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: September 30, ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________ | ||||
Commission File No. | Name of Registrant, State of Incorporation, Address of Principal Executive Offices, and Telephone No. | IRS Employer Identification No. | ||
000-49965 | MGE Energy, Inc. (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 | mgeenergy.com | 39-2040501 | ||
000-1125 | Madison Gas and Electric Company (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 | mge.com | 39-0444025 |
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:
MGE Energy, Inc. Yes ☒ No ☐ | Madison Gas and Electric Company Yes ☒ No ☐ |
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files):
MGE Energy, Inc. Yes ☒ No ☐ | Madison Gas and Electric Company Yes ☒ No ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | Accelerated Filer | Non-accelerated Filer | Smaller Reporting Company | Emerging Growth Company | |
MGE Energy, Inc. | ☒ | ☐ | ☐ | ☐ | ☐ |
Madison Gas and Electric Company | ☐ | ☐ | ☒ | ☐ | ☐ |
If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
MGE Energy, Inc. ☐ | Madison Gas and Electric Company ☐ |
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):
MGE Energy, Inc. Yes ☐ No ☒ | Madison Gas and Electric Company Yes ☐ No ☒ |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
Common Stock, $1 Par Value Per Share | MGEE | The NASDAQ Stock Market |
Number of Shares Outstanding of Each Class of Common Stock as of October 31, | |
MGE Energy, Inc. | Common stock, $1.00 par value, 36,163,370 shares outstanding. |
Madison Gas and Electric Company | Common stock, $1.00 par value, 17,347,894 shares outstanding (all of which are owned beneficially and of record by MGE Energy, Inc.). |
1
Table of Contents
3 | |
3 | |
3 | |
3 | |
Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report | 4 |
6 | |
6 | |
6 | |
7 | |
8 | |
9 | |
10 | |
10 | |
11 | |
12 | |
13 | |
14 | |
14 | |
15 | |
15 | |
16 | |
17 | |
17 | |
18 | |
18 | |
22 | |
23 | |
| |
| |
29 | |
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. |
|
| |
| |
| |
| |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
|
| |
| |
| |
52 | |
53 | |
54 |
2
PART I. FINANCIAL INFORMATION.
Filing Format
This combined Form 10-Q is being filed separately by MGE Energy, Inc. (MGE Energy) and Madison Gas and Electric Company (MGE). MGE is a wholly owned subsidiary of MGE Energy and represents a majority of its assets, liabilities, revenues, expenses, and operations. Thus, all information contained in this report relates to, and is filed by, MGE Energy. Information that is specifically identified in this report as relating solely to MGE Energy, such as its financial statements and information relating to its nonregulated business, does not relate to, and is not filed by, MGE. MGE makes no representation as to that information. The terms "we" and "our," as used in this report, refer to MGE Energy and its consolidated subsidiaries, unless otherwise indicated.
Forward-Looking Statements
This report, and other documents filed by MGE Energy and MGE with the Securities and Exchange Commission (SEC) from time to time, contain forward-looking statements that reflect management's current assumptions and estimates regarding future performance and economic conditions—especially as they relate to economic conditions, future load growth, revenues, expenses, capital expenditures and rate recovery, financial resources, regulatory matters, and the scope and expense associated with future environmental regulation. These forward-looking statements are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "expect," "anticipate," "estimate," "could," "should," "intend," "will," and other similar words, and words relating to goals, targets and projections, generally identify forward-looking statements. Both MGE Energy and MGE caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied.
The factors that could cause actual results to differ materially from the forward-looking statements made by a registrant include: (a) those factors discussed in the registrants' 20212022 Annual Report on Form 10-K: Item 1A. Risk Factors, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, as updated by Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report, and Item 8. Financial Statements and Supplementary Data – Note 16, as updated by Part I, Item 1. Financial Statements – Note 8 in this report, and (b) other factors discussed herein and in other filings made by that registrant with the SEC.
Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. MGE Energy and MGE undertake no obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date of this report, except as required by law.
Where to Find More Information
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
MGE Energy maintains a website at mgeenergy.com, and MGE maintains a website at mge.com. Copies of the reports and other information that we file with the SEC may be obtained from our websites free of charge. Information contained on MGE Energy's and MGE's websites shall not be deemed incorporated into, or to be a part of, this report.
3
Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report
Abbreviations, acronyms, and definitions used in the text and notes of this report are defined below.
MGE Energy and Subsidiaries: | |
CWDC | Central Wisconsin Development Corporation |
MAGAEL | MAGAEL, LLC |
MGE | Madison Gas and Electric Company |
MGE Energy | MGE Energy, Inc. |
MGE Power | MGE Power, LLC |
MGE Power Elm Road | MGE Power Elm Road, LLC |
MGE Power West Campus | MGE Power West Campus, LLC |
MGE Services | MGE Services, LLC |
MGE State Energy Services | MGE State Energy Services, LLC |
MGE Transco | MGE Transco Investment, LLC |
MGEE Transco | MGEE Transco, LLC |
North Mendota | North Mendota Energy & Technology Park, LLC |
Other Defined Terms: | |
2017 Tax Act | Tax Cut and Jobs Act of 2017 |
| MGE Energy's and MGE's Annual Report on Form 10-K for the year ended December 31, |
2021 Plan | MGE Energy's 2021 Long-Term Incentive Plan |
AFUDC | Allowance for Funds Used During Construction |
ATC | American Transmission Company LLC |
ATC Holdco | ATC Holdco, LLC |
Badger Hollow I | Badger Hollow I Solar Farm |
Badger Hollow II | Badger Hollow II Solar Farm |
Blount | Blount Station |
BTA | Best technology available |
CA | Certificate of Authority |
CASAC | Clean Air Scientific Advisory Committee |
CBP | U.S. Customs and Border Protection |
CCR | Coal Combustion Residual |
Columbia | Columbia Energy Center |
cooling degree days (CDD) | Measure 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 |
|
|
CSAPR | Cross-State Air Pollution Rule |
D.C. Circuit | United States Court of Appeals for the District of Columbia Circuit |
Darien | Darien Solar Energy Center |
Dth | Dekatherms, a quantity measure for natural gas |
EGU | Electric generating unit |
ELG | Effluent Limitations Guidelines |
Elm Road Units | Elm Road Generating Station |
EPA | United States Environmental Protection Agency |
FASB | Financial Accounting Standards Board |
FERC | Federal Energy Regulatory Commission |
FIP | Federal Implementation Plan |
FTR | Financial Transmission Rights |
|
|
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 |
Nasdaq | The Nasdaq Stock Market |
NOx | Nitrogen oxide |
NSPS | New Source Performance Standards |
Paris | Paris Solar and Battery Park |
the Petition | Petition for Judicial Review of Agency Action |
PGA | Purchased Gas Adjustment clause, a regulatory mechanism used to reconcile natural gas costs recovered in rates to actual costs |
PM | Particulate Matter |
4
PPA | Purchased Power Agreement |
PSCW | Public Service Commission of Wisconsin |
ROE | Return on equity |
|
|
|
|
SEC | Securities and Exchange Commission |
|
|
SO2 | Sulfur dioxide |
Stock Plan | Direct Stock Purchase and Dividend Reinvestment Plan of MGE Energy |
|
|
USDOC | U.S. Department of Commerce |
WCCF | West Campus Cogeneration Facility |
WDNR | Wisconsin Department of Natural Resources |
WEPCO | Wisconsin Electric Power Company, a subsidiary of WEC Energy Group, Inc. |
West Riverside | West Riverside Energy Center in Beloit, Wisconsin |
working capital | Current assets less current liabilities |
WPDES | Wisconsin Pollutant Discharge Elimination System |
WPL | Wisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation |
WRO | Withhold Release Order |
XBRL | eXtensible Business Reporting Language |
a
5
Item 1. Financial Statements.
MGE Energy, Inc.
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Electric revenues |
| $ | 133,090 |
|
| $ | 121,853 |
|
| $ | 355,381 |
|
| $ | 324,574 |
|
| $ | 139,104 |
|
| $ | 133,090 |
|
| $ | 378,102 |
|
| $ | 355,381 |
|
Gas revenues |
|
| 30,310 |
|
|
| 24,020 |
|
|
| 169,305 |
|
|
| 119,944 |
|
|
| 21,424 |
|
|
| 30,310 |
|
|
| 147,677 |
|
|
| 169,305 |
|
Total Operating Revenues |
|
| 163,400 |
|
|
| 145,873 |
|
|
| 524,686 |
|
|
| 444,518 |
|
|
| 160,528 |
|
|
| 163,400 |
|
|
| 525,779 |
|
|
| 524,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Fuel for electric generation |
|
| 21,045 |
|
|
| 18,486 |
|
|
| 48,410 |
|
|
| 42,570 |
|
|
| 19,712 |
|
|
| 21,045 |
|
|
| 47,118 |
|
|
| 48,410 |
|
Purchased power |
|
| 9,593 |
|
|
| 8,646 |
|
|
| 35,757 |
|
|
| 28,914 |
|
|
| 7,021 |
|
|
| 9,593 |
|
|
| 28,252 |
|
|
| 35,757 |
|
Cost of gas sold |
|
| 14,523 |
|
|
| 8,780 |
|
|
| 100,638 |
|
|
| 57,728 |
|
|
| 5,160 |
|
|
| 14,523 |
|
|
| 80,296 |
|
|
| 100,638 |
|
Other operations and maintenance |
|
| 49,194 |
|
|
| 48,494 |
|
|
| 150,714 |
|
|
| 144,563 |
|
|
| 53,997 |
|
|
| 49,194 |
|
|
| 156,004 |
|
|
| 150,714 |
|
Depreciation and amortization |
|
| 21,447 |
|
|
| 18,991 |
|
|
| 63,780 |
|
|
| 55,968 |
|
|
| 25,241 |
|
|
| 21,447 |
|
|
| 74,971 |
|
|
| 63,780 |
|
Other general taxes |
|
| 5,111 |
|
|
| 4,878 |
|
|
| 15,579 |
|
|
| 14,730 |
|
|
| 5,605 |
|
|
| 5,111 |
|
|
| 16,922 |
|
|
| 15,579 |
|
Total Operating Expenses |
|
| 120,913 |
|
|
| 108,275 |
|
|
| 414,878 |
|
|
| 344,473 |
|
|
| 116,736 |
|
|
| 120,913 |
|
|
| 403,563 |
|
|
| 414,878 |
|
Operating Income |
|
| 42,487 |
|
|
| 37,598 |
|
|
| 109,808 |
|
|
| 100,045 |
|
|
| 43,792 |
|
|
| 42,487 |
|
|
| 122,216 |
|
|
| 109,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other income, net |
|
| 6,068 |
|
|
| 6,164 |
|
|
| 20,736 |
|
|
| 14,353 |
|
|
| 10,549 |
|
|
| 6,068 |
|
|
| 20,841 |
|
|
| 20,736 |
|
Interest expense, net |
|
| (6,652 | ) |
|
| (6,079 | ) |
|
| (19,686 | ) |
|
| (17,591 | ) |
|
| (7,654 | ) |
|
| (6,652 | ) |
|
| (22,901 | ) |
|
| (19,686 | ) |
Income before income taxes |
|
| 41,903 |
|
|
| 37,683 |
|
|
| 110,858 |
|
|
| 96,807 |
|
|
| 46,687 |
|
|
| 41,903 |
|
|
| 120,156 |
|
|
| 110,858 |
|
Income tax provision |
|
| (8,183 | ) |
|
| (2,766 | ) |
|
| (20,957 | ) |
|
| (4,106 | ) |
|
| (8,830 | ) |
|
| (8,183 | ) |
|
| (22,540 | ) |
|
| (20,957 | ) |
Net Income |
| $ | 33,720 |
|
| $ | 34,917 |
|
| $ | 89,901 |
|
| $ | 92,701 |
|
| $ | 37,857 |
|
| $ | 33,720 |
|
| $ | 97,616 |
|
| $ | 89,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Earnings Per Share of Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
| $ | 0.93 |
|
| $ | 0.97 |
|
| $ | 2.49 |
|
| $ | 2.56 |
|
| $ | 1.05 |
|
| $ | 0.93 |
|
| $ | 2.70 |
|
| $ | 2.49 |
|
Diluted |
| $ | 0.93 |
|
| $ | 0.97 |
|
| $ | 2.49 |
|
| $ | 2.56 |
|
| $ | 1.05 |
|
| $ | 0.93 |
|
| $ | 2.70 |
|
| $ | 2.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Dividends per share of common stock |
| $ | 0.408 |
|
| $ | 0.388 |
|
| $ | 1.183 |
|
| $ | 1.128 |
|
| $ | 0.428 |
|
| $ | 0.408 |
|
| $ | 1.243 |
|
| $ | 1.183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted Average Shares Outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basic |
|
| 36,163 |
|
|
| 36,163 |
|
|
| 36,163 |
|
|
| 36,163 |
|
|
| 36,163 |
|
|
| 36,163 |
|
|
| 36,163 |
|
|
| 36,163 |
|
Diluted |
|
| 36,176 |
|
|
| 36,170 |
|
|
| 36,174 |
|
|
| 36,176 |
|
|
| 36,189 |
|
|
| 36,176 |
|
|
| 36,185 |
|
|
| 36,174 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
6
MGE Energy, Inc.
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Operating Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 89,901 |
|
| $ | 92,701 |
|
| $ | 97,616 |
|
| $ | 89,901 |
|
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 63,780 |
|
|
| 55,968 |
|
|
| 74,971 |
|
|
| 63,780 |
|
Deferred income taxes |
|
| 18,021 |
|
|
| 1,955 |
|
|
| 16,326 |
|
|
| 18,021 |
|
Provision for doubtful receivables |
|
| 1,323 |
|
|
| 1,163 |
|
|
| 1,323 |
|
|
| 1,323 |
|
Employee benefit plan cost (credit) |
|
| (6,087 | ) |
|
| (935 | ) |
|
| (2,976 | ) |
|
| (6,087 | ) |
Equity earnings in investments |
|
| (6,626 | ) |
|
| (7,440 | ) |
|
| (7,930 | ) |
|
| (6,626 | ) |
Other items |
|
| (2,821 | ) |
|
| (618 | ) |
|
| (2,502 | ) |
|
| (2,821 | ) |
Changes in working capital items: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Increase in current assets |
|
| (5,992 | ) |
|
| (11,240 | ) | ||||||||
(Decrease) increase in current liabilities |
|
| (5,831 | ) |
|
| 4,429 |
| ||||||||
Decrease (increase) in current assets |
|
| 33,976 |
|
|
| (5,992 | ) | ||||||||
(Decrease) increase in accounts payable |
|
| (16,586 | ) |
|
| 66 |
| ||||||||
Decrease in other current liabilities |
|
| (3,714 | ) |
|
| (5,897 | ) | ||||||||
Dividends from investments |
|
| 5,964 |
|
|
| 5,842 |
|
|
| 6,305 |
|
|
| 5,964 |
|
Cash contributions to pension and other postretirement plans |
|
| (5,095 | ) |
|
| (4,823 | ) |
|
| (5,290 | ) |
|
| (5,095 | ) |
Other noncurrent items, net |
|
| (2,255 | ) |
|
| 4,295 |
|
|
| 2,519 |
|
|
| (2,255 | ) |
Cash Provided by Operating Activities |
|
| 144,282 |
|
|
| 141,297 |
|
|
| 194,038 |
|
|
| 144,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Capital expenditures |
|
| (133,409 | ) |
|
| (114,142 | ) |
|
| (150,298 | ) |
|
| (133,409 | ) |
Capital contributions to investments |
|
| (3,938 | ) |
|
| (4,227 | ) |
|
| (5,986 | ) |
|
| (3,938 | ) |
Other |
|
| 128 |
|
|
| 22 |
|
|
| (206 | ) |
|
| 128 |
|
Cash Used for Investing Activities |
|
| (137,219 | ) |
|
| (118,347 | ) |
|
| (156,490 | ) |
|
| (137,219 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Financing Activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash dividends paid on common stock |
|
| (42,763 | ) |
|
| (40,774 | ) |
|
| (44,933 | ) |
|
| (42,763 | ) |
Repayments of long-term debt |
|
| (3,655 | ) |
|
| (3,567 | ) |
|
| (53,048 | ) |
|
| (3,655 | ) |
Issuance of long-term debt |
|
| — |
|
|
| 100,000 |
|
|
| 109,300 |
|
|
| — |
|
Proceeds from (repayments of) short-term debt |
|
| 34,500 |
|
|
| (52,500 | ) | ||||||||
(Repayments of) proceeds from short-term debt |
|
| (48,500 | ) |
|
| 34,500 |
| ||||||||
Other |
|
| (745 | ) |
|
| (1,503 | ) |
|
| (2,128 | ) |
|
| (745 | ) |
Cash (Used for) Provided by Financing Activities |
|
| (12,663 | ) |
|
| 1,656 |
| ||||||||
Cash Used for Financing Activities |
|
| (39,309 | ) |
|
| (12,663 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Change in cash, cash equivalents, and restricted cash |
|
| (5,600 | ) |
|
| 24,606 |
|
|
| (1,761 | ) |
|
| (5,600 | ) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 18,835 |
|
|
| 47,039 |
|
|
| 17,968 |
|
|
| 18,835 |
|
Cash, cash equivalents, and restricted cash at end of period |
| $ | 13,235 |
|
| $ | 71,645 |
|
| $ | 16,207 |
|
| $ | 13,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Significant noncash investing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accrued capital expenditures |
| $ | 11,218 |
|
| $ | 8,213 |
|
| $ | 17,716 |
|
| $ | 11,218 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
7
MGE Energy, Inc.
Consolidated Balance Sheets (unaudited)
(In thousands)
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
ASSETS |
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Current Assets: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
| $ | 10,615 |
|
| $ | 17,438 |
|
| $ | 11,269 |
|
| $ | 11,604 |
|
Accounts receivable, less reserves of $7,633 and $6,940, respectively |
|
| 44,460 |
|
|
| 46,205 |
| ||||||||
Other accounts receivable, less reserves of $1,069 and $1,364, respectively |
|
| 13,863 |
|
|
| 16,094 |
| ||||||||
Accounts receivable, less reserves of $6,082 and $7,050, respectively |
|
| 43,819 |
|
|
| 55,407 |
| ||||||||
Other accounts receivable, less reserves of $1,490 and $1,323, respectively |
|
| 17,270 |
|
|
| 11,418 |
| ||||||||
Unbilled revenues |
|
| 22,975 |
|
|
| 34,812 |
|
|
| 24,687 |
|
|
| 43,086 |
|
Materials and supplies, at average cost |
|
| 32,208 |
|
|
| 29,863 |
|
|
| 35,329 |
|
|
| 33,465 |
|
Fuel for electric generation, at average cost |
|
| 7,021 |
|
|
| 6,429 |
|
|
| 9,492 |
|
|
| 7,962 |
|
Stored natural gas, at average cost |
|
| 36,167 |
|
|
| 15,668 |
|
|
| 27,595 |
|
|
| 32,848 |
|
Prepaid taxes |
|
| 13,106 |
|
|
| 20,214 |
|
|
| 13,856 |
|
|
| 19,132 |
|
Regulatory assets - current |
|
| 3,685 |
|
|
| 1,465 |
|
|
| 18,308 |
|
|
| 9,541 |
|
Other current assets |
|
| 15,747 |
|
|
| 11,183 |
|
|
| 14,786 |
|
|
| 19,017 |
|
Total Current Assets |
|
| 199,847 |
|
|
| 199,371 |
|
|
| 216,411 |
|
|
| 243,480 |
|
Other long-term receivables |
|
| 574 |
|
|
| 1,155 |
| ||||||||
Regulatory assets |
|
| 110,807 |
|
|
| 107,547 |
|
|
| 96,764 |
|
|
| 103,900 |
|
Pension benefit asset |
|
| 71,104 |
|
|
| 58,757 |
|
|
| 74,087 |
|
|
| 68,872 |
|
Other deferred assets and other |
|
| 24,888 |
|
|
| 27,548 |
|
|
| 21,485 |
|
|
| 24,365 |
|
Property, Plant, and Equipment: |
|
|
|
|
|
|
|
|
|
| ||||||
Property, plant, and equipment, net |
|
| 1,848,053 |
|
|
| 1,828,171 |
|
|
| 1,902,032 |
|
|
| 1,865,352 |
|
Construction work in progress |
|
| 106,451 |
|
|
| 50,603 |
|
|
| 168,504 |
|
|
| 105,748 |
|
Total Property, Plant, and Equipment |
|
| 1,954,504 |
|
|
| 1,878,774 |
|
|
| 2,070,536 |
|
|
| 1,971,100 |
|
Investments |
|
| 103,962 |
|
|
| 98,754 |
|
|
| 111,249 |
|
|
| 105,883 |
|
Total Assets |
| $ | 2,465,686 |
|
| $ | 2,371,906 |
|
| $ | 2,590,532 |
|
| $ | 2,517,600 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIABILITIES AND CAPITALIZATION |
|
|
|
|
|
|
|
|
|
| ||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt due within one year |
| $ | 54,282 |
|
| $ | 4,889 |
|
| $ | 5,112 |
|
| $ | 54,314 |
|
Short-term debt |
|
| 40,000 |
|
|
| 5,500 |
|
|
| 22,000 |
|
|
| 70,500 |
|
Accounts payable |
|
| 60,227 |
|
|
| 64,149 |
|
|
| 53,593 |
|
|
| 59,334 |
|
Accrued interest and taxes |
|
| 7,819 |
|
|
| 10,385 |
|
|
| 7,368 |
|
|
| 7,868 |
|
Accrued payroll related items |
|
| 10,464 |
|
|
| 12,951 |
|
|
| 13,155 |
|
|
| 13,064 |
|
Regulatory liabilities - current |
|
| 14,611 |
|
|
| 9,365 |
|
|
| 13,462 |
|
|
| 11,925 |
|
Derivative liabilities |
|
| — |
|
|
| 2,140 |
| ||||||||
Other current liabilities |
|
| 7,390 |
|
|
| 8,468 |
|
|
| 8,148 |
|
|
| 8,057 |
|
Total Current Liabilities |
|
| 194,793 |
|
|
| 117,847 |
|
|
| 122,838 |
|
|
| 225,062 |
|
Other Credits: |
|
|
|
|
|
|
|
|
|
| ||||||
Deferred income taxes |
|
| 245,584 |
|
|
| 231,149 |
|
|
| 271,453 |
|
|
| 252,190 |
|
Investment tax credit - deferred |
|
| 49,242 |
|
|
| 44,836 |
|
|
| 47,369 |
|
|
| 48,735 |
|
Regulatory liabilities |
|
| 155,260 |
|
|
| 154,298 |
|
|
| 155,026 |
|
|
| 156,988 |
|
Accrued pension and other postretirement benefits |
|
| 72,001 |
|
|
| 73,085 |
|
|
| 54,531 |
|
|
| 53,607 |
|
Finance lease liabilities |
|
| 17,189 |
|
|
| 17,322 |
|
|
| 17,932 |
|
|
| 17,108 |
|
Other deferred liabilities and other |
|
| 94,851 |
|
|
| 91,690 |
|
|
| 96,102 |
|
|
| 96,990 |
|
Total Other Credits |
|
| 634,127 |
|
|
| 612,380 |
|
|
| 642,413 |
|
|
| 625,618 |
|
Capitalization: |
|
|
|
|
|
|
|
|
|
| ||||||
Common shareholders' equity |
|
| 1,075,200 |
|
|
| 1,027,468 |
|
|
| 1,135,253 |
|
|
| 1,081,674 |
|
Long-term debt |
|
| 561,566 |
|
|
| 614,211 |
|
|
| 690,028 |
|
|
| 585,246 |
|
Total Capitalization |
|
| 1,636,766 |
|
|
| 1,641,679 |
|
|
| 1,825,281 |
|
|
| 1,666,920 |
|
Commitments and contingencies (see Footnote 8) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Liabilities and Capitalization |
| $ | 2,465,686 |
|
| $ | 2,371,906 |
|
| $ | 2,590,532 |
|
| $ | 2,517,600 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
8
MGE Energy, Inc.
