 counterparties ~~have~~had defaulted.

~~10.~~

11.

Fair Value of ~~Financial~~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~~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.

~~At September 30, 2017, and December 31, 2016, the~~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 at September 30, 2017, and December 31, 2016.~~instruments. Since long-term debt is not traded in an active market, it is classified as Level ~~2.The~~2.The estimated fair market ~~values~~value of financial instruments are as follows:

September 30, 2017

December 31, 2016

(In thousands)

Carrying Amount

Fair Value

Carrying Amount

Fair Value

MGE Energy

Assets:

    Cash and cash equivalents
$
104,733
$
104,733
$
95,959
$
95,959

Liabilities:

    Short-term debt - commercial paper

7,000

7,000

-

-

    Long-term debt^(a)

397,981

444,195

391,242

430,122

MGE

Assets:

    Cash and cash equivalents
$
1,954
$
1,954
$
10,768
$
10,768

Liabilities:

    Short-term debt - commercial paper

7,000

7,000

-

-

    Long-term debt^(a)

397,981

444,195

391,242

430,122

(a)   Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of

        $4.1 million at September 30, 2017, and December 31, 2016.

March 31, 2022

December 31, 2021

(In thousands)

Carrying Amount

Fair Value

Carrying Amount

Fair Value

Long-term debt(a)

622,238

643,259

623,449

729,914

(a)

Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of $4.2 million and $4.3 million as of March 31, 2022, and December 31, 2021, 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 September 30, 2017

(In thousands)

Total

Level 1

Level 2

Level 3

MGE Energy

Assets:

    Derivatives
$
1,536
$
673
$
-
$
863

    Exchange-traded investments

816

816

-

-

    Total Assets
$
2,352
$
1,489
$
-
$
863

Liabilities:

    Derivatives
$
43,812
$
190
$
-
$
43,622

    Deferred compensation

3,150

-

3,150

-

    Total Liabilities
$
46,962
$
190
$
3,150
$
43,622

MGE

Assets:

    Derivatives
$
1,536
$
673
$
-
$
863

    Exchange-traded investments

78

78

-

-

    Total Assets
$
1,614
$
751
$
-
$
863

Liabilities:

    Derivatives
$
43,812
$
190
$
-
$
43,622

    Deferred compensation

3,150

-

3,150

-

    Total Liabilities
$
46,962
$
190
$
3,150
$
43,622


	Fair Value as of March 31, 2022
(In thousands)	Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	10,144	$	3,183	$	0	$	6,961
Exchange-traded investments		1,443		1,443		0		0
Total Assets	$	11,587	$	4,626	$	0	$	6,961
Liabilities:
Derivatives, net(b)	$	503	$	321	$	0	$	182
Deferred compensation		3,613		0		3,613		0
Total Liabilities	$	4,116	$	321	$	3,613	$	182

MGE
Assets:
Derivatives, net(b)	$	10,144	$	3,183	$	0	$	6,961
Exchange-traded investments		177		177		0		0
Total Assets	$	10,321	$	3,360	$	0	$	6,961
Liabilities:
Derivatives, net(b)	$	503	$	321	$	0	$	182
Deferred compensation		3,613		0		3,613		0
Total Liabilities	$	4,116	$	321	$	3,613	$	182


	Fair Value as of December 31, 2021
(In thousands)	Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives, net(b)	$	3,606	$	1,170	$	0	$	2,436
Exchange-traded investments		1,296		1,296		0		0
Total Assets	$	4,902	$	2,466	$	0	$	2,436
Liabilities:
Derivatives, net(b)	$	2,989	$	731	$	0	$	2,258
Deferred compensation		3,653		0		3,653		0
Total Liabilities	$	6,642	$	731	$	3,653	$	2,258

MGE
Assets:
Derivatives, net(b)	$	3,606	$	1,170	$	0	$	2,436
Exchange-traded investments		230		230		0		0
Total Assets	$	3,836	$	1,400	$	0	$	2,436
Liabilities:
Derivatives, net(b)	$	2,989	$	731	$	0	$	2,258
Deferred compensation		3,653		0		3,653		0
Total Liabilities	$	6,642	$	731	$	3,653	$	2,258

(b)

Fair Value as of December 31, 2016

(In thousands)

Total

Level 1

Level 2

Level 3

MGE Energy

Assets:

    Derivatives
$
1,527
$
1,041
$
-
$
486

    Exchange-traded investments

500

500

-

-

    Total Assets
$
2,027
$
1,541
$
-
$
486

Liabilities:

    Derivatives
$
50,808
$
16
$
-
$
50,792

    Deferred compensation

3,039

-

3,039

-

    Total Liabilities
$
53,847
$
16
$
3,039
$
50,792

MGE

Assets:

    Derivatives
$
1,527
$
1,041
$
-
$
486

    Exchange-traded investments

143

143

-

-

    Total Assets
$
1,670
$
1,184
$
-
$
486

Liabilities:

    Derivatives
$
50,808
$
16
$
-
$
50,792

    Deferred compensation

3,039

-

3,039

-

    Total Liabilities
$
53,847
$
16
$
3,039
$
50,792

~~No transfers were made~~As of March 31, 2022 and December 31, 2021 MGE received collateral of $6.9 million and $1.3 million, respectively, from counterparties under a master netting agreement for outstanding exchange traded derivative positions. The fair value of the derivative asset disclosed in ~~or out of Level 1 or Level 2~~this table has not been reduced for the ~~nine months ended September 30, 2017.~~collateral received.

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

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 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~~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 (see Footnote 9)10) was valued using an ~~internally-developed~~internal pricing model and therefore is classified as Level 3. The 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~~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.

Model Input

Significant Unobservable Inputs

September 30, 2017

December 31, 2016

Basis adjustment:

    On peak

92.4%

91.9%

    Off peak

94.2%

93.4%

Counterparty fuel mix:

    Internal generation

55% - 75%

55% - 75%

    Purchased power

45% - 25%

45% - 25%


	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 deferred compensation plan allows participants to defer certain cash compensation into a notional investment account. These amounts are included within other deferred liabilities in the consolidated balance sheets. The notional investments 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.

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				Nine Months Ended			Three Months Ended
		September 30,				September 30,			March 31,
(In thousands)		2017		2016		2017		2016	2022		2021
Beginning balance	$	(45,605)	$	(51,883)	$	(50,305)	$	(53,501)	$	178	$	(14,055)
Realized and unrealized gains (losses):
Included in regulatory liabilities		2,846		1,455		7,547		3,073
Included in regulatory assets										0		2,688
Included in regulatory liability										6,600		0
Included in other comprehensive income		-		-		-		-		0		0
Included in earnings		(1,478)		(278)		(2,614)		(4,250)		855		307
Included in current assets		(14)		-		(111)		-		73		355
Purchases		6,299		5,814		18,481		16,751		7,026		5,884
Sales		-		-		-		-		0		0
Issuances		-		-		-		-		0		0
Settlements		(4,807)		(5,537)		(15,757)		(12,502)		(7,953)		(6,546)
Transfers in and/or out of Level 3		-		-		-		-
Balance as of September 30,	$	(42,759)	$	(50,429)	$	(42,759)	$	(50,429)
Total gains (losses) included in earnings attributed to
the change in unrealized gains (losses) related to
assets and liabilities held at September 30,^(b)	$	-	$	-	$	-	$	-
Balance as of March 31,									$	6,779	$	(11,367)
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 ~~losses~~gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis~~(b)~~(c).

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2017

2016

2017

2016

Purchased Power Expense
$
(1,460)
$
(278)
$
(2,377)
$
(4,250)

Cost of Gas Sold Expense

(18)

-

(237)

-

Total
$
(1,478)
$
(278)
$
(2,614)
$
(4,250)


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

~~(b)~~

(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.

~~11.~~

12.

Joint Plant Construction Project Ownership - MGE Energy and ~~MGE.~~MGE

MGE currently has ongoing jointly-owned solar generation construction projects, as shown in the following table. Incurred costs are reflected in "Construction work in progress" on the consolidated balance sheets.


	Ownership	Share of	Share of	Costs incurred as of March 31,	Estimated Date of Commercial
Project	Interest	Generation	Estimated Costs(a)	2022(a)	Operation
Red Barn(b)	10%	9.16 MW	$18 million	$0.6 million	December 2022
Badger Hollow II(c)	33%	50 MW	$65 million	$23.8 million(d)	First Half of 2023

(a)

Excluding AFUDC.

(b)

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

(c)

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

(d)

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

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

13.

Revenue - MGE Energy and MGE.

Revenues disaggregated by revenue source were as follows:


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

Gas revenues
Residential		56,683		39,758
Commercial/Industrial		40,251		25,507
Total retail		96,934		65,265
Gas transportation		1,876		2,002
Other		1		3
Total gas revenues		98,811		67,270

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

Performance Obligations

~~In 2016, MGE and WPL negotiated an amendment~~A performance obligation is a promise in a contract to transfer a distinct good or service to the ~~existing Columbia joint operating agreement, that has been~~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 ~~under which MGE will have~~through a rate order and provide MGE's customers with the ~~option to reduce its~~standard terms and conditions, including pricing terms. The performance obligation to ~~pay certain capital expenditures (other than SCR-related expenditures) at Columbia~~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 ~~exchange for~~ a ~~proportional reduction~~given year is determined in ~~MGE's ownership~~the following year and is then reflected in ~~Columbia. On January 1~~future billings to electric retail customers. Over-collection of ~~each year, beginning in 2017 and ending June 1, 2020,~~fuel-related costs that are outside the ~~ownership percentage~~approved range will be ~~adjusted, through~~recognized as a ~~partial sale, based on~~reduction of revenue. Under-collection of these costs will be recognized in "Purchased power" expense in the ~~amount~~consolidated statements of ~~capital expenditures foregone. In June 2017, the FERC approved the ownership transfer~~income. The cumulative effects of these deferred amounts will be recorded in ~~Columbia, effective January 1, 2017.~~

During 2016, MGE accrued $14.8 million of 2016 capital expenditures that MGE has forgone as part of the ownership transfer agreement with WPL. As of December 31, 2016, MGE classified $14.8 million of Columbia assets as held-for-sale"Regulatory assets" or "Regulatory liabilities" on the consolidated balance ~~sheets. In January 2017,~~ sheets until they are reflected in future billings to customers. See Footnote 9.b. for further information.

MGE ~~reduced its ownership interest~~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 ~~Columbia from 22.0% to 20.4% through~~ the ~~partial sale of plant assets to WPL.~~period incurred.

~~During three and nine months ended September 30, 2017, MGE accrued $1.6 million and $6.7 million, respectively, of 2017 capital expenditures that MGE has forgone subject~~29

Sales to the ownership transfer agreement. As of September 30, 2017, MGE classified $6.7 million of Columbia assets as held-for-sale on the consolidated balance sheets. The assets recognized as held-for-sale are subject to a partial sale of plant assets to WPL, expected to occur in January 2018.Market

~~12.~~

~~Adoption of Accounting Principles and Recently Issued Accounting Pronouncements - MGE Energy and MGE.~~

~~Revenue from Contracts with Customers.~~

In May 2014, the FASB issued authoritative guidance within the Codification's Revenue Recognition topic that provides guidance on the recognition, measurement, and disclosure of revenue from contracts with customers. The new standard establishes a five step model for recognizing and measuring revenue from contracts with customers and replaces existing guidance on revenue recognition. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.

MGE Energy and MGE have been assessing the impact of this guidance on revenue streams within the scope of the new standard. All retail electric and gas revenues are tariff rates approved by the PSCW. Based on our evaluation of the new standard, retail revenues will be recognized within the period in which utility service is provided to the customer and the performance obligation is fulfilled, consistent with our current revenue recognition model. Electric revenues for salesSales to the market ~~represent~~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. ~~These~~Most of these sales ~~may also include bilateral sales to other utilities~~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 ~~power marketers. Revenues for sales to~~demand charges, and ancillary services are sold into MISO. MGE reports, on a net basis, transactions on the ~~market will be recognized when the sale is completed~~MISO markets in which it buys and sells power within the ~~market operated by MISO, similar~~same hour to ~~the recognition~~meet electric energy delivery requirements.

Transportation of Gas

MGE has contracts under ~~our current revenue recognition model. In addition, revenues from the~~which it provides gas transportation ~~of gas will continue~~services to be recognized upon the performance of services for the respective customer. Based on our assessment of the new standard, revenue recognition for retail revenues, sales to the market, and transportation of gas will be materially consistent with our current revenue recognition model. However, additional disclosures regarding the nature, amount, timing, and uncertainty of these revenue streams and related cash flows arising from contracts with customers ~~will be required as a result of the new standard. Management continues to analyze newly-released interpretative guidance and assess the related impacts to the current revenue recognition model.~~

This authoritative guidance will become effective January 1, 2018, and MGE Energy and MGE anticipate adopting the standard upon the effective date. Adoption of this standard is permitted under one of two methods: the full retrospective method or the modified retrospective method. MGE Energy and MGE are continuing to assess the permitted implementation methods and the impact on our financial statements.

~~Financial Instruments.~~

In January 2016, the FASB issued authoritative guidance within the Codification's Financial Instruments topic that provides guidance on the recognition and measurement of financial instruments. This authoritative guidance will become effective January 1, 2018, and will require equity investments to be measured at fair value with changes in fair value recognized in net income rather than in other comprehensive income. As a result of this guidance, MGE Energy and MGE will no longer have any other comprehensive income related to equity investments. This standard will be applied using a modified retrospective approach, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of all prior periods presented. As of September 30, 2017, MGE Energy had $0.4 million and MGE had less than $0.1 million of accumulated other comprehensive income related to equity investments within the scope of this standard.

~~Leases.~~

In February 2016, the FASB issued authoritative guidance within the Codification's Leases topic that provides guidance on the classification, recognition, measurement, and disclosure of leases. The new leasing standard establishes that a lease conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Under the new guidance, lessees will be required to recognize all leases with terms greater than one year, including operating leases, on the consolidated balance sheet by recording a right-of-use asset and lease liability. Prior to the authoritative guidance, only capital leases were recognized on the balance sheet by lessees. The new accounting guidance as applied by lessors is materially consistent from that applied under current GAAP.

Management has begun utilizing a bottoms-up approach to analyze the impact of the standard on our lease portfolio. MGE Energy and MGE have been reviewing current accounting policies and procedures to identify potential differences in accounting treatment that would result from applying the requirements of the new standard to our existing lease portfolio. In addition, we are identifying appropriate changes to our business processes, systems, and controls to support recognition and disclosure requirements under the new standard. This authoritative guidance will become effective January 1, 2019, with early adoption permitted. MGE Energy and MGE anticipate adopting the standard upon the effective date. The new leasing standard requires entities to recognize and measure leases at the beginning of the earliest comparative period presented using a modified retrospective approach. MGE Energy and MGE are currently assessing the impact this pronouncement will have on our financial statements.

~~Restricted Cash.~~

In November 2016, the FASB issued authoritative guidance within the Codification's Statement of Cash Flows topic that provides guidance on the classification and presentation of changes in restricted cash within the statement of cash flows. The new standard was issued to eliminate a current diversity in practice for the accounting treatment of restricted cash. Under the new guidance, reporting entities will be required to explain the changes in the total of restricted and unrestricted cash and cash equivalents when reconciling the beginning and ending balances on the statement of cash flows. Prior to the authoritative guidance, changes in restricted cash were presented as either cash flows from operating, investing, or financing activities within the statement of cash flows, as appropriate based on the nature of the restriction. Also under the new standard, reporting entities will be required to provide a reconciliation from the balance sheet to the statement of cash flows and disclose the nature of the restrictions of cash. This authoritative guidance will become effective January 1, 2018. Upon the effective date, MGE Energy and MGE will change the presentation of restricted cash to reflect this change in accounting guidance. MGE Energy and MGE will also retrospectively apply the guidance to all prior periods presented. As of September 30, 2017, and December 31, 2016, MGE Energy and MGE had $4.5 million and $5.1 million, respectively, of restricted cash classified within other current assets on the consolidated balance sheets.

~~Pension and Other Postretirement Benefits.~~

In March 2017, the FASB issued authoritative guidance within the Compensation – Retirement Benefits topic that provides guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost (together, net benefit cost). This authoritative guidance will become effective January 1, 2018. Under the new guidance, the service cost component of net benefit cost is required to be recorded in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of income from operations. A practical expedient within the standard permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan footnote for prior comparative periods as the estimation basis for applying the retrospective presentation requirements. MGE Energy and MGEwho have elected to ~~apply~~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 ~~practical expedient. Operating income will decrease~~PSCW through a rate order and ~~other income will increase $6.6 million~~provide gas transportation customers with standard terms and $5.0 million for the years ended December 31, 2016 and 2015, respectively. The standard also only allows the service cost component to be eligible for capitalization prospectively from the effective date of the pronouncement (whereas under current GAAP, all components of net benefit cost are eligible for capitalization). MGE Energy and MGE are currently evaluating the impact of how the change in components of net benefit cost eligible for capitalization will affect our financial statements.conditions, including pricing terms.

~~13.~~

14.

Segment ~~Information~~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 ~~2016~~2021 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
Three Months Ended March 31, 2022
Operating revenues	$	110,089	$	98,811	$	38	$	0	$	0		$	—		$	208,938
Interdepartmental revenues		118		6,121		10,315		0		0			(16,554	)		—
Total operating revenues		110,207		104,932		10,353		0		0			(16,554	)		208,938
Equity in earnings of investments		0		0		0		2,504		0			0			2,504
Net income		14,617		12,084		5,352		1,822		545			0			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
Three Months Ended March 31, 2022
Operating revenues	$	110,089	$	98,811	$	38	$	—		$	208,938
Interdepartmental revenues		118		6,121		10,315		(16,554	)		—
Total operating revenues		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

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

~~The following tables show segment information for MGE Energy's operations for the indicated periods:~~

(In thousands)
MGE Energy

Electric

Gas

Nonregulated Energy

Transmission Investment

All Others

Consolidation/ Elimination Entries

Consolidated Total
Three Months Ended September 30, 2017

Operating revenues
$
120,649
$
18,778
$
112
$
-
$
-
$
-
$
139,539
Interdepartmental revenues

(110)

3,892

11,130

-

-

(14,912)

-
Total operating revenues

120,539

22,670

11,242

-

-

(14,912)

139,539
Depreciation and amortization

(9,256)

(2,258)

(1,858)

-

-

-

(13,372)
Other operating expenses

(78,886)

(18,940)

(50)

(9)

(193)

14,912

(83,166)
Operating income (loss)

32,397

1,472

9,334

(9)

(193)

-

43,001
Other income (deductions), net

1,440

358

-

2,258

(117)

-

3,939
Interest (expense) income, net

(2,760)

(795)

(1,371)

-

199

-

(4,727)
Income (loss) before taxes

31,077

1,035

7,963

2,249

(111)

-

42,213
Income tax (provision) benefit

(11,175)

(351)

(3,196)

(906)

44

-

(15,584)
Net income (loss)
$
19,902
$
684
$
4,767
$
1,343
$
(67)
$
-
$
26,629

Three Months Ended September 30, 2016

Operating revenues
$
118,933
$
17,570
$
214
$
-
$
-
$
-
$
136,717
Interdepartmental revenues

459

6,040

10,998

-

-

(17,497)

-
Total operating revenues

119,392

23,610

11,212

-

-

(17,497)

136,717
Depreciation and amortization

(7,332)

(2,047)

(1,833)

-

-

-

(11,212)
Other operating expenses

(77,010)

(19,292)

(33)

(13)

(127)

17,497

(78,978)
Operating income (loss)

35,050

2,271

9,346

(13)

(127)

-

46,527
Other income (deductions), net

178

13

-

2,023

(109)

-

2,105
Interest (expense) income, net

(2,855)

(818)

(1,436)

-

71

-

(5,038)
Income (loss) before taxes

32,373

1,466

7,910

2,010

(165)

-

43,594
Income tax (provision) benefit

(11,290)

(494)

(3,175)

(812)

57

-

(15,714)
Net income (loss)
$
21,083
$
972
$
4,735
$
1,198
$
(108)
$
-
$
27,880

Nine Months Ended September 30, 2017

Operating revenues
$
321,279
$
101,285
$
261
$
-
$
-
$
-
$
422,825
Interdepartmental revenues

(334)

11,708

33,307

-

-

(44,681)

-
Total operating revenues

320,945

112,993

33,568

-

-

(44,681)

422,825
Depreciation and amortization

(27,341)

(6,703)

(5,562)

-

-

-

(39,606)
Other operating expenses

(231,827)

(92,670)

(153)

(9)

(779)

44,681

(280,757)
Operating income (loss)

61,777

13,620

27,853

(9)

(779)

-

102,462
Other income (deductions), net

1,821

355

-

7,242

(414)

-

9,004
Interest (expense) income, net

(8,337)

(2,399)

(4,170)

-

399

-

(14,507)
Income (loss) before taxes

55,261

11,576

23,683

7,233

(794)

-

96,959
Income tax (provision) benefit

(18,753)

(4,576)

(9,505)

(2,909)

256

-

(35,487)
Net income (loss)
$
36,508
$
7,000
$
14,178
$
4,324
$
(538)
$
-
$
61,472

Nine Months Ended September 30, 2016

Operating revenues
$
312,470
$
92,368
$
982
$
-
$
-
$
-
$
405,820
Interdepartmental revenues

1,482

17,278

32,894

-

-

(51,654)

-
Total operating revenues

313,952

109,646

33,876

-

-

(51,654)

405,820
Depreciation and amortization

(21,754)

(6,043)

(5,537)

-

(24)

-

(33,358)
Other operating expenses

(230,680)

(88,328)

(115)

(17)

(706)

51,654

(268,192)
Operating income (loss)

61,518

15,275

28,224

(17)

(730)

-

104,270
Other income (deductions), net

492

(13)

-

6,023

224

-

6,726
Interest (expense) income, net

(8,421)

(2,425)

(4,348)

-

199

-

(14,995)
Income (loss) before taxes

53,589

12,837

23,876

6,006

(307)

-

96,001
Income tax (provision) benefit

(17,984)

(5,048)

(9,583)

(2,418)

90

-

(34,943)
Net income (loss)
$
35,605
$
7,789
$
14,293
$
3,588
$
(217)
$
-
$
61,058

~~The following tables show segment information for MGE's operations for the indicated periods:~~

(In thousands)
MGE

Electric

Gas

Nonregulated Energy

Transmission Investment^(b)

Consolidation/ Elimination Entries

Consolidated Total
Three Months Ended September 30, 2017

Operating revenues
$
120,648
$
18,779
$
112
$
-
$
-
$
139,539
Interdepartmental revenues

(109)

3,891

11,130

-

(14,912)

-
Total operating revenues

120,539

22,670

11,242

-

(14,912)

139,539
Depreciation and amortization

(9,256)

(2,258)

(1,858)

-

-

(13,372)
Other operating expenses^(a)

(89,544)

(19,145)

(3,246)

-

14,912

(97,023)
Operating income^(a)

21,739

1,267

6,138

-

-

29,144
Other income, net^(a)

923

212

-

-

-

1,135
Interest expense, net

(2,760)

(795)

(1,371)

-

-

(4,926)
Net income

19,902

684

4,767

-

-

25,353
Less: Net income attributable to

noncontrolling interest, net of tax

-

-

-

-

(5,439)

(5,439)
Net income attributable to MGE
$
19,902
$
684
$
4,767
$
-
$
(5,439)
$
19,914

Three Months Ended September 30, 2016

Operating revenues
$
118,938
$
17,576
$
214
$
-
$
-
$
136,728
Interdepartmental revenues

454

6,034

10,998

-

(17,486)

-
Total operating revenues

119,392

23,610

11,212

-

(17,486)

136,728
Depreciation and amortization

(7,332)

(2,047)

(1,833)

-

-

(11,212)
Other operating expenses^(a)

(88,282)

(19,781)

(3,208)

4

17,486

(93,781)
Operating income^(a)

23,778

1,782

6,171

4

-

31,735
Other income, net^(a)

160

8

-

868

-

1,036
Interest expense, net

(2,855)

(818)

(1,436)

-

-

(5,109)
Net income

21,083

972

4,735

872

-

27,662
Less: Net income attributable to

noncontrolling interest, net of tax

-

-

-

-

(5,695)

(5,695)
Net income attributable to MGE
$
21,083
$
972
$
4,735
$
872
$
(5,695)
$
21,967

Nine Months Ended September 30, 2017

Operating revenues
$
321,282
$
101,294
$
261
$
-
$
-
$
422,837
Interdepartmental revenues