Consolidated Statements of Common Equity (unaudited)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
|
|
| |||||||||||||
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
|
|
| |||||||||||||||||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Income/(Loss) |
|
| Total |
| |||||||||||||||||||||||||||||||
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Beginning Balance |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 394,686 |
|
| $ | 576,452 |
|
| $ | — |
|
| $ | 1,007,301 |
| |||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
| 34,917 |
|
|
|
|
|
| 34,917 |
| |||||||||||||||||||||||||||||
Common stock dividends declared |
|
|
|
|
|
|
|
|
|
|
| (14,013 | ) |
|
|
|
|
| (14,013 | ) | |||||||||||||||||||||||||||||
Equity-based compensation plans and other |
|
|
|
|
|
|
|
| 80 |
|
|
|
|
|
|
|
|
| 80 |
| |||||||||||||||||||||||||||||
Ending Balance - September 30, 2021 |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 394,766 |
|
| $ | 597,356 |
|
| $ | — |
|
| $ | 1,028,285 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Income/(Loss) |
|
| Total |
| |||||||||||||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Beginning Balance |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,338 |
|
| $ | 624,556 |
|
| $ | — |
|
| $ | 1,056,057 |
|
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,338 |
|
| $ | 624,556 |
|
| $ | — |
|
| $ | 1,056,057 |
| |
Net income |
|
|
|
|
|
|
|
|
|
|
| 33,720 |
|
|
|
|
|
| 33,720 |
|
|
|
|
|
|
|
|
|
|
|
| 33,720 |
|
|
|
|
|
| 33,720 |
| |||||||||
Common stock dividends declared |
|
|
|
|
|
|
|
|
|
|
| (14,736 | ) |
|
|
|
|
| (14,736 | ) |
|
|
|
|
|
|
|
|
|
|
| (14,736 | ) |
|
|
|
|
| (14,736 | ) | |||||||||
Equity-based compensation plans and other |
|
|
|
|
|
|
|
| 159 |
|
|
|
|
|
|
|
|
| 159 |
|
|
|
|
|
|
|
|
| 159 |
|
|
|
|
|
|
|
|
| 159 |
| |||||||||
Ending Balance - September 30, 2022 |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,497 |
|
| $ | 643,540 |
|
| $ | — |
|
| $ | 1,075,200 |
|
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,497 |
|
| $ | 643,540 |
|
| $ | — |
|
| $ | 1,075,200 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Beginning Balance |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 394,408 |
|
| $ | 545,429 |
|
| $ | — |
|
| $ | 976,000 |
|
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 396,281 |
|
| $ | 680,140 |
|
| $ | — |
|
| $ | 1,112,584 |
| |
Net income |
|
|
|
|
|
|
|
|
|
|
| 92,701 |
|
|
|
|
|
| 92,701 |
|
|
|
|
|
|
|
|
|
|
|
| 37,857 |
|
|
|
|
|
| 37,857 |
| |||||||||
Common stock dividends declared |
|
|
|
|
|
|
|
|
|
|
| (40,774 | ) |
|
|
|
|
| (40,774 | ) | |||||||||||||||||||||||||||||
Common stock dividends declared |
|
|
|
|
|
|
|
|
|
|
| (15,460 | ) |
|
|
|
|
| (15,460 | ) | |||||||||||||||||||||||||||||
Equity-based compensation plans and other |
|
|
|
|
|
|
|
| 358 |
|
|
|
|
|
|
|
|
| 358 |
|
|
|
|
|
|
|
|
| 272 |
|
|
|
|
|
|
|
|
| 272 |
| |||||||||
Ending Balance - September 30, 2021 |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 394,766 |
|
| $ | 597,356 |
|
| $ | — |
|
| $ | 1,028,285 |
| |||||||||||||||||||||||||
Ending Balance - September 30, 2023 |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 396,553 |
|
| $ | 702,537 |
|
| $ | — |
|
| $ | 1,135,253 |
| |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Beginning Balance |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 394,903 |
|
| $ | 596,402 |
|
| $ | — |
|
| $ | 1,027,468 |
|
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 394,903 |
|
| $ | 596,402 |
|
| $ | — |
|
| $ | 1,027,468 |
| |
Net income |
|
|
|
|
|
|
|
|
|
|
| 89,901 |
|
|
|
|
|
| 89,901 |
|
|
|
|
|
|
|
|
|
|
|
| 89,901 |
|
|
|
|
|
| 89,901 |
| |||||||||
Common stock dividends declared |
|
|
|
|
|
|
|
|
|
|
| (42,763 | ) |
|
|
|
|
| (42,763 | ) |
|
|
|
|
|
|
|
|
|
|
| (42,763 | ) |
|
|
|
|
| (42,763 | ) | |||||||||
Equity-based compensation plans and other |
|
|
|
|
|
|
|
| 594 |
|
|
|
|
|
|
|
|
| 594 |
|
|
|
|
|
|
|
|
| 594 |
|
|
|
|
|
|
|
|
| 594 |
| |||||||||
Ending Balance - September 30, 2022 |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,497 |
|
| $ | 643,540 |
|
| $ | — |
|
| $ | 1,075,200 |
|
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,497 |
|
| $ | 643,540 |
|
| $ | — |
|
| $ | 1,075,200 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Beginning Balance |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 395,657 |
|
| $ | 649,854 |
|
| $ | — |
|
| $ | 1,081,674 |
| |||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
| 97,616 |
|
|
|
|
|
| 97,616 |
| |||||||||||||||||||||||||||||
Common stock dividends declared |
|
|
|
|
|
|
|
|
|
|
| (44,933 | ) |
|
|
|
|
| (44,933 | ) | |||||||||||||||||||||||||||||
Equity-based compensation plans and other |
|
|
|
|
|
|
|
| 896 |
|
|
|
|
|
|
|
|
| 896 |
| |||||||||||||||||||||||||||||
Ending Balance - September 30, 2023 |
|
| 36,163 |
|
| $ | 36,163 |
|
| $ | 396,553 |
|
| $ | 702,537 |
|
| $ | — |
|
| $ | 1,135,253 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
9
Madison Gas and Electric Company
Consolidated Statements of Income (unaudited)
(In thousands)
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Electric revenues |
| $ | 133,090 |
|
| $ | 121,853 |
|
| $ | 355,381 |
|
| $ | 324,574 |
|
| $ | 139,104 |
|
| $ | 133,090 |
|
| $ | 378,102 |
|
| $ | 355,381 |
|
Gas revenues |
|
| 30,310 |
|
|
| 24,020 |
|
|
| 169,305 |
|
|
| 119,944 |
|
|
| 21,424 |
|
|
| 30,310 |
|
|
| 147,677 |
|
|
| 169,305 |
|
Total Operating Revenues |
|
| 163,400 |
|
|
| 145,873 |
|
|
| 524,686 |
|
|
| 444,518 |
|
|
| 160,528 |
|
|
| 163,400 |
|
|
| 525,779 |
|
|
| 524,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Fuel for electric generation |
|
| 21,045 |
|
|
| 18,486 |
|
|
| 48,410 |
|
|
| 42,570 |
|
|
| 19,712 |
|
|
| 21,045 |
|
|
| 47,118 |
|
|
| 48,410 |
|
Purchased power |
|
| 9,593 |
|
|
| 8,646 |
|
|
| 35,757 |
|
|
| 28,914 |
|
|
| 7,021 |
|
|
| 9,593 |
|
|
| 28,252 |
|
|
| 35,757 |
|
Cost of gas sold |
|
| 14,523 |
|
|
| 8,780 |
|
|
| 100,638 |
|
|
| 57,728 |
|
|
| 5,160 |
|
|
| 14,523 |
|
|
| 80,296 |
|
|
| 100,638 |
|
Other operations and maintenance |
|
| 48,989 |
|
|
| 48,315 |
|
|
| 150,024 |
|
|
| 143,978 |
|
|
| 53,847 |
|
|
| 48,989 |
|
|
| 155,251 |
|
|
| 150,024 |
|
Depreciation and amortization |
|
| 21,447 |
|
|
| 18,991 |
|
|
| 63,780 |
|
|
| 55,968 |
|
|
| 25,241 |
|
|
| 21,447 |
|
|
| 74,971 |
|
|
| 63,780 |
|
Other general taxes |
|
| 5,106 |
|
|
| 4,878 |
|
|
| 15,573 |
|
|
| 14,730 |
|
|
| 5,605 |
|
|
| 5,106 |
|
|
| 16,922 |
|
|
| 15,573 |
|
Total Operating Expenses |
|
| 120,703 |
|
|
| 108,096 |
|
|
| 414,182 |
|
|
| 343,888 |
|
|
| 116,586 |
|
|
| 120,703 |
|
|
| 402,810 |
|
|
| 414,182 |
|
Operating Income |
|
| 42,697 |
|
|
| 37,777 |
|
|
| 110,504 |
|
|
| 100,630 |
|
|
| 43,942 |
|
|
| 42,697 |
|
|
| 122,969 |
|
|
| 110,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other income, net |
|
| 4,430 |
|
|
| 3,306 |
|
|
| 12,467 |
|
|
| 6,375 |
|
|
| 7,824 |
|
|
| 4,430 |
|
|
| 13,985 |
|
|
| 12,467 |
|
Interest expense, net |
|
| (6,662 | ) |
|
| (6,089 | ) |
|
| (19,709 | ) |
|
| (17,623 | ) |
|
| (7,721 | ) |
|
| (6,662 | ) |
|
| (23,056 | ) |
|
| (19,709 | ) |
Income before income taxes |
|
| 40,465 |
|
|
| 34,994 |
|
|
| 103,262 |
|
|
| 89,382 |
|
|
| 44,045 |
|
|
| 40,465 |
|
|
| 113,898 |
|
|
| 103,262 |
|
Income tax provision |
|
| (7,664 | ) |
|
| (1,993 | ) |
|
| (18,781 | ) |
|
| (1,853 | ) |
|
| (8,093 | ) |
|
| (7,664 | ) |
|
| (20,696 | ) |
|
| (18,781 | ) |
Net Income |
| $ | 32,801 |
|
| $ | 33,001 |
|
| $ | 84,481 |
|
| $ | 87,529 |
|
| $ | 35,952 |
|
| $ | 32,801 |
|
| $ | 93,202 |
|
| $ | 84,481 |
|
Less: Net Income Attributable to Noncontrolling |
|
| (5,603 | ) |
|
| (5,627 | ) |
|
| (15,947 | ) |
|
| (16,755 | ) |
|
| (5,487 | ) |
|
| (5,603 | ) |
|
| (16,382 | ) |
|
| (15,947 | ) |
Net Income Attributable to MGE |
| $ | 27,198 |
|
| $ | 27,374 |
|
| $ | 68,534 |
|
| $ | 70,774 |
|
| $ | 30,465 |
|
| $ | 27,198 |
|
| $ | 76,820 |
|
| $ | 68,534 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
10
Madison Gas and Electric Company
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Operating Activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 84,481 |
|
| $ | 87,529 |
|
| $ | 93,202 |
| $ | 84,481 |
| |
Items not affecting cash: |
|
|
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
|
| 63,780 |
|
|
| 55,968 |
|
|
| 74,971 |
|
|
| 63,780 |
|
Deferred income taxes |
|
| 17,706 |
|
|
| 1,375 |
|
|
| 15,218 |
|
|
| 17,706 |
|
Provision for doubtful receivables |
|
| 1,323 |
|
|
| 1,163 |
|
|
| 1,323 |
|
|
| 1,323 |
|
Employee benefit plan cost (credit) |
|
| (6,087 | ) |
|
| (935 | ) |
|
| (2,976 | ) |
|
| (6,087 | ) |
Other items |
|
| (636 | ) |
|
| 864 |
|
|
| (2,604 | ) |
|
| (636 | ) |
Changes in working capital items: |
|
|
|
|
|
|
|
|
|
| ||||||
Increase in current assets |
|
| (7,238 | ) |
|
| (11,777 | ) | ||||||||
(Decrease) increase in current liabilities |
|
| (3,642 | ) |
|
| 2,528 |
| ||||||||
Decrease (increase) in current assets |
|
| 33,076 |
|
|
| (7,238 | ) | ||||||||
(Decrease) increase in accounts payable |
|
| (16,583 | ) |
|
| 64 |
| ||||||||
Decrease in other current liabilities |
|
| (1,809 | ) |
|
| (3,706 | ) | ||||||||
Cash contributions to pension and other postretirement plans |
|
| (5,095 | ) |
|
| (4,823 | ) |
|
| (5,290 | ) |
|
| (5,095 | ) |
Other noncurrent items, net |
|
| (2,806 | ) |
|
| 3,559 |
|
|
| 1,840 |
|
|
| (2,806 | ) |
Cash Provided by Operating Activities |
|
| 141,786 |
|
|
| 135,451 |
|
|
| 190,368 |
|
|
| 141,786 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Investing Activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Capital expenditures |
|
| (133,409 | ) |
|
| (114,142 | ) |
|
| (150,298 | ) |
|
| (133,409 | ) |
Other |
|
| (680 | ) |
|
| (1,449 | ) |
|
| (1,338 | ) |
|
| (680 | ) |
Cash Used for Investing Activities |
|
| (134,089 | ) |
|
| (115,591 | ) |
|
| (151,636 | ) |
|
| (134,089 | ) |
|
|
|
|
|
|
|
|
|
|
| ||||||
Financing Activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash dividends paid to parent by MGE |
|
| (21,000 | ) |
|
| — |
|
|
| (30,000 | ) |
|
| (21,000 | ) |
Distributions to parent from noncontrolling interest |
|
| (17,500 | ) |
|
| (10,500 | ) |
|
| (17,250 | ) |
|
| (17,500 | ) |
Repayments of long-term debt |
|
| (3,655 | ) |
|
| (3,567 | ) |
|
| (53,048 | ) |
|
| (3,655 | ) |
Issuance of long-term debt |
|
| — |
|
|
| 100,000 |
|
|
| 109,300 |
|
|
| — |
|
Proceeds from (repayments of) short-term debt |
|
| 34,500 |
|
|
| (52,500 | ) | ||||||||
(Repayments of) proceeds from short-term debt |
|
| (48,500 | ) |
|
| 34,500 |
| ||||||||
Other |
|
| (745 | ) |
|
| (1,503 | ) |
|
| (2,128 | ) |
|
| (745 | ) |
Cash (Used for) Provided by Financing Activities |
|
| (8,400 | ) |
|
| 31,930 |
| ||||||||
Cash Used for Financing Activities |
|
| (41,626 | ) |
|
| (8,400 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||
Change in cash, cash equivalents, and restricted cash |
|
| (703 | ) |
|
| 51,790 |
|
|
| (2,894 | ) |
|
| (703 | ) |
Cash, cash equivalents, and restricted cash at beginning of period |
|
| 7,798 |
|
|
| 6,404 |
|
|
| 10,500 |
|
|
| 7,798 |
|
Cash, cash equivalents, and restricted cash at end of period |
| $ | 7,095 |
|
| $ | 58,194 |
|
| $ | 7,606 |
| $ | 7,095 |
| |
|
|
|
|
|
|
|
|
|
|
| ||||||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
| ||||||
Significant noncash investing activities: |
|
|
|
|
|
|
|
|
|
| ||||||
Accrued capital expenditures |
| $ | 11,218 |
|
| $ | 8,213 |
|
| $ | 17,716 |
| $ | 11,218 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
11
Madison Gas and Electric Company
Consolidated Balance Sheets (unaudited)
(In thousands)
|
| September 30, |
|
| December 31, |
|
| September 30, |
|
| December 31, |
| ||||
ASSETS |
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Current Assets: |
|
|
|
|
|
|
|
|
|
| ||||||
Cash and cash equivalents |
| $ | 4,475 |
|
| $ | 6,401 |
|
| $ | 2,668 |
|
| $ | 4,136 |
|
Accounts receivable, less reserves of $7,633 and $6,940, respectively |
|
| 44,460 |
|
|
| 46,205 |
| ||||||||
Affiliate receivables |
|
| 542 |
|
|
| 558 |
| ||||||||
Other accounts receivable, less reserves of $1,069 and $1,364, respectively |
|
| 13,862 |
|
|
| 16,092 |
| ||||||||
Accounts receivable, less reserves of $6,082 and $7,050, respectively |
|
| 43,819 |
|
|
| 55,407 |
| ||||||||
Other accounts receivable, less reserves of $1,490 and $1,323, respectively |
|
| 17,268 |
|
|
| 11,416 |
| ||||||||
Unbilled revenues |
|
| 22,975 |
|
|
| 34,812 |
|
|
| 24,687 |
|
|
| 43,086 |
|
Materials and supplies, at average cost |
|
| 32,208 |
|
|
| 29,863 |
|
|
| 35,329 |
|
|
| 33,465 |
|
Fuel for electric generation, at average cost |
|
| 7,021 |
|
|
| 6,429 |
|
|
| 9,492 |
|
|
| 7,962 |
|
Stored natural gas, at average cost |
|
| 36,167 |
|
|
| 15,668 |
|
|
| 27,595 |
|
|
| 32,848 |
|
Prepaid taxes |
|
| 13,488 |
|
|
| 19,379 |
|
|
| 14,055 |
|
|
| 18,467 |
|
Regulatory assets - current |
|
| 3,685 |
|
|
| 1,465 |
|
|
| 18,308 |
|
|
| 9,541 |
|
Other current assets |
|
| 15,679 |
|
|
| 11,071 |
|
|
| 15,284 |
|
|
| 19,479 |
|
Total Current Assets |
|
| 194,562 |
|
|
| 187,943 |
|
|
| 208,505 |
|
|
| 235,807 |
|
Affiliate receivable long-term |
|
| 1,191 |
|
|
| 1,589 |
| ||||||||
Regulatory assets |
|
| 110,807 |
|
|
| 107,547 |
|
|
| 96,764 |
|
|
| 103,900 |
|
Pension benefit asset |
|
| 71,104 |
|
|
| 58,757 |
|
|
| 74,087 |
|
|
| 68,872 |
|
Other deferred assets and other |
|
| 24,995 |
|
|
| 27,907 |
|
|
| 21,611 |
|
|
| 24,817 |
|
Property, Plant, and Equipment: |
|
|
|
|
|
|
|
|
|
| ||||||
Property, plant, and equipment, net |
|
| 1,848,081 |
|
|
| 1,828,199 |
|
|
| 1,902,060 |
|
|
| 1,865,380 |
|
Construction work in progress |
|
| 106,451 |
|
|
| 50,603 |
|
|
| 168,504 |
|
|
| 105,748 |
|
Total Property, Plant, and Equipment |
|
| 1,954,532 |
|
|
| 1,878,802 |
|
|
| 2,070,564 |
|
|
| 1,971,128 |
|
Investments |
|
| 99 |
|
|
| 230 |
|
|
| 83 |
|
|
| 115 |
|
Total Assets |
| $ | 2,357,290 |
|
| $ | 2,262,775 |
|
| $ | 2,471,614 |
|
| $ | 2,404,639 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||
LIABILITIES AND CAPITALIZATION |
|
|
|
|
|
|
|
|
|
| ||||||
Current Liabilities: |
|
|
|
|
|
|
|
|
|
| ||||||
Long-term debt due within one year |
| $ | 54,282 |
|
| $ | 4,889 |
|
| $ | 5,112 |
|
| $ | 54,314 |
|
Short-term debt |
|
| 40,000 |
|
|
| 5,500 |
|
|
| 22,000 |
|
|
| 70,500 |
|
Accounts payable |
|
| 60,206 |
|
|
| 64,130 |
|
|
| 53,578 |
|
|
| 59,317 |
|
Accrued interest and taxes |
|
| 7,774 |
|
|
| 10,649 |
|
|
| 7,323 |
|
|
| 7,912 |
|
Accrued payroll related items |
|
| 10,464 |
|
|
| 12,951 |
|
|
| 13,155 |
|
|
| 13,064 |
|
Regulatory liabilities - current |
|
| 14,611 |
|
|
| 9,365 |
|
|
| 13,462 |
|
|
| 11,925 |
|
Derivative liabilities |
|
| — |
|
|
| 2,140 |
| ||||||||
Other current liabilities |
|
| 7,389 |
|
|
| 5,968 |
|
|
| 8,148 |
|
|
| 6,062 |
|
Total Current Liabilities |
|
| 194,726 |
|
|
| 115,592 |
|
|
| 122,778 |
|
|
| 223,094 |
|
Other Credits: |
|
|
|
|
|
|
|
|
|
| ||||||
Deferred income taxes |
|
| 213,005 |
|
|
| 198,885 |
|
|
| 237,414 |
|
|
| 219,258 |
|
Investment tax credit - deferred |
|
| 49,242 |
|
|
| 44,836 |
|
|
| 47,369 |
|
|
| 48,735 |
|
Regulatory liabilities |
|
| 155,260 |
|
|
| 154,298 |
|
|
| 155,026 |
|
|
| 156,988 |
|
Accrued pension and other postretirement benefits |
|
| 72,001 |
|
|
| 73,085 |
|
|
| 54,531 |
|
|
| 53,607 |
|
Finance lease liabilities |
|
| 17,189 |
|
|
| 17,322 |
|
|
| 17,932 |
|
|
| 17,108 |
|
Other deferred liabilities and other |
|
| 95,926 |
|
|
| 92,152 |
|
|
| 98,198 |
|
|
| 98,217 |
|
Total Other Credits |
|
| 602,623 |
|
|
| 580,578 |
|
|
| 610,470 |
|
|
| 593,913 |
|
Capitalization: |
|
|
|
|
|
|
|
|
|
| ||||||
Common shareholder's equity |
|
| 851,341 |
|
|
| 803,807 |
|
|
| 901,043 |
|
|
| 854,223 |
|
Noncontrolling interest |
|
| 147,034 |
|
|
| 148,587 |
|
|
| 147,295 |
|
|
| 148,163 |
|
Total Equity |
|
| 998,375 |
|
|
| 952,394 |
|
|
| 1,048,338 |
|
|
| 1,002,386 |
|
Long-term debt |
|
| 561,566 |
|
|
| 614,211 |
|
|
| 690,028 |
|
|
| 585,246 |
|
Total Capitalization |
|
| 1,559,941 |
|
|
| 1,566,605 |
|
|
| 1,738,366 |
|
|
| 1,587,632 |
|
Commitments and contingencies (see Footnote 8) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Liabilities and Capitalization |
| $ | 2,357,290 |
|
| $ | 2,262,775 |
|
| $ | 2,471,614 |
|
| $ | 2,404,639 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
12
Madison Gas and Electric Company
Consolidated Statements of Equity (unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||||||||||
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
| Non- |
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Other |
|
| Non- |
|
|
|
| ||||||||||||||
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
| Controlling |
|
|
|
|
| Common Stock |
|
| Paid-in |
|
| Retained |
|
| Comprehensive |
|
| Controlling |
|
|
|
| ||||||||||||||||||||
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Income/(Loss) |
|
| Interest |
|
| Total |
| |||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Beginning balance |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 503,551 |