(337)

11,699

33,307

-

(44,669)

-
Total operating revenues

320,945

112,993

33,568

-

(44,669)

422,837
Depreciation and amortization

(27,341)

(6,703)

(5,562)

-

-

(39,606)
Other operating expenses^(a)

(249,992)

(97,080)

(9,658)

-

44,669

(312,061)
Operating income^(a)

43,612

9,210

18,348

-

-

71,170
Other income, net^(a)

1,233

189

-

-

-

1,422
Interest expense, net

(8,337)

(2,399)

(4,170)

-

-

(14,906)
Net income

36,508

7,000

14,178

-

-

57,686
Less: Net income attributable to

noncontrolling interest, net of tax

-

-

-

-

(16,224)

(16,224)
Net income attributable to MGE
$
36,508
$
7,000
$
14,178
$
-
$
(16,224)
$
41,462

Nine Months Ended September 30, 2016

Operating revenues
$
312,488
$
92,390
$
982
$
-
$
-
$
405,860
Interdepartmental revenues

1,464

17,256

32,894

-

(51,614)

-
Total operating revenues

313,952

109,646

33,876

-

(51,614)

405,860
Depreciation and amortization

(21,754)

(6,043)

(5,537)

-

-

(33,334)
Other operating expenses^(a)

(248,566)

(93,348)

(9,698)

-

51,614

(299,998)
Operating income^(a)

43,632

10,255

18,641

-

-

72,528
Other income (deductions), net^(a)

394

(41)

-

3,262

-

3,615
Interest expense, net

(8,421)

(2,425)

(4,348)

-

-

(15,194)
Net income

35,605

7,789

14,293

3,262

-

60,949
Less: Net income attributable to

noncontrolling interest, net of tax

-

-

-

-

(17,899)

(17,899)
Net income attributable to MGE
$
35,605
$
7,789
$
14,293
$
3,262
$
(17,899)
$
43,050

(a) Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statement of Income.
(b) As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco. See Footnote 3 for further discussion.

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 ~~149,000~~159,000 customers in Dane County, Wisconsin, including the city of Madison, and purchases and distributes natural gas to approximately ~~154,000~~169,000 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 ~~meets~~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, ~~including~~as evidenced by its most recent announcements of the ~~announced reduction~~retirement of Columbia (a coal generation plant), the change in the Elm Road Units fuel source from coal to natural gas, and its growing ownership of ~~Columbia.~~renewable generation sources. MGE will continue to focus on growing earnings while controlling operating and fuel costs. ~~MGE maintains~~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 ~~standing~~rating consistent with financial strength in MGE as well as the parent company in order to accomplish these goals.

We principally earn ~~our~~ 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,

•

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 ~~2016~~2021 Annual Report on Form 10-K.

~~For~~During the three months ended ~~September 30, 2017,~~March 31, 2022, MGE Energy's earnings were ~~$26.6~~$34.4 million or ~~$0.77~~$0.95 per share compared to ~~$27.9~~$34.9 million or ~~$0.80~~$0.97 per share ~~for~~during the same period in the prior year. MGE's earnings ~~for~~during the three months ended ~~September 30, 2017,~~March 31, 2022, were ~~$19.9~~$27.3 million compared to ~~$22.0~~$28.3 million ~~for~~during the same period in the prior year.

For the nine months ended September 30, 2017, MGE Energy's earnings were $61.5 million or $1.77 per share compared to $61.1 million or $1.76 per share for the same period in the prior year. MGE's earnings for the nine months ended September 30, 2017, were $41.5 million compared to $43.1 million for the same period in the prior year.

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

Three Months Ended

Nine Months Ended

(In thousands)

September 30,

September 30,

Business Segment:

2017

2016

2017

2016

    Electric Utility
$
19,902
$
21,083
$
36,508
$
35,605

    Gas Utility

684

972

7,000

7,789

    Nonregulated Energy

4,767

4,735

14,178

14,293

    Transmission Investments

1,343

1,198

4,324

3,588

    All Other

(67)

(108)

(538)

(217)

    Net Income
$
26,629
$
27,880
$
61,472
$
61,058


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

Our net income during the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022, compared to the same ~~period~~periods in the prior year primarily reflects the effects of the following factors:

Electric Utility

~~For~~An increase in electric investments contributed to earnings for 2022. Timing of 2021 depreciation and other operations and maintenance costs contributed to higher earnings in the first quarter of 2021. Depreciation and operations and maintenance costs increased during the remainder of 2021 after significant capital projects were completed. The new customer information system went live in September 2021 and Badger Hollow I was completed in November 2021. MGE received approval to recover 100% AFUDC during construction of these projects.

Gas Utility

An increase in gas investments contributed to increased earnings for 2022. Higher gas retail sales resulting from colder weather in the first quarter of 2022 contributed to higher earnings for the three months ended ~~electric net income decreased primarily resulting from cooler weather. The average temperature~~March 31, 2022. Heating degree days (a measure for determining the impact of weather during the heating season) increased by approximately 4% in ~~August 2017 was 67 degrees~~the first quarter 2022 compared to 73the same period in ~~August 2016. For~~ the ~~nine~~prior year.

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

2022/2023 Rate Settlement Agreement: 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 ~~net income increased primarily related to efforts to manage the level of operating and maintenance costs.~~

~~Transmission Investments~~

~~Transmission investment income reflects our share of ATC's earnings~~rates and a ~~favorable comparison~~2.15% increase to ~~2016, which included an expense reflecting ATC's establishment~~gas rates for 2022. As part of the settlement agreement for 2023, the PSCW approved a ~~reserve covering its estimate of its refund liability associated with the return on equity complaint filed with FERC.~~0.96% increase in gas rates and to address a potential electric rate change through a limited rate case reopener. See "Other Matters" below for additional information ~~concerning ATC.~~on the 2022/2023 rate case settlement.

~~During the first nine months ended of 2017,~~Utility Solar: Large solar generation projects were recently completed or are under construction, as shown in the following ~~events occurred:~~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	Share of Generation	Share of Estimated Costs(a)	Costs Incurred as of March 31, 2022(a)	Estimated Date of Commercial Operation
Red Barn	10%	9.16MW	$18 million	$0.6 million	December 2022
Badger Hollow II	33%	50 MW	$65 million	$23.8 million(b)(c)	First Half of 2023

(a)

Excluding AFUDC.

(b)

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

(c)

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

~~2017 Rate Case Order: On December 15, 2016,~~

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

2021 Annual Fuel Proceeding: MGE effective January 1, 2017, to decrease 2017 rates for retail electric customers by 0.8% or $3.3 million on an annual basis and to increase rates for retail gas customers by 1.9% or $3.1 million on an annual basis. The decreaseunder recovered fuel costs in retail electric rates reflects declining fuel and purchased power costs. The increase in retail gas rates covers costs associated with MGE's natural gas system infrastructure improvements. The authorized return on common stock equity for 2017 is 9.8% based on a capital structure consisting of 57.2% common equity. The PSCW also approved MGE's request to extend the current accounting treatment for transmission related costs through 2018.

~~Deferred Fuel Costs:~~2021. As of ~~September 30, 2017,~~December 31, 2021, MGE ~~has~~had deferred $3.3 million of ~~2017~~2021 fuel ~~savings.~~costs. These costs will be subject to the PSCW's annual review of ~~2017~~2021 fuel costs, expected to be completed ~~in 2018.~~during 2022. MGE has proposed to include these costs as part of the 2023 electric limited reopener.

~~Debt Issuance:~~2023 Electric Limited Rate Case Reopener: In April 2022, MGE issued $40 million of long-term unsecured debt in January 2017. The debt carries an interest rate of 3.76% per annum over its 35-year term. The proceeds of this debt financing were used to refinance $30 million of medium-term notes, which matured in January 2017, and assistfiled with the ~~financing of~~PSCW a proposed electric limited rate case reopener. The limited rate case reopener proposes a 4.38% increase to electric rates for 2023. See "Other Matters" below for additional ~~capital expenditures. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt.~~information on the 2023 electric limited reopener.

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

2016 Annual Fuel Proceeding: In July 2017, the PSCW issued a final order in the fuel rules proceedings requiring MGE to refund $6.0 million of additional fuel savings realized during 2015 and 2016 to its retail electric customers over a one-month period in October 2017.

ATC Return on Equity: ~~Several parties have filed complaints with~~As discussed in "Other Matters" below, ATC's authorized ROE, which is used in calculating its rates and revenues, is the ~~FERC seeking to reduce the ROE used by MISO transmission owners, including ATC. Any change to~~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 ~~7.2%~~5.1% and ~~5.8%~~5.0% of our net income ~~for~~during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively, from our investment in ATC. ~~See "Other Matters" below for additional information concerning 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. ~~At present, it is unclear how the changes in the Presidential~~Legislation and ~~EPA administrations may affect existing, pending or new legislative or~~ rulemaking ~~proposals or regulatory initiatives. Such legislation~~addressing climate change and ~~rulemaking~~related matters could significantly affect the costs of owning and operating fossil-fueled generating ~~plants, such as Columbia and the Elm Road Units, from which we derive approximately 43% of our electric generating capacity as of September 30, 2017.~~plants. We would expect to seek and receive recovery of any such costs in ~~rates; however,~~rates. However, it is difficult to estimate the amount of such costs due to the uncertainty as to the timing and form of ~~the~~any legislation ~~and~~or rules, and the scope and time of the recovery of costs in rates, which may ~~lag~~occur after those costs have been incurred and paid.

Future Generation – 80% carbon reduction target by 2030: MGE has outlined initiatives to achieve our new target.

•

Transitioning away from coal. Columbia: In February 2021, MGE, along with the ~~incurrence of those costs.~~

EPA's Clean Power Plan: In October 2015, the EPA finalized its Clean Power Plan (CPP) rule with an effective date of December 2015, setting guidelines and approval criteria for states to use in developingother plant co-owners, announced plans to ~~control GHG emissions from existing fossil fuel-fired electric~~retire the two-unit coal-fired Columbia generating ~~units (EGUs) and systems. Implementation~~plant near Portage, Wisconsin. MGE currently owns 19% of the ~~rule~~facility. The co-owners intend to retire Unit 1 by the end of 2023 and Unit 2 by the end of 2024. 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 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 ~~have~~be further reduced as the Elm Road Units transition to natural gas. 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 ~~direct impact on existing coal and natural gas fired generating units, including possible changes~~joint interest in ~~dispatch and additional operating costs. In October 2017,~~several renewable generation projects as described below.


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 ~~EPA published a proposed rule announcing~~PSCW.

(b)

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

(c)

Excluding AFUDC

(d)

Requested, in the case of projects pending PSCW approval, or received, in the case of Paris, approval to ~~repeal~~recover 100% AFUDC.

(e)

Construction of the CPP and has sought public comment on whether to replace the rule, and if so how. Given the pending legal proceedings, and the EPA's proposal, the nature and timing of any final requirements to control GHG emissions from existing fossil fuel-fired EGUs is subject to uncertainty. If a rule is implemented substantially in its present form, itproject is expected to ~~have~~be completed in phases ranging from May 2024 through December 2024.

•

Natural gas as a ~~material impact on MGE. MGE will continue to monitor developments with this proposed rule.~~

~~Future Generation: During the first quarter of~~fuel source. West Riverside: In 2016, MGE entered into an agreement with WPL under which MGE may acquire up to 50 MW of capacity in a gas-fired generating plant ~~to be~~ 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 ~~is expected to be completed by early~~was placed in service in May 2020. MGE and WPL have negotiated an amendment to the existing Columbia joint operating agreement, effective January 1, 2017, under which MGE will reduce its obligation to pay certain capital expenditures (other than SCR-related expenditures) at Columbia prior to the expected in-service date of the Riverside gas-fired generating plant in exchange for a proportional reduction in MGE's ownership in Columbia. On January 1 of each year, beginning in 2017 and ending June 1, 2020, the ownership percentage will be adjusted, through a partial sale, based on the amount of capital expenditures foregone. During three and nine months ended September 30, 2017, MGE accrued $1.6 million and $6.7 million of 2017 capital expenditures that MGE has forgone as part of the ownership transfer agreement with WPL. During 2016, MGE accrued $14.8 million of 2016 capital expenditures forgone. As of September 30, 2017, and December 31, 2016, MGE classified $6.7 million and $14.8 million, respectively, of Columbia assets as held-for-sale on the consolidated balance sheets. In January ~~2017,~~2022, MGE, ~~reduced its ownership interest in Columbia from 22.0% to 20.4% through the partial sale of plant assets to WPL. By June 2020, MGE's ownership in Columbia is forecasted to be approximately 19%.~~

~~Saratoga Wind Farm: In April 2017, MGE~~along with joint applicants, filed an application with the PSCW ~~to seek~~requesting approval ~~to construct, own~~for a sale and ~~operate a 66MW wind farm, consisting~~purchase of ~~33 turbines, located near Saratoga, Iowa.~~ownership interests in West Riverside. If approved, ~~by the PSCW, construction~~MGE's share of ~~the project~~West Riverside will be 25 MW at a purchase price of approximately $25 million. The closing and actual transfer of ownership is expected to ~~begin~~occur in ~~early 2018, with an estimated capital cost of $107 million.~~

~~Forward Wind: In October 2017,~~March 2023. MGE ~~along with two other utilities, entered into an agreement~~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.

Solar Procurement Disruptions – In June 2021, the ~~Forward Wind Energy Center, which consists of 86 wind turbines~~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 ~~Wisconsin with~~China's Xinjiang Uyghur Autonomous Region. As a total capacity of 129 MWs. The aggregate purchase price is approximately $174 million of which MGE's proportionate share is 12.8%, or approximately $23 million. MGE currently purchases 12.8% of the facility's energy output under a purchase power agreement. The transaction is subject to PSCW and FERC approvals and is expected to close in the spring of 2018.

Debt Issuance: In October 2017, MGE issued $30 million of long-term unsecured debt to cover capital expenditures and other corporate obligations. The debt carries an interest rate of 3.11% per annum, over its 10-year term. The covenantsresult of this ~~debt are substantially consistent~~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 solar panels from four Southeast Asian countries. This investigation could result in additional tariffs on solar panels. 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. Any delays or increase in costs will be filed with ~~MGE's existing unsecured long-term debt.~~the PSCW.

COVID-19 Update – MGE Energy continues to provide safe and reliable service to our customers despite the challenges presented by the Coronavirus Disease 2019 (COVID-19) pandemic. We have operated continuously throughout the pandemic and suffered no material disruptions 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.

The following discussion is based on the business segments as discussed in Footnote 1314 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.

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 ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021

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 ~~Utility Operations - MGE Energy~~revenues and ~~MGE~~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)
(In thousands, except cooling degree days)

Three Months Ended September 30,

Three Months Ended September 30,

2017

2016

% Change

2017

2016

% Change
Residential
$
39,905
$
40,120

(0.5)%

225,992

259,529

(12.9)%
Commercial

64,036

55,232

15.9 %

505,771

517,253

(2.2)%
Industrial

4,555

4,122

10.5 %

48,896

61,362

(20.3)%
Other-retail/municipal

10,459

9,091

15.0 %

119,979

114,097

5.2 %
Total retail

118,955

108,565

9.6 %

900,638

952,241

(5.4)%
Sales to the market

1,068

2,120

(49.6)%

27,581

52,278

(47.2)%
Deferral of fuel savings

-

8,194

(100.0)%

-

-

- %
Adjustments to revenues

626

54

N/A%

-

-

- %
Total
$
120,649
$
118,933

1.4 %

928,219

1,004,519

(7.6)%

Cooling degree days (normal 473)

398

570

(30.2)%

Electric ~~operating revenues~~margin, a non-GAAP measure, increased ~~$1.7~~$6.1 million ~~or 1.4% for~~during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016,~~2021, due to the following:

(In millions)

Deferral of fuel savings/fuel credit
$
9.6

Adjustments to revenues

0.6

Volume

(5.9)

Sales to the market

(1.1)

Other

(0.8)

Rate changes

(0.7)

Total
$
1.7


(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

~~Deferral of fuel savings/fuel credit.~~During the three months ended September 30, 2016, customers received a fuel credit on their bill related to accumulated fuel savings of $17.8 million, which decreased electric revenues in the prior year. In January 2016, the PSCW lowered MGE's 2016 fuel rules monitored costs, which were deferred in revenue in the prior period, as a result of continued lower projected fuel costs in 2016.

~~Adjustments to revenue.~~ MGE leases electric generating capacity from MGE Power Elm Road. MGE collects in rates the lease payments associated with the electric generating capacity as authorized by the PSCW. Any differential between estimated lease payments collected in rates and actual lease payments paid to MGE Power Elm Road are included in adjustments to revenues.

~~Volume.~~During the three months ended September 30, 2017, there was a 20.3% decrease in industrial retail sales volumes compared to the same period in the prior year as a result of a large industrial customer relocating its operations out of state. During the three months ended September 30, 2017, there was a 12.9% decrease in residential sales volumes compared to the same period in the prior year driven by decreased customer demand due, at least in part, to less favorable weather conditions, as evidenced by the lower number of cooling degree days.

~~Sales to the market.~~Sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may include spot market transactions on the markets operated by MISO and PJM. These sales may also include bilateral sales to other utilities or power marketers. Generating units are dispatched by MISO based on cost considerations as well as reliability of the system. Sales to the market typically occur when MGE has more generation and purchases online than are needed for its own system demand. The excess electricity is then sold to others in the market. For the three months ended September 30, 2017, market volumes decreased compared to the same period in the prior year, reflecting decreased opportunities for sales and those sales were made at lower market prices. The revenue generated from these sales is included in fuel rules monitored costs. See fuel rules discussion in Footnote 8.b. of the Notes to the Consolidated Financial Statements.

•

Rate ~~Changes.~~changes. In December ~~2016,~~2021, the PSCW authorized MGE to ~~decrease 2017~~increase 2022 rates for retail electric customers by ~~0.8% or $3.3 million on an annual basis.~~

approximately 8.81%. Rates charged to retail customers ~~for~~during the three months ended ~~September 30, 2017,~~March 31, 2022, were ~~2.4% or $0.7~~$11.3 million ~~lower~~higher than those charged during the same period in the prior year.

~~Electric fuel and purchased power~~

~~Electric fuel and purchased power~~

•

Fuel costs. Fuel costs reflect an increase in the volume of purchased power offset by a decrease in internal generation volumes when compared to the prior period. Adjustments related to the regulatory recovery for fuel costs, known as fuel rules, increased ~~purchased power expense. These items are explained below.~~

~~Fuel for electric generation~~

~~The expense for fuel for internal electric generation decreased $4.7 million~~ during the three months ended ~~September 30, 2017, compared to the same period in the prior year, due to the following:~~


~~(In millions)~~
~~Decrease in volume~~	$	~~(3.2)~~
~~Decrease in per-unit cost~~		~~(1.5)~~
~~Total~~	$	~~(4.7)~~

~~This decrease in expense reflects a 15.8% decrease in internal generation volume delivered to the system~~March 31, 2022, primarily as a result of ~~decreased generation at WCCF based on market prices and an 8.4% decrease in per-unit cost of internal electric generation.~~

~~Purchased power~~

~~Purchased power expense increased $6.8 million during the three months ended September 30, 2017, compared~~higher costs to ~~the same period~~generate electricity in the ~~prior year, due~~market and higher customer demand.

•

Revenue subject to ~~the following:~~

(In millions)

Change in fuel rule adjustments, net of recoveries
$
5.0

Increase in volume

2.2

Decrease in per-unit cost

(0.4)

Total
$
6.8

~~Under fuel rules, MGE is required to defer electric fuel-related costs that fall outside a 2%~~refund. For cost ~~tolerance band around~~recovery mechanisms,any over-collection of revenues resulting from the amount ~~used~~of costs authorized to be collected from customers in rates exceeding actual costs is recorded as a reduction of revenue in the ~~most recent rate proceeding. Any fuel rules adjustments~~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 ~~reflected in purchased power expense, with potential refunds associated with fuel savings increasing that expense~~reduced and ~~potential recovery of excess fuel costs decreasing that expense.~~

~~The increase in expense (before fuel rules adjustments) reflects a 17.4% increase~~offset as revenue subject to refund. There is no margin impact in the ~~volume of power purchased from third parties partially offset by a 2.5% decrease in~~year the ~~per-unit cost of purchased power.~~

~~Electric operating and maintenance expenses~~

For the three months ended September 30, 2017, electric operating and maintenance expenses increased $0.6 million, compared to the same period in the prior year. The following contributed to the net change:

(In millions)

Increased transmission costs
$
1.3

Increased customer accounts costs

0.5

Decreased production expenses

(0.5)

Decreased distribution expenses

(0.5)

Decreased administrative and general costs

(0.2)

Total
$
0.6

~~For the three months ended September 30, 2017, increased transmission~~ costs are ~~primarily due to an increase in transmission reliability enhancements.~~refunded.

~~Electric depreciation expense~~

Electric depreciation expense increased $1.9 million for the three months ended September 30, 2017, compared to the same period in the prior year as a result of new depreciation rates for Columbia, as approved by the PSCW.

~~Other electric income~~

~~Other electric income increased $1.3 million for the three months ended September 30, 2017, compared to the same period in the prior year, primarily due to the gain on sale of property assets.~~

~~Gas Utility Operations - MGE Energy and MGE~~

Gas deliveries and revenues

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


		Revenues				Therms Delivered			Revenues					Therms Delivered
(In thousands, except HDD and average rate per therm of retail customer)		Three Months Ended September 30,				Three Months Ended September 30,
		2017		2016	% Change	2017	2016	% Change
(In thousands, except HDD and average									Three Months Ended March 31,					Three Months Ended March 31,
rate per therm of retail customer)									2022		2021		% Change	2022	2021	% Change
Residential	$	12,121	$	11,440	6.0 %	5,841	5,468	6.8 %	$	56,683	$	39,758	42.6%	55,661	50,305	10.6%
Commercial/Industrial		5,622		5,043	11.5 %	8,847	8,488	4.2 %		40,251		25,507	57.8%	47,892	42,254	13.3%
Total retail		17,743		16,483	7.6 %	14,688	13,956	5.2 %		96,934		65,265	48.5%	103,553	92,559	11.9%
Gas transportation		944		997	(5.3)%	14,606	15,982	(8.6)%		1,876		2,002	(6.3)%	26,067	23,308	11.8%
Other revenues		91		90	1.1 %	-	-	- %
Other										1		3	(66.7)%	—	—	—%
Total	$	18,778	$	17,570	6.9 %	29,294	29,938	(2.2)%	$	98,811	$	67,270	46.9%	129,620	115,867	11.9%

Heating degree days (normal 158)						138	49	181.6 %
Average rate per therm of
retail customer	$	1.208	$	1.181	2.3 %
Heating degree days (normal 3,529)														3,718	3,593	3.5%

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

Gas ~~revenues~~margin, a non-GAAP measure, increased ~~$1.2~~$4.1 million ~~or 6.9% for~~during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016. These changes are~~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% compared to the same period in the prior year primarily related to favorable weather conditions in the ~~following factors:~~current year.

(In millions)

Rate/PGA changes
$
0.9

Volume

0.3

Total
$
1.2

~~Rate/PGA changes~~.

•

Rate changes. In December ~~2016,~~2021, the PSCW authorized MGE to increase ~~2017~~2022 rates for retail gas customers by ~~1.9% or $3.1 million on an annual basis.~~

approximately 2.15%.

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.

~~The average retail rate per therm~~ Payments for natural gas increased driving higher rates during the three months ended ~~September 30, 2017, increased 2.3% compared to the same period in 2016, reflecting a $0.5 million increase in natural gas commodity costs (recovered through the PGA)~~March 31, 2022.

Consolidated operations and ~~an increase in fixed rate charges.~~maintenance expenses

~~Volume~~~~. For~~During the three months ended ~~September 30, 2017, retail gas deliveries~~March 31, 2022, operations and maintenance expenses increased ~~5.2% compared to the same period in the prior year.~~

~~Cost of gas sold~~

~~For the three months ended September 30, 2017, cost of gas sold increased $0.8~~$4.3 million, compared to the same period in the prior year. The ~~cost per therm of natural~~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.

Consolidated depreciation expense

Electric depreciation expense increased $2.0 million and gas depreciation expense increased ~~10.5%, which resulted in $0.5 million of increased expense. The volume of gas purchased increased 6.9%, which resulted in $0.3 million of increased expense.~~

~~Gas operating and maintenance expenses~~

~~Gas operating and maintenance expenses increased by~~ $0.7 million ~~for~~during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to the same period in ~~2016.~~the prior year. MGE placed in service Badger Hollow I in November 2021. The ~~following~~timing of the in-service date contributed to the ~~net change:~~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.