|
| $ | — |
|
| $ | 144,824 |
|
| $ | 918,640 |
| ||||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
| 27,374 |
|
|
|
|
|
| 5,627 |
|
|
| 33,001 |
| ||||||||||||||||||||||||||||||||
Distributions to parent from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,000 | ) |
|
| (3,000 | ) | |||||||||||||||||||||||||||||||||
Ending Balance - September 30, 2021 |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 530,925 |
|
| $ | — |
|
| $ | 147,451 |
|
| $ | 948,641 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares |
|
| Value |
|
| Capital |
|
| Earnings |
|
| Income/(Loss) |
|
| Interest |
|
| Total |
| ||||||||||||||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Beginning balance |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 562,878 |
|
| $ | — |
|
| $ | 145,681 |
|
| $ | 978,824 |
|
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 562,878 |
|
| $ | — |
|
| $ | 145,681 |
|
| $ | 978,824 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
| 27,198 |
|
|
|
|
|
| 5,603 |
|
|
| 32,801 |
|
|
|
|
|
|
|
|
|
|
|
| 27,198 |
|
|
|
|
|
| 5,603 |
|
|
| 32,801 |
| ||||||||
Cash dividends paid to parent by MGE |
|
|
|
|
|
|
|
|
|
|
| (9,000 | ) |
|
|
|
|
|
|
|
| (9,000 | ) |
|
|
|
|
|
|
|
|
|
|
| (9,000 | ) |
|
|
|
|
|
|
|
| (9,000 | ) | ||||||||||
Distributions to parent from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,250 | ) |
|
| (4,250 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4,250 | ) |
|
| (4,250 | ) | ||||||||||
Ending Balance - September 30, 2022 |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 581,076 |
|
| $ | — |
|
| $ | 147,034 |
|
| $ | 998,375 |
|
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 581,076 |
|
| $ | — |
|
| $ | 147,034 |
|
| $ | 998,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Beginning balance |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 460,151 |
|
| $ | — |
|
| $ | 141,196 |
|
| $ | 871,612 |
|
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 609,313 |
|
| $ | — |
|
| $ | 148,808 |
|
| $ | 1,028,386 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
| 70,774 |
|
|
|
|
|
| 16,755 |
|
|
| 87,529 |
|
|
|
|
|
|
|
|
|
|
|
| 30,465 |
|
|
|
|
|
| 5,487 |
|
|
| 35,952 |
| ||||||||
Cash dividends paid to parent by MGE |
|
|
|
|
|
|
|
|
|
|
| (9,000 | ) |
|
|
|
|
|
|
|
| (9,000 | ) | |||||||||||||||||||||||||||||||||
Distributions to parent from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,500 | ) |
|
| (10,500 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,000 | ) |
|
| (7,000 | ) | ||||||||||
Ending Balance - September 30, 2021 |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 530,925 |
|
| $ | — |
|
| $ | 147,451 |
|
| $ | 948,641 |
| ||||||||||||||||||||||||||||
Ending Balance - September 30, 2023 |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 630,778 |
|
| $ | — |
|
| $ | 147,295 |
|
| $ | 1,048,338 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Beginning balance |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 533,542 |
|
| $ | — |
|
| $ | 148,587 |
|
| $ | 952,394 |
|
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 533,542 |
|
| $ | — |
|
| $ | 148,587 |
|
| $ | 952,394 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
| 68,534 |
|
|
|
|
|
| 15,947 |
|
|
| 84,481 |
|
|
|
|
|
|
|
|
|
|
|
| 68,534 |
|
|
|
|
|
| 15,947 |
|
|
| 84,481 |
| ||||||||
Cash dividends paid to parent by MGE |
|
|
|
|
|
|
|
|
|
|
| (21,000 | ) |
|
|
|
|
|
|
|
| (21,000 | ) |
|
|
|
|
|
|
|
|
|
|
| (21,000 | ) |
|
|
|
|
|
|
|
| (21,000 | ) | ||||||||||
Distributions to parent from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (17,500 | ) |
|
| (17,500 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (17,500 | ) |
|
| (17,500 | ) | ||||||||||
Ending Balance - September 30, 2022 |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 581,076 |
|
| $ | — |
|
| $ | 147,034 |
|
| $ | 998,375 |
|
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 581,076 |
|
| $ | — |
|
| $ | 147,034 |
|
| $ | 998,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Beginning balance |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 583,958 |
|
| $ | — |
|
| $ | 148,163 |
|
| $ | 1,002,386 |
| ||||||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
|
| 76,820 |
|
|
|
|
|
| 16,382 |
|
|
| 93,202 |
| ||||||||||||||||||||||||||||||||
Cash dividends paid to parent by MGE |
|
|
|
|
|
|
|
|
|
|
| (30,000 | ) |
|
|
|
|
|
|
|
| (30,000 | ) | |||||||||||||||||||||||||||||||||
Distributions to parent from |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (17,250 | ) |
|
| (17,250 | ) | |||||||||||||||||||||||||||||||||
Ending Balance - September 30, 2023 |
|
| 17,348 |
|
| $ | 17,348 |
|
| $ | 252,917 |
|
| $ | 630,778 |
|
| $ | — |
|
| $ | 147,295 |
|
| $ | 1,048,338 |
|
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
13
MGE Energy, Inc., and Madison Gas and Electric Company
Notes to Consolidated Financial Statements (unaudited)
September 30, 20222023
This report is a combined report of MGE Energy and MGE. References in this report to "MGE Energy" are to MGE Energy, Inc. and its subsidiaries. References in this report to "MGE" are to Madison Gas and Electric Company.
MGE Power Elm Road and MGE Power West Campus own electric generating assets and lease those assets to MGE. Both entities are variable interest entities under applicable authoritative accounting guidance. MGE is considered the primary beneficiary of these entities as a result of contractual agreements. As a result, MGE has consolidated MGE Power Elm Road and MGE Power West Campus. See Footnote 3 of Notes to Consolidated Financial Statements under Item 8, Financial Statements and Supplementary Data, of MGE Energy's and MGE's 20212022 Annual Report on Form 10-K (the 20212022 Annual Report on Form 10-K).
The accompanying consolidated financial statements as of September 30, 2022,2023, and during the three and nine months ended, 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 20212022 Annual Report on Form 10-K but does not include all disclosures required by accounting principles generally accepted in the United States of America. These notes should be read in conjunction with the financial statements and the notes on pages 6157 through 115107 of the 20212022 Annual Report on Form 10-K.
The following table presents the components of total cash, cash equivalents, and restricted cash on the consolidated balance sheets.
|
| MGE Energy |
| MGE |
| MGE Energy |
| MGE | ||||||||||||||||
|
| September 30, |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, |
| September 30, |
| December 31, | ||||||||
(In thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Cash and cash equivalents |
| $ | 10,615 |
| $ | 17,438 |
| $ | 4,475 |
| $ | 6,401 |
| $ | 11,269 |
| $ | 11,604 |
| $ | 2,668 |
| $ | 4,136 |
Restricted cash |
| 651 |
|
| 847 |
| 651 |
|
| 847 |
| 645 |
|
| 867 |
| 645 |
|
| 867 | ||||
Receivable - margin account |
|
| 1,969 |
|
| 550 |
|
| 1,969 |
|
| 550 |
|
| 4,293 |
|
| 5,497 |
|
| 4,293 |
|
| 5,497 |
Cash, cash equivalents, and restricted cash |
| $ | 13,235 |
| $ | 18,835 |
| $ | 7,095 |
| $ | 7,798 |
| $ | 16,207 |
| $ | 17,968 |
| $ | 7,606 |
| $ | 10,500 |
Cash Equivalents
All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.
Restricted Cash
MGE has certain cash accounts that are restricted to uses other than current operations and designated for a specific purpose. MGE's restricted cash accounts include cash held by trustees for certain employee benefits and cash deposits held by third parties. These are included in "Other current assets" on the consolidated balance sheets.
Receivable – Margin Account
Cash amounts held by counterparties as margin collateral for certain financial transactions are recorded as Receivable – margin account in "Other current assets" on the consolidated balance sheets. The costs being hedged are fuel for electric generation, purchased power, and cost of gas sold.
14
Columbia.
An asset that will be retired in the near future and substantially in advance of its previously expected retirement date is subject to abandonment accounting. In the second quarter of 2021, the operator of Columbia received approval from MISO to retire Columbia Units 1 and 2. The co-owners initially intendedintend to retire Unit 1 by the end of 2023 and Unit 2 by the end of 2024. In June 2022, the target retirement date for both Units was updated to June 2026 after consideration by the owners of supply chain disruptions impacting the completion dates of current and planned renewable generation projects and the impact of those delays upon energy supply availability, reliability and cost. The postponement is not expected to affect MGE's goal to achieve 80% carbon reduction by 2030.2026. Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors. As of September 30, 2022,2023, early retirement of Columbia was probable.
The net book value of our ownership share of this generating unit was $150.9133.0 million as of September 30, 2022.2023. This amount was classified as plant to be retired within "Property, plant, and equipment, net" on the consolidated balance sheets. Assets for Columbia Unit 1 and Unit 2 are currently included in rate base, and MGE continues to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW that includedinclude retirement dates of 2029 for Unit 1 and 2038 for Unit 2. MGE is currently seeking approval from the PSCW in its 2023 electric rate case limited reopener to revise the depreciation schedule for Columbia Unit 2 to 2029 to align with Unit 1. See Footnote 9 for further details on MGE's rate proceedings.both Units.
If it becomes probable that regulators will disallow full recovery or a return on the remaining net book value of a generating unit that is either abandoned or probable of being abandoned, an impairment loss would be required. An impairment loss would be recorded to the extent that the remaining net book value of the generating unit exceeds the present value of the amount expected to be recovered from ratepayers. No impairment was recorded as of September 30, 2022.2023.
MGE Energy and MGE reviewed FASB authoritative guidance recently issued, none of which are expected to have a material impact on their consolidated results of operations, financial condition, or cash flows.
ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC as required by Wisconsin law. That interest is presently held by MGE Transco, a subsidiary of MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a subsidiary of MGE Energy.
MGE Transco and MGEE Transco have accounted for their investments in ATC and ATC Holdco, respectively, under the equity method of accounting. Equity earnings from investments are recorded as "Other income" on the consolidated statements of income of MGE Energy. MGE Transco recorded the following amounts related to its investment in ATC:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Equity earnings from investment in ATC |
| $ | 1,473 |
|
| $ | 2,500 |
|
| $ | 6,543 |
|
| $ | 7,333 |
|
| $ | 2,662 |
|
| $ | 1,473 |
|
| $ | 7,844 |
|
| $ | 6,543 |
|
Dividends received from ATC |
|
| 2,005 |
|
|
| 1,942 |
|
|
| 5,964 |
|
|
| 5,842 |
|
|
| 2,057 |
|
|
| 2,005 |
|
|
| 6,305 |
|
|
| 5,964 |
|
Capital contributions to ATC |
|
| 536 |
|
|
| — |
|
|
| 2,319 |
|
|
| — |
|
|
| 1,075 |
|
|
| 536 |
|
|
| 3,033 |
|
|
| 2,319 |
|
ATC Holdco was formed in December 2016. ATC Holdco's transmission development activities have been suspended for the near term.
15
In October 2022,2023, MGE Transco made a $0.40.7 million capital contribution to ATC.
15
ATC's summarized financial data is as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Operating revenues |
| $ | 169,779 |
|
| $ | 186,785 |
|
| $ | 552,383 |
|
| $ | 561,379 |
|
| $ | 206,197 |
|
| $ | 169,779 |
|
| $ | 610,399 |
|
| $ | 552,383 |
|
Operating expenses |
|
| (97,629 | ) |
|
| (91,340 | ) |
|
| (288,376 | ) |
|
| (278,828 | ) |
|
| (102,819 | ) |
|
| (97,629 | ) |
|
| (303,412 | ) |
|
| (288,376 | ) |
Other income, net |
|
| 272 |
|
|
| 123 |
|
|
| 1,020 |
|
|
| 1,164 |
|
|
| 701 |
|
|
| 272 |
|
|
| 1,657 |
|
|
| 1,020 |
|
Interest expense, net |
|
| (34,794 | ) |
|
| (28,674 | ) |
|
| (92,293 | ) |
|
| (86,337 | ) |
|
| (33,555 | ) |
|
| (34,794 | ) |
|
| (99,969 | ) |
|
| (92,293 | ) |
Earnings before members' income taxes |
| $ | 37,628 |
|
| $ | 66,894 |
|
| $ | 172,734 |
|
| $ | 197,378 |
|
| $ | 70,524 |
|
| $ | 37,628 |
|
| $ | 208,675 |
|
| $ | 172,734 |
|
MGE receives transmission and other related services from ATC. During the three and nine months ended September 30, 2022,2023, MGE recorded $8.5 million and $25.4 million, respectively, for transmission service compared to $7.9 million and $23.6 million respectively, for transmission services compared to $8.0 million and $24.0 million for comparable periods in 2021.2022. MGE also provides a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. As of September 30, 2022,2023, and December 31, 2021,2022, MGE had a receivable due from ATC of $4.65.3 million and $7.04.8 million, respectively. The receivable is primarily related to transmission interconnection activities at Badger Hollow and Paris solar generation sites. MGE will be reimbursed for these costs after the new generation assets are placed into service.
Effective Tax Rate.
The consolidated income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes, as follows:
|
| MGE Energy |
| MGE |
| MGE Energy |
| MGE | ||||||||||||||||||||||||||||||||
Three Months Ended September 30, |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||||||||||||||||||
Statutory federal income tax rate |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
State income taxes, net of federal benefit |
|
| 6.2 |
|
|
| 6.2 |
|
|
| 6.2 |
|
|
| 6.2 |
|
|
|
| 6.2 |
|
|
| 6.2 |
|
|
| 6.2 |
|
|
| 6.2 |
|
| ||||||
Amortized investment tax credits |
|
| (0.6 | ) |
|
| (1.2 | ) |
|
| (0.7 | ) |
|
| (1.3 | ) |
|
|
| (0.6 | ) |
|
| (0.6 | ) |
|
| (0.6 | ) |
|
| (0.7 | ) |
| ||||||
Credit for electricity from wind energy |
|
| (4.9 | ) |
|
| (4.8 | ) |
|
| (5.2 | ) |
|
| (5.2 | ) |
| |||||||||||||||||||||||
Credit for electricity from renewable energy |
|
| (4.9 | ) |
|
| (4.9 | ) |
|
| (5.2 | ) |
|
| (5.2 | ) |
| |||||||||||||||||||||||
AFUDC equity, net |
|
| (0.4 | ) |
|
| (1.1 | ) |
|
| (0.4 | ) |
|
| (1.2 | ) |
|
|
| (0.9 | ) |
|
| (0.4 | ) |
|
| (1.0 | ) |
|
| (0.4 | ) |
| ||||||
Amortization of utility excess deferred tax - tax reform(a) |
|
| (1.7 | ) |
|
| (12.4 | ) |
|
| (1.8 | ) |
|
| (13.5 | ) |
|
|
| (1.4 | ) |
|
| (1.7 | ) |
|
| (1.5 | ) |
|
| (1.8 | ) |
| ||||||
Other, net, individually insignificant |
|
| (0.1 | ) |
|
|
| (0.4 | ) |
|
|
| (0.2 | ) |
|
|
| (0.3 | ) |
|
|
| (0.5 | ) |
|
|
| (0.1 | ) |
|
|
| (0.5 | ) |
|
|
| (0.2 | ) |
|
Effective income tax rate |
|
| 19.5 |
| % |
|
| 7.3 |
| % |
|
| 18.9 |
| % |
|
| 5.7 |
| % |
|
| 18.9 |
| % |
|
| 19.5 |
| % |
|
| 18.4 |
| % |
|
| 18.9 |
| % |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
|
| MGE Energy |
| MGE | ||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||||||||||||||||||||||||||
Statutory federal income tax rate |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % | ||||||||||||||||||||
State income taxes, net of federal benefit |
|
| 6.3 |
|
|
| 6.2 |
|
|
| 6.3 |
|
|
| 6.2 |
|
| |||||||||||||||||||||||
Amortized investment tax credits |
|
| (0.7 | ) |
|
| (0.7 | ) |
|
| (0.7 | ) |
|
| (0.7 | ) |
| |||||||||||||||||||||||
Credit for electricity from renewable energy |
|
| (5.4 | ) |
|
| (5.3 | ) |
|
| (5.7 | ) |
|
| (5.7 | ) |
| |||||||||||||||||||||||
AFUDC equity, net |
|
| (0.6 | ) |
|
| (0.4 | ) |
|
| (0.7 | ) |
|
| (0.5 | ) |
| |||||||||||||||||||||||
Amortization of utility excess deferred tax - tax reform(a) |
|
| (1.6 | ) |
|
| (1.8 | ) |
|
| (1.7 | ) |
|
| (1.9 | ) |
| |||||||||||||||||||||||
Other, net, individually insignificant |
|
| (0.2 | ) |
|
|
| (0.1 | ) |
|
|
| (0.3 | ) |
|
|
| (0.2 | ) |
| ||||||||||||||||||||
Effective income tax rate |
|
| 18.8 |
| % |
|
| 18.9 |
| % |
|
| 18.2 |
| % |
|
| 18.2 |
| % |
|
| MGE Energy |
| MGE | ||||||||||||||||
Nine Months Ended September 30, |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||||||||||
Statutory federal income tax rate |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
|
| 21.0 |
| % |
State income taxes, net of federal benefit |
|
| 6.2 |
|
|
|
| 6.2 |
|
|
|
| 6.2 |
|
|
|
| 6.2 |
|
|
Amortized investment tax credits |
|
| (0.7 | ) |
|
|
| (1.4 | ) |
|
|
| (0.7 | ) |
|
|
| (1.5 | ) |
|
Credit for electricity from wind energy |
|
| (5.3 | ) |
|
|
| (6.0 | ) |
|
|
| (5.7 | ) |
|
|
| (6.6 | ) |
|
AFUDC equity, net |
|
| (0.4 | ) |
|
|
| (1.0 | ) |
|
|
| (0.5 | ) |
|
|
| (1.1 | ) |
|
Amortization of utility excess deferred tax - tax reform(a) |
|
| (1.8 | ) |
|
|
| (14.5 | ) |
|
|
| (1.9 | ) |
|
|
| (15.9 | ) |
|
Other, net, individually insignificant |
|
| (0.1 | ) |
|
|
| (0.1 | ) |
|
|
| (0.2 | ) |
|
|
| — |
|
|
Effective income tax rate |
|
| 18.9 |
| % |
|
| 4.2 |
| % |
|
| 18.2 |
| % |
|
| 2.1 |
| % |
16
MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits and defined contribution 401(k) benefit plans for its employees and retirees.