(In millions)

Increased customer accounts costs
$
0.7

Increased customer service costs

0.2

Increased other costs

0.2

Decreased administrative and general costs

(0.4)

Total
$
0.7

~~For~~Electric and gas other income

Electric and gas other income increased $2.3 million and $1.3 million, respectively, during the three months ended ~~September 30, 2017, increased customer accounts costs are~~March 31, 2022, compared to the same period in the prior year, primarily related to ~~technology improvements.~~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. ~~For~~During the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, net income at the nonregulated energy operations segment was ~~$4.8~~$5.4 million and ~~$4.7~~$5.2 million, respectively.

Transmission Investment Operations - MGE Energy ~~and MGE~~

~~Transmission investment other income~~

~~For the three months ended September 30, 2017 and 2016, other income at the transmission investment segment was $2.3 million and $2.0 million, respectively.~~ The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of ~~the~~those investments. ATC Holdco was formed in December ~~2016. In the near term, it is expected that ATC Holdco will be pursuing~~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 and 2021, other income at the transmission investment segment primarily reflects ATC's operations and was $2.5 million and $2.4 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report and "Other Matters" below for additional information concerning ATC and summarized financial information regarding ATC.

Consolidated Income Taxes - MGE Energy and MGE

~~MGE Energy's~~In 2022, the effective ~~income~~electric tax rate ~~for~~increased as a result of the ~~three months ended September 30,~~return of electric excess deferred taxes related to the 2017 ~~and 2016, was 36.9% and 36.1%, respectively. MGE's effective income tax rate~~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 three months ended September 30, 2017 and 2016, was 36.7% and 36.0%, respectively. For both MGE Energy and MGE, the increase in~~ the effective tax rate ~~is due in part to lower estimated federal tax credits.~~reconciliation.

Noncontrolling Interest, Net of Tax - MGE

~~The noncontrolling~~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; however, due~~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. ~~Also included in noncontrolling interest, net of tax, for the three months ended September 30, 2016, was MGE Energy's interest in MGE Transco, which holds our investment in ATC.~~

The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:

Three Months Ended

September 30,

(In millions)

2017

2016

MGE Power Elm Road
$
3.6
$
3.7

MGE Power West Campus

1.8

1.8

MGE Transco^(a)

-

0.2


	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

~~(a)~~

MGE Transco holds an ownership interest in ATC. In July 2016, MGE's ownership interest in MGE Transco declined below a majority, resulting in MGE Energy's investment in MGE Transco being deconsolidated from MGE's consolidated financial statements. In December 2016, MGE's ownership interest in MGE Transco was transferred to MGE Energy. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for additional information.

~~Nine Months Ended September 30, 2017 and 2016~~

~~Electric Utility Operations - MGE Energy and MGE~~

~~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)
(In thousands, except cooling degree days)

Nine Months Ended September 30,

Nine Months Ended September 30,

2017

2016

% Change

2017

2016

% Change
Residential
$
104,892
$
104,917

-%

601,310

641,551

(6.3)%
Commercial

168,921

161,056

4.9 %

1,389,036

1,420,769

(2.2)%
Industrial

13,286

13,381

(0.7)%

153,759

178,535

(13.9)%
Other-retail/municipal

29,141

26,498

10.0 %

315,692

296,093

6.6 %
Total retail

316,240

305,852

3.4 %

2,459,797

2,536,948

(3.0)%
Sales to the market

3,090

5,281

(41.5)%

80,273

161,217

(50.2)%
Deferral of fuel savings

-

1,125

(100.0)%

-

-

- %
Adjustments to revenues

1,949

212

N/A%

-

-

- %
Total
$
321,279
$
312,470

2.8 %

2,540,070

2,698,165

(5.9)%

Cooling degree days (normal 653)

570

771

(26.1)%

~~Electric operating revenues increased $8.8 million or 2.8% for the nine months ended September 30, 2017, compared to the same period in 2016, due to the following:~~

(In millions)

Deferral of fuel savings/fuel credit
$
20.7

Adjustments to revenue

1.8

Volume

(8.8)

Rate changes

(2.5)

Sales to the market

(2.2)

Other

(0.2)

Total
$
8.8

~~Deferral of fuel savings/fuel credit.~~During the nine months ended September 30, 2016, customers received a fuel credit on their bill related to accumulated fuel savings of $21.8 million, which decreased electric revenues in the prior year. In January 2016, the PSCW lowered MGE's 2016 fuel rules monitored costs, which were deferred in revenue in the prior period, as a result of continued lower projected fuel costs in 2016.

~~Adjustments to revenue.~~MGE leases electric generating capacity from MGE Power Elm Road. MGE collects in rates the lease payments associated with the electric generating capacity as authorized by the PSCW. Any differential between estimated lease payments collected in rates and actual lease payments paid to MGE Power Elm Road are included in adjustments to revenues.

~~Volume.~~During the nine months ended September 30, 2017, there was a 13.9% decrease in industrial retail sales volumes compared to the same period in the prior year as a result of a large industrial customer relocating its operations out of state. During the nine months ended September 30, 2017, there was a 6.3% decrease in residential sales volumes compared to the same period in the prior year driven by decreased customer demand due, at least in part, to less favorable weather conditions, as evidenced by the lower number of cooling degree days.

~~Rate Changes.~~~~In December 2016, the PSCW authorized MGE to decrease 2017 rates for retail electric customers by 0.8% or $3.3 million on an annual basis.~~

~~Rates charged to retail customers for the nine months ended September 30, 2017, were 2.1% or $2.5 million lower than those charged during the same period in the prior year.~~

~~Sales to the market.~~Sales to the market represent wholesale sales made to third parties who are not ultimate users of the electricity. These sales may include spot market transactions on the markets operated by MISO and PJM. These sales may also include bilateral sales to other utilities or power marketers. Generating units are dispatched by MISO based on cost considerations as well as reliability of the system. Sales to the market typically occur when MGE has more generation and purchases online than are needed for its own system demand. The excess electricity is then sold to others in the market. For the nine months ended September 30, 2017, market volumes decreased compared to the same period in the prior year, reflecting decreased opportunities for sales and those sales were made at lower market prices. The revenue generated from these sales is included in fuel rules monitored costs. See fuel rules discussion in Footnote 8.b. of the Notes to the Consolidated Financial Statements.

~~Electric fuel and purchased power~~

Electric fuel and purchased power costs reflect an increase in the volume of purchased power offset by a decrease in internal generation volumes when compared to the prior period. Adjustments related to the regulatory recovery for fuel costs, known as fuel rules, increased purchased power expense. These items are explained below.

~~Fuel for electric generation~~

~~The expense for fuel for internal electric generation decreased $7.6 million during the nine months ended September 30, 2017, compared to the same period in the prior year, due to the following:~~


~~(In millions)~~
~~Decrease in volume~~	$	~~(6.0)~~
~~Decrease in per-unit cost~~		~~(1.6)~~
~~Total~~	$	~~(7.6)~~

This decrease in expense reflects a 13.0% decrease in internal generation volume delivered to the system primarily as a result of decreased generation at WCCF based on market prices and a 3.5% decrease in per-unit cost of internal electric generation.

~~Purchased power~~

~~Purchased power expense increased $9.4 million during the nine months ended September 30, 2017, compared to the same period in the prior year, due to the following:~~

(In millions)

Change in fuel rule adjustments, net of recoveries
$
8.4

Increase in volume

5.4

Decrease in per-unit cost

(4.4)

Total
$
9.4

Under fuel rules, MGE is required to defer electric fuel-related costs that fall outside a 2% cost tolerance band around the amount used in the most recent rate proceeding. Any fuel rules adjustments are reflected in purchased power expense, with potential refunds associated with fuel savings increasing that expense and potential recovery of excess fuel costs decreasing that expense.

The decrease in expense (before fuel rules adjustments) reflects a 12.2% increase in the volume of power purchased from third parties partially offset by a 9.0% decrease in the per-unit cost of purchased power.

~~Electric operating and maintenance expenses~~

Electric operating and maintenance expenses increased $2.5 million during the nine months ended September 30, 2017, compared to the same period in 2016. The following changes contributed to the net change:

(In millions)

Increased transmission costs
$
3.8

Increased customer accounts costs

1.7

Increased customer service costs

0.3

Decreased production expenses

(2.1)

Decreased administrative and general costs

(0.7)

Decreased distribution expenses

(0.5)

Total
$
2.5

For the nine months ended September 30, 2017, increased transmission costs are primarily due to an increase in transmission reliability enhancements and increased customer accounts costs are primarily related to technology improvements, partially offset by decreased production costs at Columbia and the Elm Road Units.

~~Electric depreciation expense~~

Electric depreciation expense increased $5.6 million for the nine months ended September 30, 2017, compared to the same period in the prior year as a result of new depreciation rates for Columbia, as approved by the PSCW.

~~Other electric income~~

~~Other electric income increased $1.3 million for the nine months ended September 30, 2017, compared to the same period in the prior year, primarily due to the gain on sale of property assets.~~

~~Gas Utility Operations - MGE Energy and MGE~~

~~Gas deliveries and revenues~~

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

Revenues

Therms Delivered
(In thousands, except HDD and average rate per therm of retail customer)

Nine Months Ended September 30,

Nine Months Ended September 30,

2017

2016

% Change

2017

2016

% Change
Residential
$
61,164
$
56,344

8.6 %

60,794

62,188

(2.2)%
Commercial/Industrial

36,512

32,324

13.0 %

58,865

58,812

0.1 %
Total retail

97,676

88,668

10.2 %

119,659

121,000

(1.1)%
Gas transportation

3,285

3,402

(3.4)%

50,828

53,957

(5.8)%
Other revenues

324

298

8.7 %

-

-

- %
Total
$
101,285
$
92,368

9.7 %

170,487

174,957

(2.6)%

Heating degree days (normal 4,477)

4,025

4,135

(2.7)%
Average rate per therm of

retail customer
$
0.816
$
0.733

11.3 %

~~Gas revenues increased $8.9 million or 9.7% for the nine months ended September 30, 2017, compared to the same period in 2016. These changes are related to the following factors:~~

(In millions)

Rate/PGA changes
$
9.5

Volume

(0.6)

Total
$
8.9

~~Rate/PGA changes~~~~. In December 2016, the PSCW authorized MGE to increase 2017 rates for retail gas customers by 1.9% or $3.1 million on an annual basis.~~

The average retail rate per therm for the nine months ended September 30, 2017, increased 11.3% compared to the same period in 2016, reflecting a $7.2 million increase in natural gas commodity costs (recovered through the PGA) and an increase in fixed rate charges.

~~Volume~~~~. For the nine months ended September 30, 2017, retail gas deliveries decreased 1.1% compared to the same period in the prior year primarily resulting from unfavorable weather conditions.~~

~~Cost of gas sold~~

For the nine months ended September 30, 2017, cost of gas sold increased $6.9 million compared to the same period in the prior year. The cost per therm of natural gas increased 15.9%, which resulted in $6.9 million of increased expense.

~~Gas operating and maintenance expenses~~

Gas operating and maintenance expenses increased by $1.7 million for the nine months ended September 30, 2017, compared to the same period in 2016. The following changes contributed to the net change:

(In millions)

Increased customer account costs
$
1.7

Increased customer service costs

0.8

Decreased administrative and general costs

(0.8)

Total
$
1.7

~~For the nine months ended September 30, 2017, increased customer accounts costs are primarily related to technology improvements.~~

~~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. For the nine months ended September 30, 2017 and 2016, net income at the nonregulated energy operations segment was $14.2 million and $14.3 million, respectively.

~~Transmission Investment Operations - MGE Energy and MGE~~

~~Transmission investment other income~~

For the nine months ended September 30, 2017 and 2016, other income at the transmission investment segment was $7.2 million and $6.0 million, respectively. The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of the investments. ATC Holdco was formed in December 2016. In the near term, it is expected that ATC Holdco will be pursuing transmission development opportunities that typically have long development and investment lead times before becoming operational. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report and "Other Matters" below for additional information concerning ATC and summarized financial information regarding ATC.