The components of net periodic benefit cost, other than the service cost component, are recorded in "Other income, net" on the consolidated statements of income. The service cost component is recorded in "Other operations and maintenance" on the consolidated statements of income. MGE has regulatory treatment and recognizes regulatory assets or liabilities for timing differences between when net periodic benefit costs are recovered and when costs are recognized.
The following table presents the components of net periodic benefit costs recognized.
|
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Pension Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Service cost |
| $ | 1,266 |
|
| $ | 1,432 |
|
| $ | 3,798 |
|
| $ | 4,296 |
|
| $ | 723 |
|
| $ | 1,266 |
|
| $ | 2,169 |
|
| $ | 3,798 |
|
Interest cost |
|
| 2,791 |
|
|
| 2,280 |
|
|
| 8,371 |
|
|
| 6,840 |
|
|
| 4,330 |
|
|
| 2,791 |
|
|
| 12,989 |
|
|
| 8,371 |
|
Expected return on assets |
|
| (7,848 | ) |
|
| (7,372 | ) |
|
| (23,543 | ) |
|
| (22,115 | ) |
|
| (6,312 | ) |
|
| (7,848 | ) |
|
| (18,936 | ) |
|
| (23,543 | ) |
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Prior service credit |
|
| (5 | ) |
|
| (31 | ) |
|
| (15 | ) |
|
| (93 | ) |
|
| — |
|
|
| (5 | ) |
|
| — |
|
|
| (15 | ) |
Actuarial loss |
|
| 604 |
|
|
| 1,662 |
|
|
| 1,812 |
|
|
| 4,985 |
|
|
| 440 |
|
|
| 604 |
|
|
| 1,320 |
|
|
| 1,812 |
|
Net periodic benefit (credit) cost |
| $ | (3,192 | ) |
| $ | (2,029 | ) |
| $ | (9,577 | ) |
| $ | (6,087 | ) |
| $ | (819 | ) |
| $ | (3,192 | ) |
| $ | (2,458 | ) |
| $ | (9,577 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Postretirement Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Service cost |
| $ | 323 |
|
| $ | 362 |
|
| $ | 970 |
|
| $ | 1,086 |
|
| $ | 195 |
|
| $ | 323 |
|
| $ | 585 |
|
| $ | 970 |
|
Interest cost |
|
| 485 |
|
|
| 387 |
|
|
| 1,455 |
|
|
| 1,161 |
|
|
| 827 |
|
|
| 485 |
|
|
| 2,481 |
|
|
| 1,455 |
|
Expected return on assets |
|
| (842 | ) |
|
| (819 | ) |
|
| (2,524 | ) |
|
| (2,457 | ) |
|
| (649 | ) |
|
| (842 | ) |
|
| (1,946 | ) |
|
| (2,524 | ) |
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Transition obligation |
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
|
| 1 |
|
|
| 1 |
|
|
| 2 |
|
|
| 2 |
|
Prior service credit |
|
| (74 | ) |
|
| (379 | ) |
|
| (223 | ) |
|
| (1,138 | ) |
|
| — |
|
|
| (74 | ) |
|
| — |
|
|
| (223 | ) |
Actuarial loss |
|
| 37 |
|
|
| 123 |
|
|
| 109 |
|
|
| 370 |
| ||||||||||||||||
Actuarial (gain) loss |
|
| (48 | ) |
|
| 37 |
|
|
| (143 | ) |
|
| 109 |
| ||||||||||||||||
Net periodic benefit (credit) cost |
| $ | (70 | ) |
| $ | (325 | ) |
| $ | (211 | ) |
| $ | (976 | ) |
| $ | 326 |
|
| $ | (70 | ) |
| $ | 979 |
|
| $ | (211 | ) |
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, 2023, MGE deferred $1.6 million and $2.4 million, respectively, of pension and other postretirement costs. During the three and nine months ended September 30, 2022, MGE recovered $0.2 million and $0.8 million, respectively, of pension and other postretirement costs respectively, compared to approximately $0.3 million and $3.9 million for the comparable periods in 2021. The recovery of thesepreviously deferred. These costs reduced the amount previously deferred and has not been reflected in the table above.
During the three and nine months ended September 30, 2022, MGE deferred and recorded as a regulatory liability $0.3 million and $1.1 million, respectively, of savings from employee benefit plan costs compared to $2.8 million and $5.4 million for the comparable periods in 2021. During the three and nine months ended September 30, 2022, MGE refunded in rates $1.0 million and $3.1 million, respectively, of savings from 2021 employee benefit plan costs. The deferred savings hashave not been reflected in the table above.
Shares of MGE Energy sells shares of its common stock are sold through itsMGE Energy's Direct Stock Purchase and Dividend Reinvestment Plan (the Stock Plan). Those shares may be newly issued shares or shares that are purchased in the open market by an independent agent for participants in the Stock Plan. Sales of newly issued shares under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC.
17
During the three and nine months ended September 30, 20222023 and 2021,2022, MGE Energy issued no new shares of common stock under the Stock Plan.
17
As of September 30, 2022,2023, 10,33121,423 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.
On November 1, 2022,In March 2023, $19.3 million of City of Madison, Wisconsin Industrial Development Revenue Refunding Bonds (Madison Gas and Electric Company Project), Series 2020A were remarketed. As a result of the remarketing, the Series 2020A Bonds will carry an interest rate of 3.75% per annum over its remaining 5-year life. The remarketed Series 2020A Bonds will not be subject to further remarketing or optional redemption prior to their maturity.
In August 2023, MGE entered into a private placement Note Purchase Agreement in which it committed to issue $2540 million of new long-term debt (Series A), carrying an interest rate of 5.435.61% per annum over its 10-year11-year life, and $1530 million of new long-term debt (Series B), carrying an interest rate of 5.435.91% per
annum over its 10-year life, and $35 million of new long-term debt (Series C), carrying an interest rate of 5.53% per annum over its 12-year30-year life. Funding willoccurred on September 13, 2023, for Series A and funding for Series B is expected to occur on December 1, 2022 for Series A and on February 28, 2023 for Series B and Series C.2023. The proceeds of the debt financing will bewere used to repay at maturity $30 million long-term debt due September 15, 2023, and will assist with capital expenditures and other corporate obligations. The covenants of this debt are substantially consistent with MGE's existing unsecured long-term debt.senior notes.
During the three and nine months ended September 30, 2022,2023, MGE recorded less than $0.1 million and $1.8 million, respectively, in compensation expense related to share-based compensation awards compared to $0.6 million in compensation benefit and $0.1 million in compensation expense respectively, related to share-based compensation awards under the 2006 Performance Unit Plan, the 2020 Performance Unit Plan, the 2013 Director Incentive Plan, and the 2021 Long-Term Incentive Plan (2021 Plan) compared to $0.3 million and $1.6 million in compensation expense for the comparable periods in 2021.2022.
In January 2022,the first quarter of 2023, cash payments of $1.83.6 million were distributed related to awards that were granted in 20192020 under the 2013 Director Incentive Plan, and in 20172018 under the 2006 Performance Unit Plan, and 2020 under the 2020 Performance Unit Plan.
In February 2022,March 2023, MGE issued 10,39511,320 performance units and 15,93120,472 restricted stock units under the 2021 Plan to eligible employees and non-employee directors.
MGE recognizes stock-based compensation expense on a straight-line basis over the requisite service period. Awards classified as equity awards are measured based on their grant-date fair value. Awards classified as liability awards are recorded at fair value each reporting period. The performance units can be paid out in either cash, shares of common stock or a combination of cash and stock and are classified as a liability award. The restricted stock units will be paid out in shares of common stock, and therefore are classified as equity awards.
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 and Unit 2 by June 2026. Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors. Effects of the environmental compliance requirements discussed below will depend upon the final retirement dates approved and required compliance requirement dates.
MGE Energy and MGE are subject to frequently changing local, state, and federal regulations concerning air quality, water quality, land use, threatened and endangered species, hazardous materials handling, and solid waste disposal. These regulations affect the manner in which operations are conducted, the costs of operations, as well as capital and operating expenditures. Several of these
18
environmental rules are subject to legal challenges, reconsideration and/or other uncertainties. Regulatory initiatives, proposed rules, and court challenges to adopted rules could have a material
18
effect on capital expenditures and operating costs. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.
These initiatives, proposed rules, and court challenges include:
In July 2021,With the PSCW approved a Certificateclosure 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 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 costs to comply with the rule is estimated to be approximately $4 million. Construction began in March 2022 and will extend intois scheduled to be completed by the end of 2023.
In March 2023, the EPA published a proposed update to this rule that further regulates the wastewater discharges associated with coal-fired power plants. The proposed rule focuses on wastewater discharges from flue gas desulfurization, bottom ash transport water, and combustion residual leachate. The proposed rule includes some flexibility for plants that have already installed pollution controls based on previous versions of the rule, and flexibility for plants that will be retiring or switching to natural gas by certain dates. MGE expects this rule, if finalized as proposed, to impact our Elm Road Units. However, we will not know the impact of this rule with any certainty until the rule is finalized.
Blount received its most recent WPDES permit from the Wisconsin Department of Natural Resources (WDNR) in October 2023. Blount's latest WPDES permit assumes that the plant meets BTA standards for entrainment for the duration of thethis permit which expires in 2023. Before the next permit renewal, MGE is required2028. The WDNR included a requirement to completeconduct an entrainment study and recommend a BTA along with alternative technologies considered. MGE completed the entrainmentimpingement 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 nextlatest permit renewal, which is expectedneeds to be completed byin the end of 2022 and effective in 2023. Management believes thatnext three years. Once the BTA determinationWDNR determines the impingement requirements at Blount, MGE will not be material for MGE.able to determine any compliance costs of meeting Blount's permit requirements.
Columbia's river intakesIntakes at Columbia are subject to this rule. Columbia's operator received aThe Columbia operator's most recent permit in 2019 requiringrequires that studies of intake structures to be submitted to the WDNR by November 2023 to help determine BTA. Columbia's permit renewal application is due in 2024. BTA improvements may be limited or not be required in the renewal permit given that the owners are planningowners' plan to retire both units by June of 2026. MGE will continue to work with Columbia's operator to evaluate all regulatory requirements applicable toin light of the planned retirements.
MGE does not expect this rule to have a material effect on its existing plants.Columbia.
In October 2021, as partMay 2023, the EPA proposed a rule under section 111 of the Biden administration's Unified Agenda, the EPA announced its intentionClean Air Act to issue a new ruleestablish NSPS and emission guidelines to reduce greenhouse gaslimit GHG emissions from existing fossil fuel-fired EGUs. In June 2022, the U.S. Supreme Court held that the Clean Air Act does not authorize theEGUs and new, modified, and/or reconstructed fossil fuel-fired power plants. The EPA to regulate GHG emissions using generation shifting (e.g., shifting from coal to natural gas and/or renewable generation sources). MGE will continue to evaluate greenhouse gasanticipates promulgating a final rule developments, including any new EPA actions towards rule development, and any further court decisions on the EPAin's authority to regulate greenhouse gases.
19
2024. MGE fossil fuel-fired generation units would be subject to the rule as proposed. MGE expects larger-sized units with long range retirement plans, West Riverside and the Elm Road units, may need to employ technology to achieve reduction. Columbia may not be impacted due to the owners' planned retirement of the existing fossil fuel fired units by 2026. However, we will not know the impact of this rule with any certainty until the rule is finalized.
19
The Elm Road Units are located in Milwaukee County, Wisconsin, a nonattainment area. In October 2022, the EPA reclassified Milwaukee County from "marginal" to "moderate" nonattainment under the 2015 ozone NAAQS. The Wisconsin Department of Natural Resources (WDNR) must develop a State Implementation Plan (SIP) for the area, and this reclassification will result in more stringent SIP requirements for both constructing new development and modifying or expanding existing plants in the area. The deadline for moderate classified areas to meet attainment standards is August 2024. MGE will continue to monitor the WDNR's SIP development and the extent to which the requirements will impact the Elm Road Units. At this time, the operator of the Elm Road Units does not expect that the 2015 Ozone NAAQS will have a material effect on its existing plantsthe Units based on final designations.
In January 2023, the EPA published a proposed rule to lower the average annual PM2.5 NAAQS from its current level. The EPA has also solicited comments on whether to lower the annual standard further than the proposed level, and whether to lower the maximum 24-hour limit to be consistent with recommendations from its Clean Air Scientific Advisory Committee (CASAC). Neither the proposed annual PM2.5 NAAQS nor the 24-hour limit recommended by the CASAC are expected to impact the counties where Columbia and the Elm Road Units are located. However, if the annual PM2.5 NAAQS is lowered further than the EPA's currently proposed value, Milwaukee County may be in nonattainment with the standard. A nonattainment designation would require the State of Wisconsin to develop a plan to get into attainment, which may include additional emission limitations for the Elm Road units. However, we will not know the impact of this rule until it is finalized, the EPA determines the attainment status of Wisconsin counties, and the State of Wisconsin develops an attainment implementation plan. MGE will continue to follow the rule's developments.
The EPA's CSAPR and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and fine particulate (PM2.5)PM2.5 ambient air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states. This is accomplished in the CSAPR through a reduction in SONO2x and NOSOx2 from qualifying fossil-fuel fired power plants and industrial boilers in upwind "contributing" states. NOxand SO2 contribute to fine particulate pollution and NOxcontributes to ozone formation in downwind areas. Reductions are generally achieved through a cap-and-trade system. Individual plants can meet their caps through reducing emissions and/or buying allowances on the market.
In April 2022,March 2023, the EPA published a proposedfinalized its Federal Implementation Plan (FIP) to address state obligations under the Clean Air Act "good neighbor" provisions for the 2015 Ozone NAAQS. This proposedThe final rule impacts 2623 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.Wisconsin. For Wisconsin, the proposed rule includes revisions to the current obligations for fossil-fuel power generation, as well aswhich includes Blount, Columbia, the new limitations for certain industries.
If finalized, the proposedElm Road Units, WCCF, West Riverside, and West Marinette. The final rule would bebecame effective beginning withpartway through the 2023 ozone season and start with emissionsin August 2023. Emissions budgets that can be achievedmet with what the EPA has defined asplanned retirements, fuel switching, and immediately available measures, including consistently operating emissions controls already installed at power plants. MGE expects to meet the emission reductions with immediately available measures. In 2026, additional obligations would go into effect, including potential dailya further reduction in emissions limits and technology upgrades to coal-fired power plants without existing emission controls.budgets. Wisconsin would need to submit a SIPState Implementation Plan to meet its obligations or accept the EPA's proposed FIP.
MGE has met itsis reviewing the final rule. Based on our current CSAPR obligations through a combination of reduced emissions through pollution control (e.g., SCR installation at Columbia),evaluation, the 2026 additional emission reductions may impact the Elm Road Units and owned, received, and purchased allowances. MGE expects the rule, if finalized as written,additional upgrades may be needed to impact our fossil-fueled generation assets. However,comply, however, we will not know the final impact of this rule with any certainty until it is finalized. We will continue to monitor rule developments.evaluations are completed.
20
The CCR rule regulates as athe disposal of 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. A site-specific extension to initiate closure of the primary ash pond at Columbia by DecemberMarch 31, 20222023, was requested.requested, and was met. The EPA has not formally approvedconfirmed that Columbia met the extension.required extension requirements, has documented that Columbia ceased the receipt of waste on March 23, 2023, and has noted that Columbia's obligations under this portion of the CCR Rule are now complete.
20
In July 2021, the PSCW approved a CA application filed by MGE and the other owners of Columbia to install technology required to cease bottom ash transport water discharges rather than extend the longevity of the ash ponds. Construction of theThe coal combustion residuals system that will replacereplaced the unlined surface impoundment is undergoing final testing. Construction is expected to be completed by the end of 2022.was placed in-service in March 2023. MGE's share of the costs of the project is expected to be approximately $4 million.
Review of the Elm Road Units has indicated that the costs to comply with the CCR rule are not expected to be significant.
In May 2023, the EPA proposed a CCR Legacy Rule that if finalized as currently written, will apply to previously closed CCR sites. Columbia's operator would likely need to complete a site evaluation to determine if the CCR Legacy Rule applies to Columbia's previously closed site. MGE is currently evaluating this proposed rule. However, we will not know the impact of this rule with any certainty until the rule is finalized.
MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE accrues for costs that are probable of being incurred and subject to reasonable estimation. The accrued amount for these matters is not material to the financial statements. MGE does not expect the resolution of these matters to have a material adverse effect on its consolidated results of operations, financial condition, or cash flows.
Certain environmental groups filed petitions against the PSCW regardingchallenging the fixed customer charge set in MGE's two most recent2022/2023 rate settlements.settlement and 2023 electric limited reopener. MGE has intervened in the petitions in cooperation with the PSCW. See Footnote 9.a. for more information regarding this matter.
MGE Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet their obligations to deliver electricity and natural gas to customers. Management expects to recover these costs in future customer rates. The following table shows future commitments related to purchase contracts as of September 30, 2022:2023:
(In thousands) |
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| Thereafter |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| Thereafter |
| ||||||||||||
Coal(a) |
| $ | 11,461 |
|
| $ | 26,323 |
|
| $ | 18,216 |
|
| $ | 9,043 |
|
| $ | 2,922 |
|
| $ | — |
|
| $ | 8,511 |
|
| $ | 23,173 |
|
| $ | 14,425 |
|
| $ | 2,581 |
|
| $ | — |
|
| $ | — |
|
Natural gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 20,009 |
|
|
| 41,502 |
|
|
| 25,517 |
|
|
| 14,873 |
|
|
| 2,165 |
|
|
| 11,995 |
| ||||||
Transportation and storage(b) |
|
| 9,069 |
|
|
| 31,660 |
|
|
| 31,660 |
|
|
| 31,660 |
|
|
| 18,265 |
|
|
| 14,449 |
| ||||||||||||||||||||||||
Supply(c) |
|
| 24,959 |
|
|
| 25,682 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Renewable energy(d) |
|
| 5,847 |
|
|
| 3,108 |
|
|
| 2,025 |
|
|
| 2,040 |
|
|
| 2,056 |
|
|
| 28,529 |
| ||||||||||||||||||||||||
|
| $ | 51,336 |
|
| $ | 86,773 |
|
| $ | 51,901 |
|
| $ | 42,743 |
|
| $ | 23,243 |
|
| $ | 42,978 |
|
| $ | 28,520 |
|
| $ | 64,675 |
|
| $ | 39,942 |
|
| $ | 17,454 |
|
| $ | 2,165 |
|
| $ | 11,995 |
|
21
21
|
| Rate increase |
| Return on Common Equity |
| Common Equity Component of Regulatory Capital Structure |
| Effective Date |
| Rate increase |
| Return on Common Equity |
| Common Equity Component of Regulatory Capital Structure |
| Effective Date |
Approved 2021 settlement(a) |
|
|
|
|
|
|
|
| ||||||||
Electric |
| —% |
| 9.8% |
| 55.8% |
| 1/1/2021 | ||||||||
Gas |
| 4.00% |
| 9.8% |
| 55.8% |
| 1/1/2021 | ||||||||
Approved 2022/2023 settlement(b) |
|
| ||||||||||||||
Approved 2022/2023 settlement(a) |
|
| ||||||||||||||
Electric |
| 8.81% |
| 9.8% |
| 55.6% |
| 1/1/2022 |
| 8.81% |
| 9.8% |
| 55.6% |
| 1/1/2022 |
Gas |
| 2.15% |
| 9.8% |
| 55.6% |
| 1/1/2022 |
| 2.15% |
| 9.8% |
| 55.6% |
| 1/1/2022 |
Gas |
| 0.96% |
| 9.8% |
| 55.6% |
| 1/1/2023 |
| 0.96% |
| 9.8% |
| 55.6% |
| 1/1/2023 |
Proposed limited 2023 reopener(c) |
|
| ||||||||||||||
Approved limited 2023 reopener(b) |
|
| ||||||||||||||
Electric |
| 4.38% |
| 9.8% |
| 55.6% |
| 1/1/2023 |
| 9.01% |
| 9.8% |
| 55.6% |
| 1/1/2023 |
Proposed 2024/2025 rate proceeding(c) |
|
| ||||||||||||||
Electric(d) |
| 3.75% |
| 9.8% |
| 56.1% |
| 1/1/2024 | ||||||||
Gas(d) |
| 2.56% |
| 9.8% |
| 56.1% |
| 1/1/2024 | ||||||||
Electric(e) |
| 3.41% |
| 9.8% |
| 56.1% |
| 1/1/2025 | ||||||||
Gas(e) |
| 1.66% |
| 9.8% |
| 56.1% |
| 1/1/2025 |
Sierra Club and Vote Solar have filed petitions with the Dane County Circuit Court seeking review of the PSCW decisiondecisions approving MGE's two most recentelectric and gas 2022/2023 rate settlements (2021settlement and 2022/2023).2023 electric limited reopener. The PSCW is named as the responding party; MGE is not named as a party. The petitionsPetitions challenge the process the PSCW used to approve the portionamount 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 settlementssettlement and limited reopener have not been challenged. The PSCW is expected to vigorously defend its approval of the rate case settlements.settlement and limited reopener. MGE has intervened in the proceedings to further defend the PSCW's decision. The Dane County Circuit Court affirmed the PSCW's decision to approve the 2022/2023 rate
22
settlement, and Sierra Club and Vote Solar have now appealed that decision to the Wisconsin Court of Appeals.