~~Consolidated Income Taxes - MGE Energy and MGE~~

MGE Energy's effective income tax rate for the nine months ended September 30, 2017 and 2016, was 36.6% and 36.4%, respectively. MGE's effective income tax rate for the nine months ended September 30, 2017 and 2016, was 36.3% and 36.4%, respectively.

~~Noncontrolling Interest, Net of Tax - MGE~~

The 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; however, 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. Also included in noncontrolling interest, net of tax, for the nine months ended September 30, 2016, is MGE Energy's interest in MGE Transco, which holds our investment in ATC. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:

Nine Months Ended

September 30,

(In millions)

2017

2016

MGE Power Elm Road
$
10.8
$
11.1

MGE Power West Campus

5.4

5.4

MGE Transco^(a)

-

1.4

~~(a)~~

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 ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, except as noted below. Further discussion of the contractual obligations and commercial commitments is included in Footnote 1716 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 ~~MGE Energy's and MGE's 2016~~the 2021 Annual Report on Form 10-K.

Purchase Contracts -– MGE Energy and MGE

See item c. within Footnote ~~7.c.~~8 of Notes to Consolidated Financial Statements in this Report for a description of commitments ~~at September 30, 2017,~~as of March 31, 2022, 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.

Liquidity and Capital Resources

~~Other Commitments - MGE Energy~~

~~In May 2017, MGE Energy entered a subscription agreement~~Subject to invest in a nonpublic venture capital fund. From time to time, this entity will require capital infusions from its investors. MGE Energy has committed to contribute $5 million in capital for such infusions. The timing of these infusions is dependent on the ~~needs~~duration and severity of the ~~investee and is therefore uncertain at this time.~~

~~Long-term Debt -~~COVID-19 pandemic, MGE Energy and MGE

~~MGE issued $40 million of long-term unsecured debt in January 2017. The proceeds of this debt financing were used~~ expect to refinance $30 million of medium-term notes, which matured in January 2017, and assist with the financing of additional capital expenditures. In October 2017, MGE also issued an additional $30 million of long-term unsecured debt to cover capital expenditures and other corporate obligations. See Footnote 2 of the Notes to Consolidated Financial Statements in this Report for further discussion of these debt issuances.

~~Liquidity and Capital Resources~~

~~MGE Energy and MGE~~ have adequate liquidity to ~~fund~~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 both long-term debt financing, short-term debt financing, and if needed, could issue new shares through our Direct Stock Purchase and Dividend Reinvestment Plan. 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 ~~MGE Energy's and MGE's 2016~~the 2021 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 ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016:~~2021:

MGE Energy

MGE

(In thousands)

2017

2016

2017

2016

Cash provided by/(used for):

    Operating activities
$
99,016
$
129,192

$
94,366
$
128,959

    Investing activities

(71,114)

(64,619)

(65,105)

(64,407)

    Financing activities

(19,128)

(34,372)

(38,075)

(59,754)


	MGE Energy				MGE
(In thousands)	2022		2021		2022		2021
Cash provided by (used for):
Operating activities	$	62,099	$	43,883	$	62,681	$	41,981
Investing activities		(32,169)		(35,835)		(30,942)		(35,208)
Financing activities		(21,216)		(13,585)		(21,203)		(5,205)

Cash Provided by Operating Activities

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 ~~for~~during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, was ~~$99.0~~$62.1 million, ~~a decrease~~an increase of ~~$30.2~~$18.2 million when compared to the same period in the prior ~~year, primarily reflecting changes in working capital items between the periods.~~year.

MGE Energy's net income ~~increased $0.4~~decreased $0.5 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, when compared to the same period in the prior year.

~~In 2016, MGE received a $10.0 million refund from the IRS for the 2015 tax year. Excluding the 2016 refund,~~ MGE Energy's federal and state taxes paid increased ~~$10.2~~$1.0 million during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, when compared to the prior year.

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, was $62.7 million, an increase of $20.7 million when compared to the same period in the prior year.

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

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

Working capital accounts (excluding prepaid and accrued taxes) resulted in ~~$13.9~~$2.8 million in cash ~~used for~~provided by operating activities ~~for~~during the ~~nine~~three months ended ~~September 30, 2017, primarily due to~~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 ~~accounts payable~~inventories and ~~increased inventories,~~decreased unbilled revenues, partially offset by increased accounts receivable and decreased ~~unbilled revenues, decreased other current assets, and increased other current liabilities.~~accounts payable.

Working capital accounts (excluding prepaid and accrued taxes) resulted in ~~$7.6~~$11.3 million in cash ~~provided by~~used for operating activities ~~for~~during the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2021. Actual purchased gas costs were $13.0 million higher than the amount collected in rates primarily due to ~~decreased inventories, decreased unbilled revenues,~~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 ~~payable,~~receivable and ~~increased~~decreased other current liabilities, partially offset by increased receivables. The increase in current liabilities includes a fuel credit, that was approved in August 2015, of $6.3 million that customers received on their bill from January through September 2016decreased gas inventories and ~~a one-time fuel credit, approved in July 2016, of $15.5 million that customers received on their bill in September 2016.~~decreased unbilled revenues.

~~A decrease in pension contribution resulted in an additional $3.4 million in cash provided by operating activities for~~Hosted software asset expenditures during the ~~nine~~three months ended ~~September 30, 2017,~~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 million during the three months ended March 31, 2022, when compared to the same period in the prior year. ~~Pension contributions reflect amounts required by law and discretionary amounts.~~

~~MGE~~

~~Cash provided by operating activities for~~Capital expenditures during the ~~nine~~three months ended ~~September 30, 2017, was $94.4 million, a decrease of $34.6 million when compared to the same period in the prior year, primarily reflecting changes in working capital items between the periods.~~

~~Net income decreased $3.3 million for the nine months ended September 30, 2017, when compared to the same period in the prior year.~~

In 2016, MGE received a $10.0 million refund from the IRS for the 2015 tax year. Excluding the 2016 refund, MGE Energy's federal and state taxes paid increased $10.2 million during the nine months ended September 30, 2017, when compared to the same period in the prior year.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $13.6 million in cash used for operating activities for the nine months ended September 30, 2017, primarily due to decreased accounts payable and increased inventories, partially offset by decreased unbilled revenues, decreased other current assets, and increased other current liabilities.

Working capital accounts (excluding prepaid and accrued taxes) resulted in $7.7 million in cash provided by operating activities for the nine months ended September 30, 2016, primarily due to decreased inventories, decreased unbilled revenues, increased accounts payable, and increased other current liabilities, partially offset by increased receivables. The increase in current liabilities includes a fuel credit, that was approved in August 2015, of $6.3 million that customers received on their bill from January through September 2016 and a one-time fuel credit, approved in July 2016, of $15.5 million that customers received on their bill in September 2016.

A decrease in pension contribution resulted in an additional $3.4 million in cash provided by operating activities for the nine months ended September 30, 2017, when compared to the same period in the prior year. Pension contributions reflect amounts required by law and discretionary amounts.

~~Cash Used for Investing Activities~~

~~MGE Energy~~

~~MGE Energy's cash used for investing activities increased $6.5 million for the nine months ended September 30, 2017, when compared to the same period in the prior year.~~

~~Capital expenditures for the nine months ended September 30, 2017,~~March 31, 2022, were ~~$66.3~~$30.8 million. This amount represents ~~an increase~~a decrease of $4.0 million from the expenditures made in the same period in the prior year. This ~~increase~~decrease primarily reflects ~~increased expenditures on electric distribution assets.~~the reduction of utility expenditures.

~~Capital contributions in ATC and other investments increased $4.8~~MGE

MGE's cash used for investing activities decreased $4.3 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, when compared to the same period in the prior year.

~~MGE Energy received $2.4 million in proceeds from~~40

Capital expenditures during the ~~sales of property for the nine~~three months ended ~~September 30, 2017.~~

~~MGE~~

~~MGE's cash used for investing activities increased $0.7 million for the nine months ended September 30, 2017, when compared to the same period in the prior year.~~

MGE Energy's and MGE's Capital Requirements

~~Capital contributions in ATC~~

MGE Energy's and ~~other investments decreased $1.6 million for~~MGE's liquidity are primarily affected by their capital expenditure requirements. During the ~~nine~~three months ended ~~September 30, 2017, when compared~~March 31, 2022, capital expenditures for MGE Energy and MGE totaled $30.8 million, which included $30.2 million of utility capital expenditures.

MGE does not currently expect any material changes resulting from the COVID-19 pandemic and associated governmental regulations to ~~the same period~~its construction plans as presented in the ~~prior year. In December 2016, MGE transferred its ownership interest to MGE Energy. See Footnote 3~~2022 through 2025 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 ~~Notes to Consolidated Financial Statements in this~~2021 Annual Report ~~for further details.~~on Form 10-K.

~~MGE received $1.8 million in proceeds from the sales of property for the nine months ended September 30, 2017.~~

Cash Used for Financing Activities

MGE Energy

Cash used for MGE Energy's financing activities was ~~$19.1~~$21.2 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2017, a decrease of $15.2~~March 31, 2022, compared to $13.6 million ~~when compared to~~for the same period in the prior year.

~~For~~During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, dividends paid were ~~$32.5~~$14.0 million compared to ~~$31.1~~$13.4 million in the prior year. ~~This~~The increase ~~was a result of~~reflected a higher dividend rate per share ($~~0.938~~0.388 vs. ~~$0.898)~~$0.370).

During the ~~nine~~three months ended ~~September 30, 2017, MGE issued $40.0~~March 31, 2022, net short-term debt repayments were $5.5 million, compared to $1.5 million of ~~senior unsecured notes, which was used to refinance $30.0 million of medium-term notes and assist with financing additional capital expenditures.~~net short-term debt borrowings in the prior year.

~~For~~MGE

During the ~~nine~~three months ended ~~September 30, 2017, short-term borrowings were $7.0 million. There were no short term borrowings for the nine months ended September 30, 2016.~~

~~MGE~~

~~During the nine months ended September 30, 2017,~~March 31, 2022, cash used for MGE's financing activities was ~~$38.1~~$21.2 million, ~~a decrease of $21.7~~compared to $5.2 million ~~when compared to~~for the same period in the prior year.

~~Dividends paid from MGE~~Cash dividends to ~~MGE Energy~~parent (MGE Energy) were ~~$35.0~~$5.0 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2017, compared~~March 31, 2022. There were no cash dividends to ~~$40.0 for~~parent in the ~~nine months ended September 30, 2016.~~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 ~~$16.5~~$9.0 million ~~for~~during the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$18.1~~$5.0 million in the prior year.

~~For~~During the ~~nine~~three months ended ~~September 30, 2016, equity contributions received from noncontrolling interest, which represent contributions~~March 31, 2022, net short-term debt repayments were $5.5 million, compared to ~~MGE Transco, were $1.6 million. There were no equity contributions received from noncontrolling interest, which represent contributions to MGE Transco for the nine months ended September 30, 2017.~~

~~During the nine months ended September 30, 2017, MGE issued $40.0~~$1.5 million of ~~senior unsecured notes, which was used to refinance $30.0 million of medium-term notes and assist with financing additional capital expenditures.~~net short-term debt borrowings in the prior year.

~~For the nine months ended September 30, 2017, short-term borrowings were $7.0 million. There were no short term borrowings for the nine months ended September 30, 2016.~~

Capitalization Ratios

MGE Energy's capitalization ratios were as follows:

MGE Energy

September 30, 2017

December 31, 2016

Common shareholders' equity
65.3 %

65.2 %

Long-term debt^(a)
34.1 %

34.8 %

Short-term debt
0.6 %

-%


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

(a)

Includes the current portion of long-term debt.

~~MGE Energy's and MGE's Capital Requirements~~

MGE Energy's and MGE's liquidity are primarily affected by their capital requirements. During the nine months ended September 30, 2017, capital expenditures for MGE Energy and MGE totaled $66.3 million, which included $63.9 million of capital expenditures for utility operations.

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 ~~borrowings are~~borrowing is subject to default or prepayment as a result of a downgrading of credit ratings, although a downgrading of MGE's credit ratings ~~could~~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 the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2022. Further discussion of environmental matters is included in ~~MGE Energy's and MGE's 2016~~the 2021 Annual Report on Form 10-K and Footnote ~~7.a.~~8.a. of Notes to Consolidated Financial Statements in this Report.

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 ~~Clean Power Plan~~

~~In October 2015,~~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 ~~finalized its Clean Power Plan (CPP) rule with an effective date of December 2015, setting guidelines~~has determined as being significantly impacted by pollution from upwind states. This is accomplished in the CSAPR through a reduction in SO2 and ~~approval criteria for states~~NOx from qualifying fossil-fuel fired power plants in upwind "contributing" states. NOx and SO2 contribute to ~~use~~fine particulate pollution and NOx contributes to ozone formation in ~~developing plans to control GHG emissions from existing fossil fuel-fired electric generating units (EGUs) and systems. Implementation of~~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 ~~rule is expected to have a direct impact on existing coal and natural gas fired generating units, including possible changes in dispatch and additional operating costs.~~ market.

In ~~October 2017,~~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 ~~announcing~~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 NOx 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.

MGE is currently evaluating the proposed rule to ~~repeal the CPP and has sought public comment on whether~~determine potential impacts to ~~replace~~our business. MGE expects the rule, ~~and~~ if ~~so how. Given~~finalized as written, to impact our fossil-fueled generation assets. However, MGE will not know the ~~pending legal proceedings, and~~impacts of this rule with any certainty until the ~~EPA's proposal, the nature and timing of any final requirements to control GHG emissions from existing fossil fuel-fired EGUs is subject to uncertainty. If a~~ rule is ~~implemented substantially in its present form, it is expected to have a material impact on MGE. MGE~~finalized. We will continue to monitor ~~developments~~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% increase to electric rates 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 2023, the PSCW approved a 0.96% increase in gas rates and to address a potential electric rate change through a limited rate case reopener.

In April 2022, MGE filed a limited reopener with a proposed a 4.38% increase to electric rates for 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 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 electric limited reopener:


(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

(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 ~~proposed rule.~~balance and discussed further in the Management Discussion and Analysis - 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.

ATC

~~Other Matters~~

~~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, "due to changes in the capital markets."~~ATC. The complaint ~~alleged~~provided for a statutory refund period of November 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%, 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, 2016, FERC issued an order, for the period November 2013 through February 2015, reducing ATC's base ROE to 10.32%. 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. This increased the ROE from 9.88% to 10.02%. This base ROE is effective for the 2013 FERC complaint period and for all periods following September 2016.

2015 FERC Complaint - In February 2015, several parties filed a ~~second~~ complaint ~~was filed for the period February 2015 through May 2015~~ with the FERC ~~requesting a reduction in~~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 of the complaint.~~date. In June 2016, an administrative law judge issued an initial decision for the ~~second~~ complaint that would reduce the transmission owner's base ROE to 9.7%. ~~The initial decision will be reviewed by FERC. It is anticipated FERC will issue an order on this issue in the beginning of 2018. On September 28, 2016,~~In November 2019, FERC issued an order ondismissing the ~~first~~ complaint ~~for~~with the ~~period November 2013 through February 2015, reducing~~determination that the ~~base~~ ROE was reasonable. As a result of this order and the methodology FERC used to ~~10.32%. This base~~determine the applicable ROE ~~also became effective September 28, 2016, and will apply to future periods until FERC rules~~ in the ~~second~~2013 FERC complaint, ~~at which time~~several parties have requested a rehearing by FERC. If FERC denies these requests, the ~~base ROE ordered by FERC in~~complainants are likely to file an appeal with the ~~second complaint will prospectively become the authorized base ROE.~~

~~In January 2015, FERC accepted the transmission owner's request for a 50 basis-point incentive ROE adder for participating in MISO. The adder became effective January 6, 2015.~~

appellate court. Any downward change to ATC's ROE could result in lower equity earnings and distributions from ATC in the future. ~~Our~~

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 ~~expense~~adjustment of ~~$0.7~~ $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 a $0.6 million reduction of our reserve. Additionally, our share of ATC's earnings reflects the derecognition of a possible refund related to the 2015 complaint as ATC considers such a refund to be no longer considered probable due to FERC's November 2019 dismissal of that complaint. 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 is approximately $2.3 million. As of December 31, 2020, our share of the estimated refund amount reflected a net increase in ATC's earnings with a pre-tax adjustment of $0.6 million, inclusive of interest.

We derived approximately 5.1% and 5.0% of our net income during the three months ended ~~September 30, 2016,~~March 31, 2022 and a pre-tax expense of $0.2 million and $1.8 million for the nine months ended September 30, 2017 and 2016, respectively, recorded by ATC for this matter representing its estimate of its refund liability. There was not a pre-tax expense for the three months ended September 30, 2017. We derived approximately 7.2% and 5.8% of our net income for the nine months ended September 30, 2017 and 2016,2021, respectively, from our investment in ATC.

Adoption of Accounting Principles and Recently Issued Accounting Pronouncements

See Footnote 122 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 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 ~~somewhat~~substantially mitigated by the current ratemaking process in place for recovering electric fuel cost, purchased energy costs, and the cost of natural gas.

The recovery of MGE's electric fuel costs ~~are~~is subject to fuel rules established by the PSCW. ~~The fuel~~Fuel rules require ~~the PSCW and~~ Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band. Any ~~over/~~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 ~~is required to~~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. ~~Currently,~~ MGE is subject to a plus or minus 2%1% range. MGE assumes the risks and benefits of variances that are within the cost tolerance band. For ~~2017,~~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 ~~base~~ fuel ~~rates are $101.9 million.~~monitoring level rates. See Footnote ~~8.b.~~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 ~~FTRs,~~financial transmission rights (FTRs), which are used to hedge the risk of increased transmission congestion charges. ~~At September 30, 2017,~~As of March 31, 2022, the fair value of ~~these instruments~~exchange traded derivatives and FTRs exceeded their cost basis by ~~$0.9~~$9.8 million. Under the PGA clause and electric fuel rules, MGE may include ~~in the costs of fuel (natural gas or power)~~ the costs and benefits of the aforementioned fuel price risk management ~~tools.~~tools in the costs of fuel (natural gas or power). Because these ~~costs/~~costs or benefits are recoverable, the related unrealized ~~loss/~~loss or gain has been deferred on the consolidated balance sheets as a regulatory ~~asset/liability.~~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 agreement also allows MGE an option to extend the contract after that base term.~~2022 (the "base term"). The agreement is considered a derivative contract and is recognized at its fair value on the consolidated balance ~~sheet.~~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 ~~at September 30, 2017, reflects~~as of March 31, 2022, reflected a loss position of ~~$43.1~~$0.1 million.

Interest Rate Risk

Both MGE Energy and MGE may have ~~short term~~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 ~~its~~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 ~~its~~ credit risk, which include ~~utilizing~~ an established credit approval process, ~~monitoring~~ counterparty limits, ~~employing~~ 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 ~~would include~~could include: the loss in value of mark-to-market ~~contracts;~~contracts, the amount owed for settled ~~transactions;~~transactions, and additional payments ~~if any,~~ to settle unrealized ~~losses on accrual contracts.~~losses. As of ~~September 30, 2017,~~March 31, 2022, no counterparties ~~have~~had defaulted.

MGE is obligated to provide service to all electric and gas customers within its ~~respective~~ franchised territories. MGE's franchised electric territory includes a ~~316~~264 square-mile area in Dane County, Wisconsin, and MGE's franchised gas territory includes a service area covering ~~1,682~~1,684 square miles in Wisconsin. Based on results for the year ended December 31, ~~2016,~~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~~4. Controls and Procedures.

During the ~~third~~first quarter of ~~2017,~~2022, 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 ~~September 30, 2017,~~March 31, 2022, 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 ~~September 30, 2017,~~March 31, 2022, 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.

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 ~~7.a.~~8.a. and ~~7.b.~~8.b. of Notes to Consolidated Financial Statements in this Report for more information.

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^*

Maximum number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs^*
July 1-31, 2017

23,072
$
64.34

-

-
August 1-31, 2017

9,975

65.54

-

-
September 1-30, 2017

49,666

65.21

-

-
Total

82,713
$
65.01

-

-


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's~~Energy, Inc. Direct Stock Purchase and Dividend Reinvestment Plan (Stock Plan), common stock shares deliverable to plan participants may be either newly issued shares or shares purchased on the open market, as determined from time to time by MGE Energy. ~~In June 2009,~~During 2022, MGE ~~Energy switched to using~~Energy's transfer agent used open market purchases to provide shares to meet obligations to participants in the Stock Plan. The shares are purchased on the open market through athe transfer agent's securities broker-dealer and then are reissued under the Stock Plan as needed to meet share delivery requirements. The volume and timing of share repurchases 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 ~~reissued following~~ open market purchases, are ~~issued and~~ sold pursuant to a registration statement that was filed with the SEC and is currently effective.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable to MGE Energy and MGE.

Item 5. Other Information.

None.

Item 6. Exhibits.

~~Statement regarding computation of ratio of earnings to fixed charges for Madison Gas and Electric Company.~~

Certifications Pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed by the following officers for the following companies:

~~31.1~~

~~Filed by Jeffrey M. Keebler for MGE Energy, Inc.~~

~~31.2~~

~~Filed by Jeffrey C. Newman for MGE Energy, Inc.~~

~~31.3~~

~~Filed by Jeffrey M. Keebler for Madison Gas and Electric Company~~

~~31.4~~

~~Filed by Jeffrey C. Newman for Madison Gas and Electric Company~~


50

Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) as to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed by the following officers for the following companies:

~~32.1~~

~~Filed by Jeffrey M. Keebler for MGE Energy, Inc.~~

~~32.2~~

~~Filed by Jeffrey C. Newman for MGE Energy, Inc.~~

~~32.3~~

~~Filed by Jeffrey M. Keebler for Madison Gas and Electric Company~~

~~32.4~~

~~Filed by Jeffrey C. Newman for Madison Gas and Electric Company~~

~~101~~

~~Interactive Data Files:~~

~~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~~


51Ex. 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.

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: ~~November 3, 2017~~May 5, 2022	/s/ Jeffrey M. Keebler
	Jeffrey M. Keebler Chairman, President and Chief Executive Officer (Duly Authorized Officer)



Date: ~~November 3, 2017~~May 5, 2022	/s/ ~~Jeffrey C. Newman~~Jared J. Bushek
	~~Jeffrey C. Newman~~Jared J. Bushek ~~Executive~~ Vice President - Finance, Chief ~~Financial~~Information Officer ~~Secretary~~ and Treasurer (Chief Financial ~~and Accounting~~ Officer)


52


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

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 ~~COMPANY~~



Date: ~~November 3, 2017~~May 5, 2022	/s/ Jeffrey M. Keebler
	Jeffrey M. Keebler Chairman, President and Chief Executive Officer (Duly Authorized Officer)



Date: ~~November 3, 2017~~May 5, 2022	/s/ ~~Jeffrey C. Newman~~Jared J. Bushek
	~~Jeffrey C. Newman~~Jared J. Bushek ~~Executive~~ Vice President - Finance, Chief ~~Financial~~Information Officer ~~Secretary~~ and Treasurer (Chief Financial Officer)



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


(In thousands)		2017		2018		2019		2020		2021		Thereafter
Coal^(a)	$	6,402	$	19,685	$	13,497	$	3,445	$	-	$	-
Natural gas
Transportation & storage^(b)		6,073		20,839		19,680		15,423		8,660		24,373
Supply^(c)		11,243		11,817		-		-		-		-
	$	23,718	$	52,341	$	33,177	$	18,868	$	8,660	$	24,373


		September 30, 2017				December 31, 2016
(In thousands)		Carrying Amount		Fair Value		Carrying Amount		Fair Value
MGE Energy
Assets:
Cash and cash equivalents	$	104,733	$	104,733	$	95,959	$	95,959
Liabilities:
Short-term debt - commercial paper		7,000		7,000		-		-
Long-term debt^(a)		397,981		444,195		391,242		430,122

MGE
Assets:
Cash and cash equivalents	$	1,954	$	1,954	$	10,768	$	10,768
Liabilities:
Short-term debt - commercial paper		7,000		7,000		-		-
Long-term debt^(a)		397,981		444,195		391,242		430,122

(a) Includes long-term debt due within one year. Excludes debt issuance costs and unamortized discount of
$4.1 million at September 30, 2017, and December 31, 2016.