Fuel rules require Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any over- or under-recovery of the actual costs is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is set at plus or minus 2% in 2023 and 1%. in 2022. The electric fuel-related costs are subject to an excess revenues test. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. The recovery of under-collected electric fuel-related costs would be reduced by the amount that exceeds the excess revenue test. These costs are subject to the PSCW's annual review of fuel costs completed in the year following the deferral.The following table summarizedsummarizes deferred electric fuel-related costs:
22
Fuel Costs (in millions) | Refund or Recovery Period | |||
|
|
| ||
|
|
| ||
2021 deferred fuel costs | $3.3(a) | January 2023 through December 2023(b) | ||
2022 deferred fuel costs | $ | October 2023 through September 2024(c) | ||
2023 deferred fuel savings | ($4.3) | (d) |
As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, the derivatives are recognized in the consolidated balance sheets at fair value. MGE's financial commodity derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability depending on whether the derivative is in a net loss or net gain position, respectively. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are refundable or recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism.
The gross notional volume of open derivatives is as follows:
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 | ||||||||||||||||
Commodity derivative contracts |
|
| 293,200 |
|
| MWh |
|
| 278,000 |
|
| MWh |
|
| 384,080 |
|
| MWh |
|
| 353,600 |
|
| MWh |
Commodity derivative contracts |
|
| 8,235,000 |
|
| Dth |
|
| 5,735,000 |
|
| Dth |
|
| 7,780,000 |
|
| Dth |
|
| 8,070,000 |
|
| Dth |
FTRs |
|
| 3,015 |
|
| MW |
|
| 2,127 |
|
| MW |
|
| 2,901 |
|
| MW |
|
| 1,945 |
|
| MW |
PPA |
|
| — |
|
| MW |
|
| 250 |
|
| MW |
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
23
power purchases. These transactions are employed by both MGE's gas and electric segments. Additionally, as a result of the firm transmission agreements that MGE holds on electricity transmission paths in the MISO market, MGE holds financial transmission rights (FTRs). An FTR is a financial instrument that entitles the holder to a stream of revenues or charges based on the differences in hourly day-ahead energy prices between two points on the transmission grid. The fair values of these instruments are offset with a corresponding regulatory asset/liability depending on whether they are in a net loss/gain position. Depending on the nature of the instrument, the gain or loss associated with these transactions will be reflected as cost of gas sold, fuel for electric generation, or purchased power expense in the delivery month applicable to the instrument. As of September 30, 2022,2023, and December 31, 2021,2022, the fair valuecost basis of exchange traded derivatives and FTRs exceeded their cost basisfair value by $5.22.5 million and $2.85.1 million, respectively.
MGE was a party to a purchased power agreement that provided MGE with firm capacity and energy during a base term from June 1, 2012, through May 31, 2022. The agreement was accounted for as a derivative contract and was recognized at its fair value on the consolidated balance sheets. However,
23
the derivative qualified for regulatory deferral and was recognized with a corresponding regulatory asset or liability depending on whether the fair value was in a loss or gain position. The actual cost was recognized in purchased power expense in the month of purchase.
The following table summarizes the fair value of the derivative instruments on the consolidated balance sheets. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, instruments are netted with the same counterparty under a master netting agreement as well as the netting of collateral.
|
| Derivative |
|
| Derivative |
|
|
|
| Derivative |
|
| Derivative |
|
|
| ||||
(In thousands) |
| Assets |
|
| Liabilities |
|
| Balance Sheet Location |
| Assets |
|
| Liabilities |
|
| Balance Sheet Location | ||||
September 30, 2022 |
|
|
|
|
|
|
|
| ||||||||||||
September 30, 2023 |
|
|
|
|
|
|
|
| ||||||||||||
Commodity derivative contracts(a) |
| $ | 8,793 |
|
| $ | 4,533 |
|
| Other current assets |
| $ | 837 |
|
| $ | 3,424 |
|
| Other current liabilities |
Commodity derivative contracts(a) |
|
| 932 |
|
|
| 81 |
|
| Other deferred charges |
|
| 115 |
|
|
| 413 |
|
| Other deferred liabilities and other |
FTRs |
|
| 102 |
|
|
| — |
|
| Other current assets |
|
| 337 |
|
|
| — |
|
| Other current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
December 31, 2021 |
|
|
|
|
|
|
| |||||||||||||
Commodity derivative contracts(b) |
| $ | 2,959 |
|
| $ | 811 |
|
| Other current assets | ||||||||||
Commodity derivative contracts(b) |
|
| 420 |
|
|
| 38 |
|
| Other deferred charges | ||||||||||
December 31, 2022 |
|
|
|
|
|
|
| |||||||||||||
Commodity derivative contracts(a) |
| $ | 2,164 |
|
| $ | 7,687 |
|
| Other current liabilities | ||||||||||
Commodity derivative contracts(a) |
|
| 802 |
|
|
| 476 |
|
| Other deferred liabilities and other | ||||||||||
FTRs |
|
| 227 |
|
|
| — |
|
| Other current assets |
|
| 103 |
|
|
| — |
|
| Other current assets |
PPA |
| N/A |
|
|
| 2,140 |
|
| Derivative liability (current) |
The following tables show the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the consolidated balance sheets.
Offsetting of Derivative Assets
(In thousands) |
| Gross Amounts |
|
| Gross Amounts Offset in Balance Sheets |
|
| Collateral Posted Against Derivative Positions |
|
| Net Amount Presented in Balance Sheets |
|
| Gross Amounts |
|
| Gross Amounts Offset in Balance Sheets |
|
| Collateral Posted Against Derivative Positions |
|
| Net Amount Presented in Balance Sheets |
| ||||||||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commodity derivative contracts |
| $ | 9,725 |
|
| $ | (4,614 | ) |
| $ | — |
|
| $ | 5,111 |
|
| $ | 952 |
|
| $ | (952 | ) |
| $ | — |
|
| $ | — |
|
FTRs |
|
| 102 |
|
|
| — |
|
|
| — |
|
|
| 102 |
|
|
| 337 |
|
|
| — |
|
|
| — |
|
|
| 337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commodity derivative contracts |
| $ | 3,379 |
|
| $ | (849 | ) |
| $ | (1,254 | ) |
| $ | 1,276 |
|
| $ | 2,966 |
|
| $ | (2,966 | ) |
| $ | — |
|
| $ | — |
|
FTRs |
|
| 227 |
|
|
| — |
|
|
| — |
|
|
| 227 |
|
|
| 103 |
|
|
| — |
|
|
| — |
|
|
| 103 |
|
24
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 |
|
| Gross Amounts |
|
| Gross Amounts Offset in Balance Sheets |
|
| Collateral Posted Against Derivative Positions |
|
| Net Amount Presented in Balance Sheets |
| ||||||||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commodity derivative contracts |
| $ | 4,614 |
|
| $ | (4,614 | ) |
| $ | — |
|
| $ | — |
|
| $ | 3,837 |
|
| $ | (952 | ) |
| $ | (2,885 | ) |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commodity derivative contracts |
| $ | 849 |
|
| $ | (849 | ) |
| $ | — |
|
| $ | — |
|
| $ | 8,163 |
|
| $ | (2,966 | ) |
| $ | (5,197 | ) |
| $ | — |
|
PPA |
|
| 2,140 |
|
|
| — |
|
|
| — |
|
|
| 2,140 |
|
24
The following tables summarize the unrealized and realized gains/losses related to the derivative instruments on the consolidated balance sheets and the consolidated statements of income.
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||
(In thousands) |
| Current and Long-Term Regulatory Asset (Liability) |
|
| Other Current Assets |
|
| Current and Long-Term Regulatory Asset (Liability) |
|
| Other Current Assets |
|
| Current and Long-Term Regulatory Asset (Liability) |
|
| Other Current Assets |
|
| Current and Long-Term Regulatory Asset (Liability) |
|
| Other Current Assets |
| ||||||||
Three Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Balance as of July 1, |
| $ | (8,484 | ) |
| $ | (161 | ) |
| $ | 2,581 |
|
| $ | 520 |
|
| $ | 5,017 |
|
| $ | 1,074 |
|
| $ | (8,484 | ) |
| $ | (161 | ) |
Unrealized gain |
|
| (4,385 | ) |
|
| — |
|
|
| (18,677 | ) |
|
| — |
| ||||||||||||||||
Realized gain (loss) reclassified to a deferred account |
|
| 1,122 |
|
|
| (1,122 | ) |
|
| 65 |
|
|
| (65 | ) | ||||||||||||||||
Realized gain reclassified to income statement |
|
| 6,534 |
|
|
| 1,916 |
|
|
| 2,356 |
|
|
| 311 |
| ||||||||||||||||
Unrealized loss (gain) |
|
| 1,100 |
|
|
| — |
|
|
| (4,385 | ) |
|
| — |
| ||||||||||||||||
Realized (loss) gain reclassified to a deferred account |
|
| (1,676 | ) |
|
| 1,676 |
|
|
| 1,122 |
|
|
| (1,122 | ) | ||||||||||||||||
Realized (loss) gain reclassified to income statement |
|
| (1,893 | ) |
|
| (2,155 | ) |
|
| 6,534 |
|
|
| 1,916 |
| ||||||||||||||||
Balance as of September 30, |
| $ | (5,213 | ) |
| $ | 633 |
|
| $ | (13,675 | ) |
| $ | 766 |
|
| $ | 2,548 |
|
| $ | 595 |
|
| $ | (5,213 | ) |
| $ | 633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Nine Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Balance as of January 1, |
| $ | (617 | ) |
| $ | 770 |
|
| $ | 13,989 |
|
| $ | 1,162 |
|
| $ | 5,094 |
|
| $ | 2,747 |
|
| $ | (617 | ) |
| $ | 770 |
|
Unrealized gain |
|
| (21,706 | ) |
|
| — |
|
|
| (30,314 | ) |
|
| — |
| ||||||||||||||||
Realized gain (loss) reclassified to a deferred account |
|
| 3,952 |
|
|
| (3,952 | ) |
|
| (351 | ) |
|
| 351 |
| ||||||||||||||||
Realized gain (loss) reclassified to income statement |
|
| 13,158 |
|
|
| 3,815 |
|
|
| 3,001 |
|
|
| (747 | ) | ||||||||||||||||
Unrealized loss (gain) |
|
| 15,495 |
|
|
| — |
|
|
| (21,706 | ) |
|
| — |
| ||||||||||||||||
Realized (loss) gain reclassified to a deferred account |
|
| (10,581 | ) |
|
| 10,581 |
|
|
| 3,952 |
|
|
| (3,952 | ) | ||||||||||||||||
Realized (loss) gain reclassified to income statement |
|
| (7,460 | ) |
|
| (12,733 | ) |
|
| 13,158 |
|
|
| 3,815 |
| ||||||||||||||||
Balance as of September 30, |
| $ | (5,213 | ) |
| $ | 633 |
|
| $ | (13,675 | ) |
| $ | 766 |
|
| $ | 2,548 |
|
| $ | 595 |
|
| $ | (5,213 | ) |
| $ | 633 |
|
|
| Realized Losses (Gains) |
|
| Realized Losses (Gains) |
| ||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||
(In thousands) |
| Fuel for Electric Generation/ Purchased Power |
|
| Cost of Gas Sold |
|
| Fuel for Electric Generation/ Purchased Power |
|
| Cost of Gas Sold |
|
| Fuel for Electric Generation/ Purchased Power |
|
| Cost of Gas Sold |
|
| Fuel for Electric Generation/ Purchased Power |
|
| Cost of Gas Sold |
| ||||||||
Three Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity derivative contracts |
| $ | (8,698 | ) |
| $ | 36 |
|
| $ | (1,586 | ) |
| $ | — |
|
| $ | 4,179 |
|
| $ | — |
|
| $ | (8,698 | ) |
| $ | 36 |
|
FTRs |
|
| 212 |
|
|
| — |
|
|
| (132 | ) |
|
| — |
|
|
| (131 | ) |
|
| — |
|
|
| 212 |
|
|
| — |
|
PPA |
|
| — |
|
|
| — |
|
|
| (949 | ) |
|
| — |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Nine Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Commodity derivative contracts |
| $ | (14,343 | ) |
| $ | (800 | ) |
| $ | (2,107 | ) |
| $ | 1,055 |
|
| $ | 14,566 |
|
| $ | 6,451 |
|
| $ | (14,343 | ) |
| $ | (800 | ) |
FTRs |
|
| 812 |
|
|
| — |
|
|
| (443 | ) |
|
| — |
|
|
| (824 | ) |
|
| — |
|
|
| 812 |
|
|
| — |
|
PPA |
|
| (2,642 | ) |
|
| — |
|
|
| (759 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,642 | ) |
|
| — |
|
MGE's commodity derivative contracts, FTRs, and PPA are subject to regulatory deferral. These derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Realized gains and losses are deferred on the consolidated balance sheets and are recognized in earnings in the delivery month applicable to the instrument. As a result of the treatment described above, there are no unrealized gains or losses that flow through earnings.
Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of September 30, 2022,2023, and December 31, 2021,2022, no counterparties were in a net liability position.
25
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, 2022,2023, no counterparties had defaulted.
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
25
fair value should be based on the assumptions market participants would use when pricing the asset or liability including assumptions about risk. The standard also establishes a three-level fair value hierarchy based upon the observability of the assumptions used and requires the use of observable market data when available. The levels are:
Level 1 - Pricing inputs are quoted prices within active markets for identical assets or liabilities.
Level 2 - Pricing inputs are quoted prices within active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations that are correlated with or otherwise verifiable by observable market data.
Level 3 - Pricing inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability.
The carrying amount of cash, cash equivalents, and outstanding commercial paper approximates fair market value due to the short maturity of those investments and obligations. The estimated fair market value of long-term debt is based on quoted market prices for similar financial instruments. Since long-term debt is not traded in an active market, it is classified as Level 2. The estimated fair market value of financial instruments are as follows:
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
(In thousands) |
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
| ||||||||
Long-term debt(a) |
| $ | 619,794 |
|
| $ | 549,585 |
|
| $ | 623,449 |
|
| $ | 729,914 |
|
| $ | 699,812 |
|
| $ | 606,355 |
|
| $ | 643,560 |
|
| $ | 571,374 |
|
26
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis.
|
| Fair Value as of September 30, 2022 |
|
| Fair Value as of September 30, 2023 |
| ||||||||||||||||||||||||||
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
MGE Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Derivatives, net(b) |
| $ | 9,827 |
|
| $ | 5,446 |
|
| $ | — |
|
| $ | 4,381 |
|
| $ | 1,289 |
|
| $ | 766 |
|
| $ | — |
|
| $ | 523 |
|
Exchange-traded investments |
|
| 1,504 |
|
|
| 1,504 |
|
|
| — |
|
|
| — |
|
|
| 1,771 |
|
|
| 1,771 |
|
|
| — |
|
|
| — |
|
Total Assets |
| $ | 11,331 |
|
| $ | 6,950 |
|
| $ | — |
|
| $ | 4,381 |
|
| $ | 3,060 |
|
| $ | 2,537 |
|
| $ | — |
|
| $ | 523 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Derivatives, net(b) |
| $ | 4,614 |
|
| $ | 4,087 |
|
| $ | — |
|
| $ | 527 |
|
| $ | 3,837 |
|
| $ | 2,190 |
|
| $ | — |
|
| $ | 1,647 |
|
Deferred compensation |
|
| 3,782 |
|
|
| — |
|
|
| 3,782 |
|
|
| — |
|
|
| 5,077 |
|
|
| — |
|
|
| 5,077 |
|
|
| — |
|
Total Liabilities |
| $ | 8,396 |
|
| $ | 4,087 |
|
| $ | 3,782 |
|
| $ | 527 |
|
| $ | 8,914 |
|
| $ | 2,190 |
|
| $ | 5,077 |
|
| $ | 1,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
MGE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Derivatives, net(b) |
| $ | 9,827 |
|
| $ | 5,446 |
|
| $ | — |
|
| $ | 4,381 |
|
| $ | 1,289 |
|
| $ | 766 |
|
| $ | — |
|
| $ | 523 |
|
Exchange-traded investments |
|
| 99 |
|
|
| 99 |
|
|
| — |
|
|
| — |
|
|
| 83 |
|
|
| 83 |
|
|
| — |
|
|
| — |
|
Total Assets |
| $ | 9,926 |
|
| $ | 5,545 |
|
| $ | — |
|
| $ | 4,381 |
|
| $ | 1,372 |
|
| $ | 849 |
|
| $ | — |
|
| $ | 523 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Derivatives, net(b) |
| $ | 4,614 |
|
| $ | 4,087 |
|
| $ | — |
|
| $ | 527 |
|
| $ | 3,837 |
|
| $ | 2,190 |
|
| $ | — |
|
| $ | 1,647 |
|
Deferred compensation |
|
| 3,782 |
|
|
| — |
|
|
| 3,782 |
|
|
| — |
|
|
| 5,077 |
|
|
| — |
|
|
| 5,077 |
|
|
| — |
|
Total Liabilities |
| $ | 8,396 |
|
| $ | 4,087 |
|
| $ | 3,782 |
|
| $ | 527 |
|
| $ | 8,914 |
|
| $ | 2,190 |
|
| $ | 5,077 |
|
| $ | 1,647 |
|
|
| Fair Value as of December 31, 2022 |
| |||||||||||||
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
MGE Energy |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net(b) |
| $ | 3,069 |
|
| $ | 1,353 |
|
| $ | — |
|
| $ | 1,716 |
|
Exchange-traded investments |
|
| 1,516 |
|
|
| 1,516 |
|
|
| — |
|
|
| — |
|
Total Assets |
| $ | 4,585 |
|
| $ | 2,869 |
|
| $ | — |
|
| $ | 1,716 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net(b) |
| $ | 8,163 |
|
| $ | 5,581 |
|
| $ | — |
|
| $ | 2,582 |
|
Deferred compensation |
|
| 4,743 |
|
|
| — |
|
|
| 4,743 |
|
|
| — |
|
Total Liabilities |
| $ | 12,906 |
|
| $ | 5,581 |
|
| $ | 4,743 |
|
| $ | 2,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
MGE |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net(b) |
| $ | 3,069 |
|
| $ | 1,353 |
|
| $ | — |
|
| $ | 1,716 |
|
Exchange-traded investments |
|
| 115 |
|
|
| 115 |
|
|
| — |
|
|
| — |
|
Total Assets |
| $ | 3,184 |
|
| $ | 1,468 |
|
| $ | — |
|
| $ | 1,716 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net(b) |
| $ | 8,163 |
|
| $ | 5,581 |
|
| $ | — |
|
| $ | 2,582 |
|
Deferred compensation |
|
| 4,743 |
|
|
| — |
|
|
| 4,743 |
|
|
| — |
|
Total Liabilities |
| $ | 12,906 |
|
| $ | 5,581 |
|
| $ | 4,743 |
|
| $ | 2,582 |
|
26
|
| Fair Value as of December 31, 2021 |
| |||||||||||||
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
MGE Energy |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net(c) |
| $ | 3,606 |
|
| $ | 1,170 |
|
| $ | — |
|
| $ | 2,436 |
|
Exchange-traded investments |
|
| 1,296 |
|
|
| 1,296 |
|
|
| — |
|
|
| — |
|
Total Assets |
| $ | 4,902 |
|
| $ | 2,466 |
|
| $ | — |
|
| $ | 2,436 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net |
| $ | 2,989 |
|
| $ | 731 |
|
| $ | — |
|
| $ | 2,258 |
|
Deferred compensation |
|
| 3,653 |
|
|
| — |
|
|
| 3,653 |
|
|
| — |
|
Total Liabilities |
| $ | 6,642 |
|
| $ | 731 |
|
| $ | 3,653 |
|
| $ | 2,258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
MGE |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net(c) |
| $ | 3,606 |
|
| $ | 1,170 |
|
| $ | — |
|
| $ | 2,436 |
|
Exchange-traded investments |
|
| 230 |
|
|
| 230 |
|
|
| — |
|
|
| — |
|
Total Assets |
| $ | 3,836 |
|
| $ | 1,400 |
|
| $ | — |
|
| $ | 2,436 |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivatives, net |
| $ | 2,989 |
|
| $ | 731 |
|
| $ | — |
|
| $ | 2,258 |
|
Deferred compensation |
|
| 3,653 |
|
|
| — |
|
|
| 3,653 |
|
|
| — |
|
Total Liabilities |
| $ | 6,642 |
|
| $ | 731 |
|
| $ | 3,653 |
|
| $ | 2,258 |
|
Exchange-traded Investments.Investments include exchange-traded investment securities valued using quoted prices on active exchanges and are therefore classified as Level 1.
Deferred Compensation.
The deferred compensation plan allowsplans allow participants to defer certain cash compensation into a notional investment account.accounts. These amounts are included within other"Other deferred liabilities and other" in the consolidated balance sheets. The value of certain deferred compensation obligations is based on the market value of the participants' notional investment accounts. The
27
underlying notional investments are comprised primarily of equities, mutual funds, and fixed income securities which are based on directly and indirectly observable market prices. Since the deferred compensation obligations themselves are not exchanged in an active market, they are classified as Level 2.
The value of legacy deferred compensation obligations are based on notional investments that earn interest based upon the semiannual rate of U.S. Treasury Bills having a 26-week maturity increased by 1% compounded monthly with a minimum annual rate of 7%, compounded monthly. The notional investments are based upon observable market data, however, since the deferred compensation obligations themselves are not exchanged in an active market, they are classified as Level 2.
Derivatives.Derivatives include exchange-traded derivative contracts, over-the-counter transactions, a purchased power agreement, and FTRs. Most exchange-traded derivative contracts are valued based on unadjusted quoted prices in active markets and are therefore classified as Level 1. A small number of exchange-traded derivative contracts are valued using quoted market pricing in markets with insufficient volumes and are therefore considered unobservable and classified as Level 3. Transactions done with an over-the-counter party are on inactive markets and are therefore classified as Level 3. These transactions are valued based on quoted prices from markets with similar exchange-traded transactions. FTRs are priced based upon monthly auction results for identical or similar instruments in a closed market with limited data available and are therefore classified as Level 3.
The purchased power agreement, with a term ended May 2022, (see Footnote 10) was valued using an internal pricing model and therefore was classified as Level 3. See the 20212022 Annual Report on Form 10-K for details on the internal pricing model and significant unobservable inputs.
27
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 |
| Nine Months Ended | ||||||||||||||||
|
| September 30, |
| September 30, |
| September 30, |
| September 30, | ||||||||||||||||
(In thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Beginning balance |
| $ | 8,959 |
| $ | (4,533) |
| $ | 178 |
| $ | (14,055) |
| $ | (2,892) |
| $ | 8,959 |
| $ | (866) |
| $ | 178 |
Realized and unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Included in regulatory assets |
| 1,768 |
|
| — |
| (258) |
|
| — | ||||||||||||||
Included in regulatory liability |
| (5,105) |
|
| 8,122 |
| 3,675 |
|
| 17,644 |
| — |
|
| (5,105) |
| — |
|
| 3,675 | ||||
Included in other comprehensive income |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — | ||||
Included in earnings |
| 6,609 |
|
| 2,476 |
| 13,607 |
|
| 2,686 |
| (2,016) |
|
| 6,609 |
| (7,590) |
|
| 13,607 | ||||
Included in current assets |
| (73) |
|
| — |
| 45 |
|
| 175 |
| — |
|
| (73) |
| — |
|
| 45 | ||||
Purchases |
| 108 |
|
| 6,638 |
| 11,911 |
|
| 18,899 |
| — |
|
| 108 |
| — |
|
| 11,911 | ||||
Sales |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — | ||||
Issuances |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — |
| — |
|
| — | ||||
Settlements |
|
| (6,644) |
|
| (9,114) |
|
| (25,562) |
|
| (21,760) |
|
| 2,016 |
|
| (6,644) |
|
| 7,590 |
|
| (25,562) |
Balance as of September 30, |
| $ | 3,854 |
| $ | 3,589 |
| $ | 3,854 |
| $ | 3,589 |
| $ | (1,124) |
| $ | 3,854 |
| $ | (1,124) |
| $ | 3,854 |
Total gains (losses) included in earnings attributed to |
| $ | — |
| $ | — |
| $ | — |
| $ | — | ||||||||||||
Total gains (losses) included in earnings attributed to |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis(d)(c).
|
| Three Months Ended |
| Nine Months Ended |
| Three Months Ended |
| Nine Months Ended | ||||||||||||||||
|
| September 30, |
| September 30, |
| September 30, |
| September 30, | ||||||||||||||||
(In thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Purchased power expense |
| $ | 6,644 |
| $ | 2,476 |
| $ | 13,805 |
| $ | 3,113 |
| $ | (2,016) |
| $ | 6,644 |
| $ | (7,590) |
| $ | 13,805 |
Cost of gas sold expense |
|
| (35) |
|
| — |
|
| (198) |
|
| (427) |
|
| — |
|
| (35) |
|
| — |
|
| (198) |
Total |
| $ | 6,609 |
| $ | 2,476 |
| $ | 13,607 |
| $ | 2,686 |
| $ | (2,016) |
| $ | 6,609 |
| $ | (7,590) |
| $ | 13,607 |
28
MGE currently has ongoing jointly-owned solarownership interests in generation projects with other co-owners, some of which are under construction, projects, as shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" or "Construction work in progress" on the consolidated balance sheets.
Project | Ownership Interest | Source | Share of | Share of |
|
| ||||||
|
|
|
|
| Date of | |||||||
Red Barn(b) | 10% | Wind | 9.16 MW | $18 million | $ |
| ||||||
Badger Hollow II(c) | 33% | Solar | 50 MW | $ | $ |
| ||||||
Paris(d) | 10% |
| 20 MW/11 MW | $ | $ |
| ||||||
Darien(e) | 10% | Solar | 25 MW | $46 million(i)(j) | $21.9 million | 2024(g) | ||||||
West Riverside | 3.4% | Natural Gas | 25 MW | $25 million | $24.7 million | (h) |
MGE received specific approval to recover 100% AFUDC on Badger Hollow II, Paris, and Paris.Darien. During the three and nine months ended September 30, 2022,2023, MGE recognized $1.9 million and $4.8 million, respectively, after tax, in AFUDC for these projects compared to $1.1 million and $2.1 million respectively, after
28
tax, in AFUDC for these projects compared to $0.2 million and $0.4 million for the comparable periodperiods in 2021.2022.
Revenues disaggregated by revenue source were as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(In thousands) |
| September 30, |
|
| September 30, |
| ||||||||||
Electric revenues |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Residential |
| $ | 45,154 |
|
| $ | 44,398 |
|
| $ | 123,183 |
|
| $ | 117,229 |
|
Commercial |
|
| 65,468 |
|
|
| 60,996 |
|
|
| 177,877 |
|
|
| 161,270 |
|
Industrial |
|
| 3,912 |
|
|
| 3,380 |
|
|
| 10,535 |
|
|
| 9,469 |
|
Other-retail/municipal |
|
| 10,010 |
|
|
| 9,478 |
|
|
| 28,215 |
|
|
| 26,340 |
|
Total retail |
|
| 124,544 |
|
|
| 118,252 |
|
|
| 339,810 |
|
|
| 314,308 |
|
Sales to the market |
|
| 7,858 |
|
|
| 3,071 |
|
|
| 13,938 |
|
|
| 8,854 |
|
Other |
|
| 474 |
|
|
| 316 |
|
|
| 1,167 |
|
|
| 948 |
|
Total electric revenues |
|
| 132,876 |
|
|
| 121,639 |
|
|
| 354,915 |
|
|
| 324,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gas revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Residential |
|
| 17,167 |
|
|
| 14,643 |
|
|
| 97,498 |
|
|
| 72,286 |
|
Commercial/Industrial |
|
| 11,490 |
|
|
| 8,069 |
|
|
| 66,913 |
|
|
| 42,972 |
|
Total retail |
|
| 28,657 |
|
|
| 22,712 |
|
|
| 164,411 |
|
|
| 115,258 |
|
Gas transportation |
|
| 1,588 |
|
|
| 1,256 |
|
|
| 4,804 |
|
|
| 4,589 |
|
Other |
|
| 65 |
|
|
| 52 |
|
|
| 90 |
|
|
| 97 |
|
Total gas revenues |
|
| 30,310 |
|
|
| 24,020 |
|
|
| 169,305 |
|
|
| 119,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-regulated energy revenues |
|
| 214 |
|
|
| 214 |
|
|
| 466 |
|
|
| 464 |
|
Total Operating Revenue |
| $ | 163,400 |
|
| $ | 145,873 |
|
| $ | 524,686 |
|
| $ | 444,518 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(In thousands) |
| September 30, |
|
| September 30, |
| ||||||||||
Electric revenues |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Residential |
| $ | 50,008 |
|
| $ | 45,154 |
|
| $ | 131,552 |
|
| $ | 123,183 |
|
Commercial |
|
| 70,795 |
|
|
| 65,468 |
|
|
| 193,760 |
|
|
| 177,877 |
|
Industrial |
|
| 3,715 |
|
|
| 3,912 |
|
|
| 10,578 |
|
|
| 10,535 |
|
Other-retail/municipal |
|
| 10,991 |
|
|
| 10,010 |
|
|
| 30,853 |
|
|
| 28,215 |
|
Total retail |
|
| 135,509 |
|
|
| 124,544 |
|
|
| 366,743 |
|
|
| 339,810 |
|
Sales to the market |
|
| 3,305 |
|
|
| 7,858 |
|
|
| 9,617 |
|
|
| 13,938 |
|
Other |
|
| 77 |
|
|
| 474 |
|
|
| 1,267 |
|
|
| 1,167 |
|
Total electric revenues |
|
| 138,891 |
|
|
| 132,876 |
|
|
| 377,627 |
|
|
| 354,915 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gas revenues |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Residential |
|
| 13,719 |
|
|
| 17,167 |
|
|
| 86,131 |
|
|
| 97,498 |
|
Commercial/Industrial |
|
| 6,016 |
|
|
| 11,490 |
|
|
| 55,726 |
|
|
| 66,913 |
|
Total retail |
|
| 19,735 |
|
|
| 28,657 |
|
|
| 141,857 |
|
|
| 164,411 |
|
Gas transportation |
|
| 1,587 |
|
|
| 1,588 |
|
|
| 5,354 |
|
|
| 4,804 |
|
Other |
|
| 102 |
|
|
| 65 |
|
|
| 466 |
|
|
| 90 |
|
Total gas revenues |
|
| 21,424 |
|
|
| 30,310 |
|
|
| 147,677 |
|
|
| 169,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-regulated energy revenues |
|
| 213 |
|
|
| 214 |
|
|
| 475 |
|
|
| 466 |
|
Total Operating Revenue |
| $ | 160,528 |
|
| $ | 163,400 |
|
| $ | 525,779 |
|
| $ | 524,686 |
|
29
MGE Energy operates in the following business segments: electric utility, gas utility, nonregulated energy, transmission investment, and all other. See the 20212022 Annual Report on Form 10-K for additional discussion of each of these segments.
(In thousands) |
| Electric |
|
| Gas |
|
| Non-Regulated Energy |
|
| Transmission Investment |
|
| All Others |
|
| Consolidation/ |
|
| Consolidated Total |
|
| Electric |
|
| Gas |
|
| Non-Regulated Energy |
|
| Transmission Investment |
|
| All Others |
|
| Consolidation/ |
|
| Consolidated Total |
| ||||||||||||||
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Operating revenues |
| $ | 138,891 |
|
| $ | 21,424 |
|
| $ | 213 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 160,528 |
| ||||||||||||||||||||||||||||
Interdepartmental revenues |
|
| 512 |
|
|
| 3,547 |
|
|
| 10,398 |
|
|
| — |
|
|
| — |
|
|
| (14,457 | ) |
|
| — |
| ||||||||||||||||||||||||||||
Total operating revenues |
|
| 139,403 |
|
|
| 24,971 |
|
|
| 10,611 |
|
|
| — |
|
|
| — |
|
|
| (14,457 | ) |
|
| 160,528 |
| ||||||||||||||||||||||||||||
Equity in earnings of investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,690 |
|
|
| — |
|
|
| — |
|
|
| 2,690 |
| ||||||||||||||||||||||||||||
Net income (loss) |
|
| 31,126 |
|
|
| (801 | ) |
|
| 5,627 |
|
|
| 1,957 |
|
|
| (52 | ) |
|
| — |
|
|
| 37,857 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Operating revenues |
| $ | 132,876 |
|
| $ | 30,310 |
|
| $ | 214 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 163,400 |
|
| $ | 132,876 |
|
| $ | 30,310 |
|
| $ | 214 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 163,400 |
|
Interdepartmental revenues |
|
| 24 |
|
|
| 12,465 |
|
|
| 10,405 |
|
|
| — |
|
|
| — |
|
|
| (22,894 | ) |
|
| — |
|
|
| 24 |
|
|
| 12,465 |
|
|
| 10,405 |
|
|
| — |
|
|
| — |
|
|
| (22,894 | ) |
|
| — |
|
Total operating revenues |
|
| 132,900 |
|
|
| 42,775 |
|
|
| 10,619 |
|
|
| — |
|
|
| — |
|
|
| (22,894 | ) |
|
| 163,400 |
|
|
| 132,900 |
|
|
| 42,775 |
|
|
| 10,619 |
|
|
| — |
|
|
| — |
|
|
| (22,894 | ) |
|
| 163,400 |
|
Equity in earnings of investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,499 |
|
|
| — |
|
|
| — |
|
|
| 1,499 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,499 |
|
|
| — |
|
|
| — |
|
|
| 1,499 |
|
Net income (loss) |
|
| 27,619 |
|
|
| (394 | ) |
|
| 5,576 |
|
|
| 1,091 |
|
|
| (172 | ) |
|
| — |
|
|
| 33,720 |
|
|
| 27,619 |
|
|
| (394 | ) |
|
| 5,576 |
|
|
| 1,091 |
|
|
| (172 | ) |
|
| — |
|
|
| 33,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Operating revenues |
| $ | 121,639 |
|
| $ | 24,020 |
|
| $ | 214 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 145,873 |
|
| $ | 377,627 |
|
| $ | 147,677 |
|
| $ | 475 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 525,779 |
|
Interdepartmental revenues |
|
| 89 |
|
|
| 6,689 |
|
|
| 10,224 |
|
|
| — |
|
|
| — |
|
|
| (17,002 | ) |
|
| — |
|
|
| 653 |
|
|
| 12,978 |
|
|
| 31,143 |
|
|
| — |
|
|
| — |
|
|
| (44,774 | ) |
|
| — |
|
Total operating revenues |
|
| 121,728 |
|
|
| 30,709 |
|
|
| 10,438 |
|
|
| — |
|
|
| — |
|
|
| (17,002 | ) |
|
| 145,873 |
|
|
| 378,280 |
|
|
| 160,655 |
|
|
| 31,618 |
|
|
| — |
|
|
| — |
|
|
| (44,774 | ) |
|
| 525,779 |
|
Equity in earnings of investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,532 |
|
|
| — |
|
|
| — |
|
|
| 2,532 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,930 |
|
|
| — |
|
|
| — |
|
|
| 7,930 |
|
Net income (loss) |
|
| 27,833 |
|
|
| (218 | ) |
|
| 5,386 |
|
|
| 1,842 |
|
|
| 74 |
|
|
| — |
|
|
| 34,917 |
|
|
| 65,996 |
|
|
| 10,539 |
|
|
| 16,667 |
|
|
| 5,770 |
|
|
| (1,356 | ) |
|
| — |
|
|
| 97,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Operating revenues |
| $ | 354,915 |
|
| $ | 169,305 |
|
| $ | 466 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 524,686 |
|
| $ | 354,915 |
|
| $ | 169,305 |
|
| $ | 466 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 524,686 |
|
Interdepartmental revenues |
|
| 76 |
|
|
| 26,645 |
|
|
| 31,073 |
|
|
| — |
|
|
| — |
|
|
| (57,794 | ) |
|
| — |
|
|
| 76 |
|
|
| 26,645 |
|
|
| 31,073 |
|
|
| — |
|
|
| — |
|
|
| (57,794 | ) |
|
| — |
|
Total operating revenues |
|
| 354,991 |
|
|
| 195,950 |
|
|
| 31,539 |
|
|
| — |
|
|
| — |
|
|
| (57,794 | ) |
|
| 524,686 |
|
|
| 354,991 |
|
|
| 195,950 |
|
|
| 31,539 |
|
|
| — |
|
|
| — |
|
|
| (57,794 | ) |
|
| 524,686 |
|
Equity in earnings of investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,626 |
|
|
| — |
|
|
| — |
|
|
| 6,626 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,626 |
|
|
| — |
|
|
| — |
|
|
| 6,626 |
|
Net income |
|
| 55,248 |
|
|
| 12,782 |
|
|
| 16,451 |
|
|
| 4,821 |
|
|
| 599 |
|
|
| — |
|
|
| 89,901 |
|
|
| 55,248 |
|
|
| 12,782 |
|
|
| 16,451 |
|
|
| 4,821 |
|
|
| 599 |
|
|
| — |
|
|
| 89,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||
Operating revenues |
| $ | 324,110 |
|
| $ | 119,944 |
|
| $ | 464 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 444,518 |
| ||||||||||||||||||||||||||||
Interdepartmental revenues |
|
| 316 |
|
|
| 14,377 |
|
|
| 30,595 |
|
|
| — |
|
|
| — |
|
|
| (45,288 | ) |
|
| — |
| ||||||||||||||||||||||||||||
Total operating revenues |
|
| 324,426 |
|
|
| 134,321 |
|
|
| 31,059 |
|
|
| — |
|
|
| — |
|
|
| (45,288 | ) |
|
| 444,518 |
| ||||||||||||||||||||||||||||
Equity in earnings of investments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,440 |
|
|
| — |
|
|
| — |
|
|
| 7,440 |
| ||||||||||||||||||||||||||||
Net income (loss) |
|
| 59,979 |
|
|
| 11,615 |
|
|
| 15,935 |
|
|
| 5,413 |
|
|
| (241 | ) |
|
| — |
|
|
| 92,701 |
|
(In thousands) |
| Electric |
|
| Gas |
|
| Non-Regulated Energy |
|
| Consolidation/ |
|
| Consolidated Total |
|
| Electric |
|
| Gas |
|
| Non-Regulated Energy |
|
| Consolidation/ |
|
| Consolidated Total |
| ||||||||||
Three Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Operating revenues |
| $ | 138,891 |
|
| $ | 21,424 |
|
| $ | 213 |
|
| $ | — |
|
| $ | 160,528 |
| ||||||||||||||||||||
Interdepartmental revenues |
|
| 512 |
|
|
| 3,547 |
|
|
| 10,398 |
|
|
| (14,457 | ) |
|
| — |
| ||||||||||||||||||||
Total operating revenues |
|
| 139,403 |
|
|
| 24,971 |
|
|
| 10,611 |
|
|
| (14,457 | ) |
|
| 160,528 |
| ||||||||||||||||||||
Net income (loss) attributable to MGE |
|
| 31,126 |
|
|
| (801 | ) |
|
| 5,627 |
|
|
| (5,487 | ) |
|
| 30,465 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Three Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating revenues |
| $ | 132,876 |
|
| $ | 30,310 |
|
| $ | 214 |
|
| $ | — |
|
| $ | 163,400 |
|
| $ | 132,876 |
|
| $ | 30,310 |
|
| $ | 214 |
|
| $ | — |
|
| $ | 163,400 |
|
Interdepartmental revenues |
|
| 24 |
|
|
| 12,465 |
|
|
| 10,405 |
|
|
| (22,894 | ) |
|
| — |
|
|
| 24 |
|
|
| 12,465 |
|
|
| 10,405 |
|
|
| (22,894 | ) |
|
| — |
|
Total operating revenues |
|
| 132,900 |
|
|
| 42,775 |
|
|
| 10,619 |
|
|
| (22,894 | ) |
|
| 163,400 |
|
|
| 132,900 |
|
|
| 42,775 |
|
|
| 10,619 |
|
|
| (22,894 | ) |
|
| 163,400 |
|
Net income (loss) attributable to MGE |
|
| 27,619 |
|
|
| (394 | ) |
|
| 5,576 |
|
|
| (5,603 | ) |
|
| 27,198 |
|
|
| 27,619 |
|
|
| (394 | ) |
|
| 5,576 |
|
|
| (5,603 | ) |
|
| 27,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Three Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Nine Months Ended September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Operating revenues |
| $ | 121,639 |
|
| $ | 24,020 |
|
| $ | 214 |
|
| $ | — |
|
| $ | 145,873 |
|
| $ | 377,627 |
|
| $ | 147,677 |
|
| $ | 475 |
|
| $ | — |
|
| $ | 525,779 |
|
Interdepartmental revenues |
|
| 89 |
|
|
| 6,689 |
|
|
| 10,224 |
|
|
| (17,002 | ) |
|
| — |
|
|
| 653 |
|
|
| 12,978 |
|
|
| 31,143 |
|
|
| (44,774 | ) |
|
| — |
|
Total operating revenues |
|
| 121,728 |
|
|
| 30,709 |
|
|
| 10,438 |
|
|
| (17,002 | ) |
|
| 145,873 |
|
|
| 378,280 |
|
|
| 160,655 |
|
|
| 31,618 |
|
|
| (44,774 | ) |
|
| 525,779 |
|
Net income (loss) attributable to MGE |
|
| 27,833 |
|
|
| (218 | ) |
|
| 5,386 |
|
|
| (5,627 | ) |
|
| 27,374 |
| ||||||||||||||||||||
Net income attributable to MGE |
|
| 65,996 |
|
|
| 10,539 |
|
|
| 16,667 |
|
|
| (16,382 | ) |
|
| 76,820 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Operating revenues |
| $ | 354,915 |
|
| $ | 169,305 |
|
| $ | 466 |
|
| $ | — |
|
| $ | 524,686 |
|
| $ | 354,915 |
|
| $ | 169,305 |
|
| $ | 466 |
|
| $ | — |
|
| $ | 524,686 |
|
Interdepartmental revenues |
|
| 76 |
|
|
| 26,645 |
|
|
| 31,073 |
|
|
| (57,794 | ) |
|
| — |
|
|
| 76 |
|
|
| 26,645 |
|
|
| 31,073 |
|
|
| (57,794 | ) |
|
| — |
|
Total operating revenues |
|
| 354,991 |
|
|
| 195,950 |
|
|
| 31,539 |
|
|
| (57,794 | ) |
|
| 524,686 |
|
|
| 354,991 |
|
|
| 195,950 |
|
|
| 31,539 |
|
|
| (57,794 | ) |
|
| 524,686 |
|
Net income attributable to MGE |
|
| 55,248 |
|
|
| 12,782 |
|
|
| 16,451 |
|
|
| (15,947 | ) |
|
| 68,534 |
|
|
| 55,248 |
|
|
| 12,782 |
|
|
| 16,451 |
|
|
| (15,947 | ) |
|
| 68,534 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Operating revenues |
| $ | 324,110 |
|
| $ | 119,944 |
|
| $ | 464 |
|
| $ | — |
|
| $ | 444,518 |
| ||||||||||||||||||||
Interdepartmental revenues |
|
| 316 |
|
|
| 14,377 |
|
|
| 30,595 |
|
|
| (45,288 | ) |
|
| — |
| ||||||||||||||||||||
Total operating revenues |
|
| 324,426 |
|
|
| 134,321 |
|
|
| 31,059 |
|
|
| (45,288 | ) |
|
| 444,518 |
| ||||||||||||||||||||
Net income attributable to MGE |
|
| 59,979 |
|
|
| 11,615 |
|
|
| 15,935 |
|
|
| (16,755 | ) |
|
| 70,774 |
|
30
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:
Our principal subsidiary is MGE, which generates and distributes electric energy, distributes natural gas, and represents a majority portion of our assets, liabilities, revenues, and expenses. MGE generates, purchases, and distributes electricity to approximately 159,000161,000 customers in Dane County, Wisconsin, including the city of Madison, and purchases and distributes natural gas to approximately 169,000173,000 customers in the Wisconsin counties of Columbia, Crawford, Dane, Iowa, Juneau, Monroe, and Vernon.