		Fair Value as of September 30, 2017
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives	$	1,536	$	673	$	-	$	863
Exchange-traded investments		816		816		-		-
Total Assets	$	2,352	$	1,489	$	-	$	863
Liabilities:
Derivatives	$	43,812	$	190	$	-	$	43,622
Deferred compensation		3,150		-		3,150		-
Total Liabilities	$	46,962	$	190	$	3,150	$	43,622

MGE
Assets:
Derivatives	$	1,536	$	673	$	-	$	863
Exchange-traded investments		78		78		-		-
Total Assets	$	1,614	$	751	$	-	$	863
Liabilities:
Derivatives	$	43,812	$	190	$	-	$	43,622
Deferred compensation		3,150		-		3,150		-
Total Liabilities	$	46,962	$	190	$	3,150	$	43,622


		Fair Value as of December 31, 2016
(In thousands)		Total		Level 1		Level 2		Level 3
MGE Energy
Assets:
Derivatives	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		500		500		-		-
Total Assets	$	2,027	$	1,541	$	-	$	486
Liabilities:
Derivatives	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792

MGE
Assets:
Derivatives	$	1,527	$	1,041	$	-	$	486
Exchange-traded investments		143		143		-		-
Total Assets	$	1,670	$	1,184	$	-	$	486
Liabilities:
Derivatives	$	50,808	$	16	$	-	$	50,792
Deferred compensation		3,039		-		3,039		-
Total Liabilities	$	53,847	$	16	$	3,039	$	50,792


(In thousands) MGE Energy		Electric		Gas		Nonregulated Energy		Transmission Investment		All Others		Consolidation/ Elimination Entries		Consolidated Total
*Three Months Ended September 30, 2017*
Operating revenues	$	120,649	$	18,778	$	112	$	-	$	-	$	-	$	139,539
Interdepartmental revenues		(110)		3,892		11,130		-		-		(14,912)		-
Total operating revenues		120,539		22,670		11,242		-		-		(14,912)		139,539
Depreciation and amortization		(9,256)		(2,258)		(1,858)		-		-		-		(13,372)
Other operating expenses		(78,886)		(18,940)		(50)		(9)		(193)		14,912		(83,166)
Operating income (loss)		32,397		1,472		9,334		(9)		(193)		-		43,001
Other income (deductions), net		1,440		358		-		2,258		(117)		-		3,939
Interest (expense) income, net		(2,760)		(795)		(1,371)		-		199		-		(4,727)
Income (loss) before taxes		31,077		1,035		7,963		2,249		(111)		-		42,213
Income tax (provision) benefit		(11,175)		(351)		(3,196)		(906)		44		-		(15,584)
Net income (loss)	$	19,902	$	684	$	4,767	$	1,343	$	(67)	$	-	$	26,629

*Three Months Ended September 30, 2016*
Operating revenues	$	118,933	$	17,570	$	214	$	-	$	-	$	-	$	136,717
Interdepartmental revenues		459		6,040		10,998		-		-		(17,497)		-
Total operating revenues		119,392		23,610		11,212		-		-		(17,497)		136,717
Depreciation and amortization		(7,332)		(2,047)		(1,833)		-		-		-		(11,212)
Other operating expenses		(77,010)		(19,292)		(33)		(13)		(127)		17,497		(78,978)
Operating income (loss)		35,050		2,271		9,346		(13)		(127)		-		46,527
Other income (deductions), net		178		13		-		2,023		(109)		-		2,105
Interest (expense) income, net		(2,855)		(818)		(1,436)		-		71		-		(5,038)
Income (loss) before taxes		32,373		1,466		7,910		2,010		(165)		-		43,594
Income tax (provision) benefit		(11,290)		(494)		(3,175)		(812)		57		-		(15,714)
Net income (loss)	$	21,083	$	972	$	4,735	$	1,198	$	(108)	$	-	$	27,880

*Nine Months Ended September 30, 2017*
Operating revenues	$	321,279	$	101,285	$	261	$	-	$	-	$	-	$	422,825
Interdepartmental revenues		(334)		11,708		33,307		-		-		(44,681)		-
Total operating revenues		320,945		112,993		33,568		-		-		(44,681)		422,825
Depreciation and amortization		(27,341)		(6,703)		(5,562)		-		-		-		(39,606)
Other operating expenses		(231,827)		(92,670)		(153)		(9)		(779)		44,681		(280,757)
Operating income (loss)		61,777		13,620		27,853		(9)		(779)		-		102,462
Other income (deductions), net		1,821		355		-		7,242		(414)		-		9,004
Interest (expense) income, net		(8,337)		(2,399)		(4,170)		-		399		-		(14,507)
Income (loss) before taxes		55,261		11,576		23,683		7,233		(794)		-		96,959
Income tax (provision) benefit		(18,753)		(4,576)		(9,505)		(2,909)		256		-		(35,487)
Net income (loss)	$	36,508	$	7,000	$	14,178	$	4,324	$	(538)	$	-	$	61,472

*Nine Months Ended September 30, 2016*
Operating revenues	$	312,470	$	92,368	$	982	$	-	$	-	$	-	$	405,820
Interdepartmental revenues		1,482		17,278		32,894		-		-		(51,654)		-
Total operating revenues		313,952		109,646		33,876		-		-		(51,654)		405,820
Depreciation and amortization		(21,754)		(6,043)		(5,537)		-		(24)		-		(33,358)
Other operating expenses		(230,680)		(88,328)		(115)		(17)		(706)		51,654		(268,192)
Operating income (loss)		61,518		15,275		28,224		(17)		(730)		-		104,270
Other income (deductions), net		492		(13)		-		6,023		224		-		6,726
Interest (expense) income, net		(8,421)		(2,425)		(4,348)		-		199		-		(14,995)
Income (loss) before taxes		53,589		12,837		23,876		6,006		(307)		-		96,001
Income tax (provision) benefit		(17,984)		(5,048)		(9,583)		(2,418)		90		-		(34,943)
Net income (loss)	$	35,605	$	7,789	$	14,293	$	3,588	$	(217)	$	-	$	61,058


(In thousands) MGE		Electric		Gas		Nonregulated Energy		Transmission Investment^(b)		Consolidation/ Elimination Entries		Consolidated Total
*Three Months Ended September 30, 2017*
Operating revenues	$	120,648	$	18,779	$	112	$	-	$	-	$	139,539
Interdepartmental revenues		(109)		3,891		11,130		-		(14,912)		-
Total operating revenues		120,539		22,670		11,242		-		(14,912)		139,539
Depreciation and amortization		(9,256)		(2,258)		(1,858)		-		-		(13,372)
Other operating expenses^(a)		(89,544)		(19,145)		(3,246)		-		14,912		(97,023)
Operating income^(a)		21,739		1,267		6,138		-		-		29,144
Other income, net^(a)		923		212		-		-		-		1,135
Interest expense, net		(2,760)		(795)		(1,371)		-		-		(4,926)
Net income		19,902		684		4,767		-		-		25,353
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(5,439)		(5,439)
Net income attributable to MGE	$	19,902	$	684	$	4,767	$	-	$	(5,439)	$	19,914

*Three Months Ended September 30, 2016*
Operating revenues	$	118,938	$	17,576	$	214	$	-	$	-	$	136,728
Interdepartmental revenues		454		6,034		10,998		-		(17,486)		-
Total operating revenues		119,392		23,610		11,212		-		(17,486)		136,728
Depreciation and amortization		(7,332)		(2,047)		(1,833)		-		-		(11,212)
Other operating expenses^(a)		(88,282)		(19,781)		(3,208)		4		17,486		(93,781)
Operating income^(a)		23,778		1,782		6,171		4		-		31,735
Other income, net^(a)		160		8		-		868		-		1,036
Interest expense, net		(2,855)		(818)		(1,436)		-		-		(5,109)
Net income		21,083		972		4,735		872		-		27,662
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(5,695)		(5,695)
Net income attributable to MGE	$	21,083	$	972	$	4,735	$	872	$	(5,695)	$	21,967

*Nine Months Ended September 30, 2017*
Operating revenues	$	321,282	$	101,294	$	261	$	-	$	-	$	422,837
Interdepartmental revenues		(337)		11,699		33,307		-		(44,669)		-
Total operating revenues		320,945		112,993		33,568		-		(44,669)		422,837
Depreciation and amortization		(27,341)		(6,703)		(5,562)		-		-		(39,606)
Other operating expenses^(a)		(249,992)		(97,080)		(9,658)		-		44,669		(312,061)
Operating income^(a)		43,612		9,210		18,348		-		-		71,170
Other income, net^(a)		1,233		189		-		-		-		1,422
Interest expense, net		(8,337)		(2,399)		(4,170)		-		-		(14,906)
Net income		36,508		7,000		14,178		-		-		57,686
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(16,224)		(16,224)
Net income attributable to MGE	$	36,508	$	7,000	$	14,178	$	-	$	(16,224)	$	41,462

*Nine Months Ended September 30, 2016*
Operating revenues	$	312,488	$	92,390	$	982	$	-	$	-	$	405,860
Interdepartmental revenues		1,464		17,256		32,894		-		(51,614)		-
Total operating revenues		313,952		109,646		33,876		-		(51,614)		405,860
Depreciation and amortization		(21,754)		(6,043)		(5,537)		-		-		(33,334)
Other operating expenses^(a)		(248,566)		(93,348)		(9,698)		-		51,614		(299,998)
Operating income^(a)		43,632		10,255		18,641		-		-		72,528
Other income (deductions), net^(a)		394		(41)		-		3,262		-		3,615
Interest expense, net		(8,421)		(2,425)		(4,348)		-		-		(15,194)
Net income		35,605		7,789		14,293		3,262		-		60,949
Less: Net income attributable to
noncontrolling interest, net of tax		-		-		-		-		(17,899)		(17,899)
Net income attributable to MGE	$	35,605	$	7,789	$	14,293	$	3,262	$	(17,899)	$	43,050

(a) Amounts are shown net of the related tax expense, consistent with the presentation on the MGE Consolidated Statement of Income.
(b) As of July 31, 2016, MGE no longer consolidates MGE Energy's proportionate share of equity earnings in MGE Transco. See Footnote 3 for further discussion.


		Revenues				Sales (kWh)
(In thousands, except cooling degree days)		Three Months Ended September 30,				Three Months Ended September 30,
		2017		2016	% Change	2017	2016	% Change
Residential	$	39,905	$	40,120	(0.5)%	225,992	259,529	(12.9)%
Commercial		64,036		55,232	15.9 %	505,771	517,253	(2.2)%
Industrial		4,555		4,122	10.5 %	48,896	61,362	(20.3)%
Other-retail/municipal		10,459		9,091	15.0 %	119,979	114,097	5.2 %
Total retail		118,955		108,565	9.6 %	900,638	952,241	(5.4)%
Sales to the market		1,068		2,120	(49.6)%	27,581	52,278	(47.2)%
Deferral of fuel savings		-		8,194	(100.0)%	-	-	- %
Adjustments to revenues		626		54	N/A%	-	-	- %
Total	$	120,649	$	118,933	1.4 %	928,219	1,004,519	(7.6)%

Cooling degree days (normal 473)						398	570	(30.2)%


(In millions)
Deferral of fuel savings/fuel credit	$	9.6
Adjustments to revenues		0.6
Volume		(5.9)
Sales to the market		(1.1)
Other		(0.8)
Rate changes		(0.7)
Total	$	1.7


(In millions)
Change in fuel rule adjustments, net of recoveries	$	5.0
Increase in volume		2.2
Decrease in per-unit cost		(0.4)
Total	$	6.8


(In millions)
Increased transmission costs	$	1.3
Increased customer accounts costs		0.5
Decreased production expenses		(0.5)
Decreased distribution expenses		(0.5)
Decreased administrative and general costs		(0.2)
Total	$	0.6


(In millions)
Increased customer accounts costs	$	0.7
Increased customer service costs		0.2
Increased other costs		0.2
Decreased administrative and general costs		(0.4)
Total	$	0.7


(In millions)
Deferral of fuel savings/fuel credit	$	20.7
Adjustments to revenue		1.8
Volume		(8.8)
Rate changes		(2.5)
Sales to the market		(2.2)
Other		(0.2)
Total	$	8.8


(In millions)
Increased customer account costs	$	1.7
Increased customer service costs		0.8
Decreased administrative and general costs		(0.8)
Total	$	1.7


Period	Total Number of Shares Purchased		Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs^*	Maximum number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs^*
July 1-31, 2017	23,072	$	64.34	-	-
August 1-31, 2017	9,975		65.54	-	-
September 1-30, 2017	49,666		65.21	-	-
Total	82,713	$	65.01	-	-