Our nonregulated energy operations own interests in electric generating capacity that is leased to MGE. The ownership/leasing structure was adopted under applicable state regulatory guidelines for MGE's participation in these generation facilities, consisting principally of a stable return on the equity investment in the new generation facilities over the term of the related leases. The nonregulated energy operations include an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin and a partial ownership of a cogeneration project on the UW-Madison campus. A third party operates the units in Oak Creek, and MGE operates the cogeneration project. Due to the nature of MGE's participation in these facilities, the results of MGE Energy's nonregulated operations are also consolidated into MGE's consolidated financial position and results of operations under applicable accounting standards.
Executive Overview
Our primary focus today and for the foreseeable future is our core utility customers at MGE as well as creating long-term value for our shareholders. MGE continues to face the challenge of providing its customers with reliable power at competitive prices. MGE works on meeting this challenge by investing in more efficient generation projects, including renewable energy sources. As we work toward achieving 80% carbon reduction by 2030 (from 2005 levels), MGE continues to examine and pursue opportunities to reduce the proportion that coal generation represents in its generation mix, as evidenced by its most recent announcements of the retirement of Columbia (a coal generation plant), the planned change in the Elm Road Units fuel source from coal to natural gas, and its growing ownership of renewable generation sources. MGE will continue to focus on growing earnings while controlling operating and fuel costs. MGE's goal is to provide safe and efficient operations in addition to providing customer value. We believe it is critical to maintain a strong credit rating consistent with financial strength in MGE in order to accomplish these goals.
We principally earn revenue and generate cash from operations by providing electric and natural gas utility services, including electric power generation and electric power and gas distribution. The earnings and cash flows from the utility business are sensitive to various external factors, including:
31
31
During the three months ended September 30, 2022,2023, MGE Energy's earnings were $33.7$37.9 million or $0.93$1.05 per share compared to $34.9$33.7 million or $0.97$0.93 per share during the same period in the prior year. MGE's earnings during the three months ended September 30, 2022,2023, were $27.2$30.5 million compared to $27.4$27.2 million during the same period in the prior year.
During the nine months ended September 30, 2022,2023, MGE Energy's earnings were $89.9$97.6 million or $2.49$2.70 per share compared to $92.7$89.9 million or $2.56$2.49 per share during the same period in the prior year. MGE's earnings during the nine months ended September 30, 2022,2023, were $68.5$76.8 million compared to $70.8$68.5 million during the same period in the prior year.
MGE Energy's net income was derived from our business segments as follows:
| Three Months Ended |
| Nine Months Ended | Three Months Ended |
| Nine Months Ended | ||||||||||||||||
(In millions) | September 30, |
| September 30, | September 30, |
| September 30, | ||||||||||||||||
Business Segment: | 2022 |
| 2021 |
| 2022 |
| 2021 | 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Electric Utility | $ | 27.6 |
| $ | 27.8 |
| $ | 55.2 |
| $ | 60.0 | $ | 31.1 |
| $ | 27.6 |
| $ | 66.0 |
| $ | 55.2 |
Gas Utility |
| (0.4) |
|
| (0.2) |
| 12.8 |
|
| 11.6 |
| (0.8) |
|
| (0.4) |
| 10.5 |
|
| 12.8 | ||
Nonregulated Energy |
| 5.6 |
|
| 5.4 |
| 16.5 |
|
| 15.9 |
| 5.6 |
|
| 5.6 |
| 16.7 |
|
| 16.5 | ||
Transmission Investments |
| 1.1 |
|
| 1.8 |
| 4.8 |
|
| 5.4 |
| 2.0 |
|
| 1.1 |
| 5.8 |
|
| 4.8 | ||
All Other |
| (0.2) |
|
| 0.1 |
|
| 0.6 |
|
| (0.2) |
| — |
|
| (0.2) |
|
| (1.4) |
|
| 0.6 |
Net Income | $ | 33.7 |
| $ | 34.9 |
| $ | 89.9 |
| $ | 92.7 | $ | 37.9 |
| $ | 33.7 |
| $ | 97.6 |
| $ | 89.9 |
Our net income during the three and nine months ended September 30, 2022,2023, compared to the same periods in the prior year primarily reflects the effects of the following factors:
Electric Utility
An increase in electric investments contributed to earnings for 2022.2023. Timing of 2021 depreciation expense and other operations and maintenancelower fuel costs also contributed to higher earnings in 2021.the first nine months of 2023. Depreciation and operations and maintenance costs increased during the remainder of 2021 and into 2022expense is expected to increase after significant capital projects were(Badger Hollow II and Paris) are completed. The new customer information system went liveWeather during 2023 has also impacted electric earnings. Warmer than normal weather during the heating season in September 2021the first quarter of 2023 lowered electric retail sales reducing earnings and Badger Hollow I was completedwarmer than normal weather in November 2021. MGE received approvalthe third quarter of 2023 increased electric retail sales increasing earnings. Electric retail sales decreased approximately 1% during the first nine months of 2023 compared to recover 100% AFUDCthe same period in the prior year. Electric retail sales increased approximately 1% during constructionthe third quarter of these projects.2023 compared to the same period in the prior year.
Gas Utility
An increase in gas investments contributed to increased earnings for 2022. HigherLower gas retail sales resulting from colderwarmer than normal weather in the first halfquarter of 20222023 contributed to higherlower gas earnings for the nine months ended September 30, 2022.2023. Gas retail sales decreased approximately 11%. Heating degree days (a measure for determining the impact of weather during the heating season) increaseddecreased by approximately 7%15% in the first nine months of 20222023 compared to the same period in the prior year.
Transmission Investments
In September 2022, our share of ATC's earnings reflected an estimated possible loss of approximately $0.8 million inclusive of interest and net of tax, related to the August 2022 developments in the MISO transmission owners complaints on authorized return on equity. See additional information in "Other Matters" below.
All Other
Investment losses from our venture capital funds resulted in lower earnings in 2023 compared to the same period in the prior year. These venture capital investments support early-stage companies working to advance smart technologies, the customer experience, distributed energy resources, electrification, cybersecurity and other priorities for utility companies such as greater sustainability.
The following developments affected the first nine months of 2022:2023:
2022/2023 Rate Settlement Agreement:Agreement and 2023 Electric Limited Rate Case Reopener: In December 2021, the PSCW approved a settlement agreement for MGE's 2022 rate case. The settlement agreement provides for an 8.81% increase to electric rates and a 2.15% increase to gas rates for 2022. As part of that settlement agreement, the PSCW approved a 0.96% increase in 2023 gas rates and a potential 2023 electric rate change to be addressed through a
32
limited rate case reopener. In December 2022, the PSCW approved an 9.01% increase to electric rates for 2023. See "Other Matters" below for additional information on the 2022/2023 rate case settlement.settlement and 2023 Electric Limited Rate Case reopener.
32
Utility Solar: Large solar generation projects, were recently completed orsome of which are under construction, asare shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" for projects placed in service, or "Construction work in progress" for projects under construction on the consolidated balance sheets.
Project | Ownership Interest | Source | Share of Generation | Share of | Costs |
| |||||||
Red Barn | 10% |
| Wind | 9.16 MW | $18 million | $ |
| ||||||
Badger Hollow II | 33% | Solar | 50 MW | $ | $ |
| |||||||
Paris | 10% |
| 20 MW/11 MW | $ | $ |
| |||||||
Darien | 10% | Solar | 25 MW | $46 million(e)(f) | $21.9 million(b) | 2024(d) |
West Riverside: In March 2023, MGE purchased a 3.4% ownership interest in the natural gas-fired facility West Riverside from WPL, the operator of the plant, for approximately $25 million. MGE's share of the generation capacity of West Riverside is 25 MW.
Deferred Fuel Costs: MGE has under-recovered fuel costs through the nine months ended September 30, 2022.Savings: As of September 30, 2022,2023, MGE hadhas deferred $4.4$4.3 million of 20222023 fuel costs. Coal transportation constraints resulted in reduced generation at Columbia, which required MGE to purchase power in the market at higher cost. We may continue to see increased fuel costs in the near term because of these coal transportation constraints.savings. These costs will be subject to the PSCW's annual review of 20222023 fuel costs, expected to be completed during 2023.2024. See Footnote 9.b.9 of the Notes to the Consolidated Financial Statements in this Report for further information regarding fuel cost proceedings.
In the near term, several items may affect us, including:
20212022 Annual Fuel Proceeding: MGE under-recovered fuel costs in 2021.2022. As of December 31, 2021,2022, MGE had deferred $3.3$8.8 million of 20212022 fuel costs. In August 2022,2023, the PSCW issued a final decision in the 20212022 fuel rules proceedings for MGE to include the recovery ofrecover these costs as part of theover a 12-month period from October 2023 electric limited rate case reopener.through September 2024. There was no change to the costs to be recovered in the fuel rule proceedings from the amount MGE deferred in the previous year.
2023 Electric Limited2024/2025 Rate Case Reopener:Proceeding: In April 2022,2023, MGE filed with the PSCW a proposed 2024/2025 rate application. MGE has proposed a 3.75% increase for electric limited rate case reopener.rates and a 2.56% increase to gas rates for 2024. The limited rate case reopenerproceeding also proposes a 4.38%3.41% increase for electric rates and a 1.66% increase to electricgas rates for 2025. A final order is expected before the end of 2023. MGE cannot predict with any certainty the final outcome of the rate proceeding. Regulated entities are allowed to defer certain costs that would otherwise be charged to expense if the regulated entity believes the recovery of those costs is probable. Recovery of the deferred costs in future rates is subject to the review and approval by the PSCW. Any disallowance of previously deferred costs would be charged to income in the current period. See "Other Matters" below for additional information on the 2023 electric limited2024/2025 rate case reopener.proceeding.
ATC Return on Equity: As discussed in "Other Matters" below, ATC's authorized ROE, which is used in calculating its rates and revenues, is the subject of a challenge before FERC. A decrease in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 5.1%5.7% and 5.7%5.1% of our net income during the nine months ended September 30, 20222023 and 2021,2022, respectively, from our investment in ATC.
33
Environmental Initiatives: There are proposed legislative rules and initiatives involving matters related to air emissions, water effluent, hazardous materials, and greenhouse gases, all of which affect generation plant capital expenditures and operating costs as well as future operational planning. Legislation and rulemaking addressing climate change and related matters could significantly affect the costs of owning and operating fossil-fueled generating plants. We would expect to seek and receive recovery of any such costs in rates. However, it is difficult to estimate the amount of such costs due to the uncertainty as to the timing and form of any legislation or rules, and the scope and time of the recovery of costs in rates, which may occur after those costs have been incurred and paid.
Future Generation – 80% carbon reduction target by 2030 (from 2005 levels): MGE has outlined initiatives to achieve our raised target.
33
Elm Road Units: In November 2021, MGE, along with the plant co-owners, announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. MGE is a minority owner of Elm Road, owning 8.33%. The approximately 1,230 MW coal-fired plant is co-owned by WEC Energy Group, whose subsidiary serves as operator, and by WPPI Energy, Inc. Transition plans and costs will be subject to PSCW approval. MGE's remaining use of coal is expected to be further reduced as the Elm Road Units transition to natural gas. By the end of 2030, MGE expects coal to be used only as a backup fuel at the Elm Road Units. This transition will help MGE meet its 2030 carbon reduction goals. By 2035,2032, 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.
Environmental Initiatives – Natural gas distribution: Building upon our long-standing commitment to providing affordable, sustainable energy, MGE has set a goal to achieve net-zero methane emissions from its natural gas distribution system by 2035. If MGE can accelerate plans to achieve net-zero methane emissions from its natural gas system—through the evolution of new technologies, such as renewable natural gas—it will. MGE is working to reduce overall emissions from its natural gas distribution system cost-effectively as quickly as possible.
Solar Procurement Disruptions – Import Regulations: In June 2021,Disruptions: MGE is monitoring import regulations under the U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) against silica-based products made by Hoshine Silicon Industry Co. Ltd., a company located in China's Xinjiang Uyghur Autonomous Region. As a result of this WRO, CBP is holding many solar panels imported into the United States until importers can prove that the panels do not contain materials originating from this region. The Uyghur Forced Labor Protection Act and the U.S. Department of Commerce investigation on whether to impose new solar tariffs. These disruptions have a federal law that became effective on June 21, 2022, further established that all goods mined, produced, or manufactured wholly or in part in Xinjiang or by certain defined entities are prohibited from U.S. importation. MGE is currently assessing the potential to impact of these disruptions on current and future solar projects which may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we have filed and expect to continue to file a notification with the PSCW and expect to request recovery of any increases in MGE’s nextMGE's future rate proceeding.proceedings. See "Other Matters" below for additional information on the solar procurement disruptions.
Solar Procurement Disruptions – Solar Tariff Investigation: In March 2022, the U.S. Department of Commerce (USDOC) announced a solar tariff investigation on solar panels from four Southeast Asian countries. This investigation could result in additional tariffs on solar panels. In June 2022, the USDOC issued a 24-month exemption from tariffs for solar panel and module imports from these four countries. MGE is currently assessing the potential impact of these disruptions on current and future solar projects which may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we expect to file a notification with the PSCW and expect to request recovery of any increases in MGE’s next rate proceeding.
COVID-19 Update: MGE Energy continues to provide safe and reliable service to our customers despite the challenges presented by the COVID-19 and its variants. 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.
34
The following discussion is based on the business segments as discussed in Footnote 14 of the Notes to Consolidated Financial Statements in this Report.
Results of Operations
Three Months Ended September 30, 20222023 and 20212022
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) |
| Revenues |
| Sales (kWh) | ||||||||||||||||||||
|
| Three Months Ended September 30, |
| Three Months Ended September 30, |
| Three Months Ended September 30, |
| Three Months Ended September 30, | ||||||||||||||||||||
(In thousands, except CDD) |
| 2022 |
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
| 2023 |
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||||
Residential |
| $ | 45,154 |
| $ | 44,398 |
| 1.7% |
| 252,457 |
| 263,833 |
| (4.3)% |
| $ | 50,008 |
| $ | 45,154 |
| 10.7% |
| 264,678 |
| 252,457 |
| 4.8% |
Commercial |
| 65,468 |
| 60,996 |
| 7.3% |
| 495,135 |
| 500,434 |
| (1.1)% |
| 70,795 |
| 65,468 |
| 8.1% |
| 496,161 |
| 495,135 |
| 0.2% | ||||
Industrial |
| 3,912 |
| 3,380 |
| 15.7% |
| 41,304 |
| 42,400 |
| (2.6)% |
| 3,715 |
| 3,912 |
| (5.0)% |
| 39,908 |
| 41,304 |
| (3.4)% | ||||
Other-retail/municipal |
|
| 10,010 |
|
| 9,478 |
| 5.6% |
| 104,548 |
| 106,919 |
| (2.2)% |
|
| 10,991 |
|
| 10,010 |
| 9.8% |
| 102,400 |
| 104,548 |
| (2.1)% |
Total retail |
| 124,544 |
| 118,252 |
| 5.3% |
| 893,444 |
| 913,586 |
| (2.2)% |
| 135,509 |
| 124,544 |
| 8.8% |
| 903,147 |
| 893,444 |
| 1.1% | ||||
Sales to the market |
| 7,858 |
| 3,071 |
| n.m.% |
| 48,632 |
| 67,536 |
| (28.0)% |
| 3,305 |
| 7,858 |
| (57.9)% |
| 72,916 |
| 48,632 |
| 49.9% | ||||
Other |
|
| 474 |
|
| 316 |
| 50.0% |
| — |
| — |
| —% |
|
| 77 |
|
| 474 |
| (83.8)% |
| — |
| — |
| —% |
Total |
| $ | 132,876 |
| $ | 121,639 |
| 9.2% |
| 942,076 |
| 981,122 |
| (4.0)% |
| $ | 138,891 |
| $ | 132,876 |
| 4.5% |
| 976,063 |
| 942,076 |
| 3.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Cooling degree days (normal 500) |
|
|
|
| 507 |
| 511 |
| (0.8)% | |||||||||||||||||||
Cooling degree days (normal 502) |
|
|
|
| 549 |
| 507 |
| 8.3% |
n.m. not meaningful
Electric revenue increased $11.2$6.0 million during the three months ended September 30, 2022,2023, compared to the same period in 2021,the prior year, due to the following:
(In millions) |
|
|
|
|
|
| ||
Rate changes |
| $ | 7.8 |
|
| $ | 12.3 |
|
Increase in residential volume |
|
| 1.8 |
| ||||
Sales to the market |
|
| 4.8 |
|
|
| (4.5 | ) |
Revenue subject to refund, net |
|
| 0.4 |
|
|
| (2.9 | ) |
Customer fixed and demand charges |
|
| (0.3 | ) | ||||
Other |
|
| 0.4 |
|
|
| (0.4 | ) |
Decrease in residential volume |
|
| (1.6 | ) | ||||
Net decrease in commercial, industrial and other-retail/municipal volume |
|
| (0.6 | ) | ||||
Total |
| $ | 11.2 |
|
| $ | 6.0 |
|
35
35
Electric fuel and purchased power
| Three Months Ended September 30, |
| Three Months Ended September 30, | |||||||||||||||||||
(In millions) | 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
| 2022 |
| $ Change | |||||||||
Fuel for electric generation | $ |
| 21.0 |
|
| $ |
| 18.5 |
|
| $ |
| 2.5 |
| $ | 19.7 |
| $ | 21.0 |
| $ | (1.3) |
Purchased power |
|
| 9.6 |
|
|
|
| 8.6 |
|
|
| 1.0 |
|
| 7.0 |
|
| 9.6 |
| (2.6) |
The $2.5$1.3 million increasedecrease in fuel for electric generation was due to an approximately 29% increase18% decrease in the average cost offset by an approximately 12% decrease15% increase in internal generation. Coal transportation constraints resulted in reducedColumbia generation at Columbia, which required MGEwas higher during the three months ended September 30, 2023, compared to purchase powerthe same period in the prior year as a result of market at higher cost.prices.
The $1.0$2.6 million increasedecrease in purchased power was due to an approximately 40% increasedecrease in market purchases as a result of lowerhigher internal generation.generation, partially offset by an approximately 4% increase in average cost.
Fuel and purchased power costs are generally offset by electric revenue and do not have a significant impact on net income. MGE expects to seek and receive recovery of fuel and purchased power costs outsidethat exceed the fuel rules bandwidth in customer rates. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the fuel rules bandwidth.
Gas deliveries and revenues
The following table compares MGE's gas revenues and gas therms delivered by customer class for each of the periods indicated:
|
| Revenues |
| Therms Delivered |
| Revenues |
| Therms Delivered | ||||||||||||||||||||
(In thousands, except HDD and average |
| Three Months Ended September 30, |
| Three Months Ended September 30, |
| Three Months Ended September 30, |
| Three Months Ended September 30, | ||||||||||||||||||||
rate per therm of retail customer) |
| 2022 |
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
| 2023 |
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||||
Residential |
| $ | 17,167 |
| $ | 14,643 |
| 17.2% |
| 6,166 |
| 5,987 |
| 3.0% |
| $ | 13,719 |
| $ | 17,167 |
| (20.1)% |
| 6,202 |
| 6,166 |
| 0.6% |
Commercial/Industrial |
|
| 11,490 |
|
| 8,069 |
| 42.4% |
| 9,555 |
| 8,889 |
| 7.5% |
|
| 6,016 |
|
| 11,490 |
| (47.6)% |
| 9,335 |
| 9,555 |
| (2.3)% |
Total retail |
| 28,657 |
| 22,712 |
| 26.2% |
| 15,721 |
| 14,876 |
| 5.7% |
| 19,735 |
| 28,657 |
| (31.1)% |
| 15,537 |
| 15,721 |
| (1.2)% | ||||
Gas transportation |
| 1,588 |
| 1,256 |
| 26.4% |
| 15,183 |
| 15,212 |
| (0.2)% |
| 1,587 |
| 1,588 |
| (0.1)% |
| 15,014 |
| 15,183 |
| (1.1)% | ||||
Other |
|
| 65 |
|
| 52 |
| 25.0% |
| — |
| — |
| —% |
|
| 102 |
|
| 65 |
| 56.9% |
| — |
| — |
| —% |
Total |
| $ | 30,310 |
| $ | 24,020 |
| 26.2% |
| 30,904 |
| 30,088 |
| 2.7% |
| $ | 21,424 |
| $ | 30,310 |
| (29.3)% |
| 30,551 |
| 30,904 |
| (1.1)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Heating degree days (normal 134) |
|
|
|
| 135 |
| 50 |
| 170.0% | |||||||||||||||||||
Heating degree days (normal 138) |
|
|
|
| 70 |
| 135 |
| (48.1)% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Average rate per therm |
| $ | 1.823 |
| $ | 1.527 |
| 19.4% |
|
|
|
|
| $ | 1.270 |
| $ | 1.823 |
| (30.3)% |
|
|
|
|
Gas revenue increased $6.3decreased $8.9 million during the three months ended September 30, 2022,2023, compared to the same period in 2021,the prior year, due to the following:
(In millions) |
|
|
|
|
|
| ||
Rate changes |
| $ | 3.9 |
|
| $ | (8.5 | ) |
Increase in volume |
|
| 2.0 |
| ||||
Decrease in volume |
|
| (0.7 | ) | ||||
Other |
|
| 0.4 |
|
|
| 0.3 |
|
Total |
| $ | 6.3 |
|
| $ | (8.9 | ) |
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
36
affect revenues but do not change net income in view of the pass-through treatment of the costs. Payments for natural gas increaseddecreased driving higherlower rates during the three months ended September 30, 2022.2023.
36
The average retail rate per therm for the three months ended 2022, increasedSeptember 30, 2023, decreased approximately 19%30% compared to 2021,the same period in the prior year, reflecting a $5.7 million increasedecrease in natural gas commodity costs (recovered through the PGA).
.
•
Cost of gas sold decreased $9.4 million during the three months ended September 30, 2023, compared to the same period in the prior year primarily related to favorable weather conditions in September 2022.
Cost of gas sold
A $5.7 million increase in cost of gas sold driven by higher cost per therm of gas.year. Average cost per therm increaseddecreased approximately 62%64% and therms delivered decreased approximately 2%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenue above.
Consolidated operations and maintenance expenses
During the three months ended September 30, 2022,2023, operations and maintenance expenses increased $0.7$4.8 million, compared to the same period in the prior year. The following contributed to the net change:
(In millions) |
|
|
|
|
|
| ||
Increased customer accounts costs |
| $ | 0.5 |
| ||||
Increased administrative and general costs |
| $ | 4.1 |
| ||||
Increased electric distribution expenses |
|
| 0.6 |
| ||||
Increased electric production expenses |
|
| 0.4 |
|
|
| 0.3 |
|
Increased transmission costs |
|
| 0.3 |
| ||||
Decreased other expenses |
|
| (0.5 | ) | ||||
Increased other expenses |
|
| 0.2 |
| ||||
Decreased customer accounts costs |
|
| (0.4 | ) | ||||
Total |
| $ | 0.7 |
|
| $ | 4.8 |
|
Consolidated depreciation expense
Electric depreciation expense increased $1.7$3.7 million and gas depreciation expense increased $0.7$0.1 million during the three months ended September 30, 2022,2023, compared to the same period in the prior year. MGE placed Badger Hollow I in service in November 2021. The timingAs part of the in-service datePSCW approved electric limited reopener for 2023, MGE accelerated the depreciation schedule for Columbia Unit 2 from 2038 to 2029 to align with the depreciation schedule previously approved for Columbia Unit 1. The accelerated depreciation schedule, which began in 2023, for Columbia Unit 2 contributed to the increase in electric depreciation expense. The new customer information system went live in September 2021, which increased depreciation expense for both electric and gas in 2022.
Nonregulated Energy Operations - MGE Energy and MGE
The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During both the three months ended September 30, 20222023 and 2021,2022, net income at the nonregulated energy operations segment was $5.6 million and $5.4 million, respectively.million.
Transmission Investment Operations - MGE Energy
The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. ATC Holdco's transmission development activities have been suspended for the near term. During the three months ended September 30, 20222023 and 2021,2022, other income at the transmission investment segment primarily reflects ATC's operations and was $2.7 million and $1.5 million, and $2.5 million, respectively. In August 2022, the U.S. Court of Appeals for the D.C. Circuit vacated the underlying FERC orders regarding methodology for setting authorized return on equity resulting in an additional estimated possible loss. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and "Other Matters" below for additional information concerning ATC and summarized financial information regarding ATC.
37
Consolidated Income Taxes - MGE Energy and MGE
In 2022, the effective electric tax rate increased as a result of the return of electric excess deferred taxes related to the 2017 Tax Act not governed by IRS normalization rules in 2021. These costs were recorded as a regulatory liability in the year of remeasurement. See Footnote 4 of the Notes to Consolidated Financial Statements in this Report for the effective tax rate reconciliation.
37
Noncontrolling Interest, Net of Tax - MGE
Noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus. They are not owned by MGE. Due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with those of MGE, the primary beneficiary of the VIEs. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
MGE Power Elm Road |
| $ | 3.8 |
|
| $ | 3.8 |
|
| $ | 3.7 |
|
| $ | 3.8 |
|
MGE Power West Campus |
|
| 1.8 |
|
|
| 1.8 |
|
|
| 1.8 |
|
|
| 1.8 |
|
Results of Operations
Nine Months Ended September 30, 20222023 and 20212022
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) |
| Revenues |
| Sales (kWh) | ||||||||||||||||||||
|
| Nine Months Ended September 30, |
| Nine Months Ended September 30, |
| Nine Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||||||||||
(In thousands, except CDD) |
| 2022 |
|
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
| 2023 |
|
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||
Residential |
| $ | 123,183 |
| $ | 117,229 |
| 5.1% |
| 679,308 |
| 693,739 |
| (2.1)% |
| $ | 131,552 |
| $ | 123,183 |
| 6.8% |
| 672,760 |
| 679,308 |
| (1.0)% |
Commercial |
| 177,877 |
| 161,270 |
| 10.3% |
| 1,368,060 |
| 1,352,091 |
| 1.2% |
| 193,760 |
| 177,877 |
| 8.9% |
| 1,356,286 |
| 1,368,060 |
| (0.9)% | ||||
Industrial |
| 10,535 |
| 9,469 |
| 11.3% |
| 120,827 |
| 122,493 |
| (1.4)% |
| 10,578 |
| 10,535 |
| 0.4% |
| 114,514 |
| 120,827 |
| (5.2)% | ||||
Other-retail/municipal |
|
| 28,215 |
|
| 26,340 |
| 7.1% |
| 276,843 |
| 276,950 |
| —% |
|
| 30,853 |
|
| 28,215 |
| 9.3% |
| 274,875 |
| 276,843 |
| (0.7)% |
Total retail |
| 339,810 |
| 314,308 |
| 8.1% |
| 2,445,038 |
| 2,445,273 |
| —% |
| 366,743 |
| 339,810 |
| 7.9% |
| 2,418,435 |
| 2,445,038 |
| (1.1)% | ||||
Sales to the market |
| 13,938 |
| 8,854 |
| 57.4% |
| 121,848 |
| 201,902 |
| (39.6)% |
| 9,617 |
| 13,938 |
| (31.0)% |
| 126,739 |
| 121,848 |
| 4.0% | ||||
Other revenues |
|
| 1,167 |
|
| 948 |
| 23.1% |
| — |
| — |
| —% |
|
| 1,267 |
|
| 1,167 |
| 8.6% |
| — |
| — |
| —% |
Total |
| $ | 354,915 |
| $ | 324,110 |
| 9.5% |
| 2,566,886 |
| 2,647,175 |
| (3.0)% |
| $ | 377,627 |
| $ | 354,915 |
| 6.4% |
| 2,545,174 |
| 2,566,886 |
| (0.8)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Cooling degree days (normal 690) |
|
|
|
| 784 |
| 820 |
| (4.4)% | |||||||||||||||||||
Cooling degree days (normal 696) |
|
|
|
| 754 |
| 784 |
| (3.8)% |
Electric revenue increased $30.8$22.7 million during the nine months ended September 30, 2022,2023, compared to the same period in 2021,the prior year, due to the following:
(In millions) | ||||||
Rate changes | $ |
| 32.6 | |||
Other | 0.1 | |||||
Sales to the market |
| (4.3 | ) | |||
Customer fixed and demand charges |
| (2.7 | ) | |||
Net |
| |||||
|
| |||||
| ( | ) | ||||
Decrease in residential volume | ( | ) | ||||
Revenue subject to refund, net | (0.3 | ) | ||||
Total | $ |
| 22.7 |
38
38
Electric fuel and purchased power
| Nine Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(In millions) | 2022 |
| 2021 |
| $ Change | 2023 |
| 2022 |
| $ Change | ||||||
Fuel for electric generation | $ | 48.4 |
| $ | 42.6 |
| $ | 5.8 | $ | 47.1 |
| $ | 48.4 |
| $ | (1.3) |
Purchased power |
| 35.8 |
| 28.9 |
| 6.9 |
| 28.3 |
| 35.8 |
| (7.5) |
The $5.8$1.3 million increasedecrease in fuel for electric generation was due to an approximately 31% increase8% decrease in the average cost offset by an approximately 13% decrease6% increase in internal generation. Coal transportation constraints resultedWest Riverside was purchased in reducedMarch 2023 contributing to the increase in internal generation at Columbia, which required MGEduring the nine months ended September 30, 2023, compared to purchase powerthe same period in the market at higher cost.prior year.
The $6.9$7.5 million increasedecrease in purchased power was due to an approximately 43% increase21% decrease in market purchases as a result of lower customer sales and increased internal generation. An approximately 19% decrease in average cost also contributed to the decrease in purchase power costs.
Fuel and purchased power costs are generally offset by electric revenue and do not have a significant impact on net income. MGE expects to seek and receive recovery of fuel and purchased power costs outsidethat exceed the fuel rules bandwidth in customer rates. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the fuel rules bandwidth.
39
Gas deliveries and revenues
The following table compares MGE's gas revenues and gas therms delivered by customer class for each of the periods indicated:
|
| Revenues |
| Therms Delivered |
| Revenues |
| Therms Delivered | ||||||||||||||||||||
(In thousands, except HDD and average |
| Nine Months Ended September 30, |
| Nine Months Ended September 30, |
| Nine Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||||||||||||||
rate per therm of retail customer) |
| 2022 |
|
| 2021 |
| % Change |
| 2022 |
| 2021 |
| % Change |
| 2023 |
|
| 2022 |
| % Change |
| 2023 |
| 2022 |
| % Change | ||
Residential |
| $ | 97,498 |
| $ | 72,286 |
| 34.9% |
| 77,091 |
| 68,791 |
| 12.1% |
| $ | 86,131 |
| $ | 97,498 |
| (11.7)% |
| 66,948 |
| 77,091 |
| (13.2)% |
Commercial/Industrial |
| 66,913 |
|
| 42,972 |
| 55.7% |
| 73,349 |
| 64,179 |
| 14.3% |
| 55,726 |
|
| 66,913 |
| (16.7)% |
| 66,584 |
| 73,349 |
| (9.2)% | ||
Total retail |
| 164,411 |
| 115,258 |
| 42.6% |
| 150,440 |
| 132,970 |
| 13.1% |
| 141,857 |
| 164,411 |
| (13.7)% |
| 133,532 |
| 150,440 |
| (11.2)% | ||||
Gas transportation |
| 4,804 |
| 4,589 |
| 4.7% |
| 58,059 |
| 55,150 |
| 5.3% |
| 5,354 |
| 4,804 |
| 11.4% |
| 53,319 |
| 58,059 |
| (8.2)% | ||||
Other revenues |
|
| 90 |
|
| 97 |
| (7.2)% |
| — |
| — |
| —% |
|
| 466 |
|
| 90 |
| n.m.% |
| — |
| — |
| —% |
Total |
| $ | 169,305 |
| $ | 119,944 |
| 41.2% |
| 208,499 |
| 188,120 |
| 10.8% |
| $ | 147,677 |
| $ | 169,305 |
| (12.8)% |
| 186,851 |
| 208,499 |
| (10.4)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Heating degree days (normal 4,479) |
|
|
|
| 4,723 |
| 4,404 |
| 7.2% | |||||||||||||||||||
Heating degree days (normal 4,503) |
|
|
|
| 3,999 |
| 4,723 |
| (15.3)% | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Average rate per therm of retail customer |
| $ | 1.093 |
| $ | 0.867 |
| 26.1% |
|
|
|
|
| $ | 1.062 |
| $ | 1.093 |
| (2.8)% |
|
|
|
|
n.m. not meaningful
Gas revenue increased $49.4decreased $21.6 million during the nine months ended September 30, 2022,2023, compared to the same period in 2021,the prior year, due to the following:
(In millions) |
|
|
|
|
|
| ||
Decrease in volume |
| $ | (12.4 | ) | ||||
Rate changes |
| $ | 38.2 |
|
|
| (10.4 | ) |
Increase in volume |
|
| 9.9 |
| ||||
Other |
|
| 1.3 |
|
|
| 1.2 |
|
Total |
| $ | 49.4 |
|
| $ | (21.6 | ) |
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 in view of the pass-through treatment of the costs. Payments for natural gas increaseddecreased driving higherlower rates during the nine months ended September 30, 2022.2023.
The average retail rate per therm excluding customer fixed charge for the nine months ended 2022, increasedSeptember 30, 2023, decreased approximately 26%3% compared to 2021,the same period in the prior year, reflecting a $42.9 million increasedecrease in natural gas commodity costs (recovered through the PGA).
Cost of gas sold
The $42.9 million increase in costCost of gas sold was driven by higherdecreased $20.3 million during the nine months ended September 30, 2023, compared to the same period in the same period in the prior year. Therms delivered decreased approximately 12% and cost per therm of gas. Average cost per therm increased approximately 56%. An increase in volume of approximately 12% also contributed to the increase in cost.
40
therm decreased approximately 9%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenue above.
40
Consolidated operations and maintenance expenses
During the nine months ended September 30, 2022,2023, operations and maintenance expenses increased $6.1$5.3 million, compared to the same period in the prior year. The following contributed to the net change:
(In millions) |
|
|
|
|
|
| ||
Increased administrative and general costs |
| $ | 4.2 |
|
| $ | 4.7 |
|
Increased customer accounts costs |
|
| 2.6 |
| ||||
Increased electric distribution expenses |
|
| 0.5 |
| ||||
Increased electric production expenses |
|
| 1.5 |
| ||||
Increased customer services |
|
| 0.6 |
| ||||
Increased other expenses |
|
| 0.5 |
|
|
| 0.3 |
|
Decreased electric production expenses |
|
| (1.3 | ) | ||||
Decreased customer services |
|
| (0.4 | ) | ||||
Decreased customer accounts costs |
|
| (1.6 | ) | ||||
Decreased electric distribution expenses |
|
| (0.2 | ) | ||||
Total |
| $ | 6.1 |
|
| $ | 5.3 |
|
Consolidated depreciation expense
Electric depreciation expense increased $5.7$10.9 million and gas depreciation expense increased $2.2$0.3 million during the nine months ended September 30, 2022,2023, compared to the same period in the prior year. MGE placed Badger Hollow I in service in November 2021. The timingAs part of the in-service datePSCW approved electric limited reopener for 2023, MGE accelerated the depreciation schedule for Columbia Unit 2 from 2038 to 2029 to align with the depreciation schedule previously approved for Columbia Unit 1. The accelerated depreciation schedule, which began in 2023, for Columbia Unit 2 contributed to the increase in electric depreciation expense. The new customer information system went live in September 2021, which increased depreciation expense for both electric and gas in 2022.
Electric and gas other income
Electric other income increased $2.3 million and gas other income increased $3.7 million during the nine months ended September 30, 2022, compared to the same period in the prior year, primarily related to the collection in 2021 of the deferred pension and other postretirement other than service costs from 2019.
Nonregulated Energy Operations - MGE Energy and MGE
The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During the nine months ended September 30, 20222023 and 2021,2022, net income at the nonregulated energy operations segment was $16.5$16.7 million and $15.9$16.5 million, respectively.
Transmission Investment Operations - MGE Energy
The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. ATC Holdco's transmission development activities have been suspended for the near term. During the nine months ended September 30, 20222023 and 2021,2022, other income at the transmission investment segment primarily reflects ATC's operations and was $7.9 million and $6.6 million, and $7.4 million, respectively. In August 2022, the U.S. Court of Appeals for the D.C. Circuit vacated the underlying FERC orders regarding methodology for setting authorized return on equity resulting in an additional estimated possible loss. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and "Other Matters" below for additional information concerning ATC and summarized financial information regarding ATC.
All Other Operations - MGE Energy
Other income
The decrease of $2.7 million in other income from all other operations during the nine months ended September 30, 2023, primarily results from increased investment losses from our venture capital funds compared
41
to the same period in the prior year. These venture capital investments support early-stage companies working to advance smart technologies, the customer experience, distributed energy resources, electrification, cybersecurity and other priorities for utility companies such as greater sustainability.
Consolidated Income Taxes - MGE Energy and MGE
In 2022, the effective electric tax rate increased as a result of the return of electric excess deferred taxes related to the 2017 Tax Act not governed by IRS normalization rules in 2021. These costs were recorded as a regulatory liability in the year of remeasurement. See Footnote 4 of the Notes to Consolidated Financial Statements in this Report for the effective tax rate reconciliation.
Noncontrolling Interest, Net of Tax - MGE
Noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus. They are not owned by MGE. Due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with those of MGE, the primary beneficiary of the VIEs. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
(In millions) |
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
MGE Power Elm Road |
| $ | 10.5 |
|
| $ | 11.4 |
|
| $ | 11.0 |
|
| $ | 10.5 |
|
MGE Power West Campus |
|
| 5.4 |
|
|
| 5.4 |
|
|
| 5.4 |
|
|
| 5.4 |
|
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 months ended September 30, 2022,2023, except as noted below. Further discussion of the contractual obligations and commercial commitments is included in Footnote 16 of the Notes to Consolidated Financial Statements and "Contractual Obligations and Commercial Commitments for MGE Energy and MGE" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 20212022 Annual Report on Form 10-K.
Purchase Contracts – MGE Energy and MGE
See Footnote 8.c. of Notes to Consolidated Financial Statements in this Report for a description of commitments as of September 30, 2022,2023, that MGE Energy and MGE have entered with respect to various commodity supply and transportation contracts to meet their obligations to deliver electricity and natural gas to customers.
Long-term Debt – MGE Energy and MGE
In November 2022,March 2023, $19.3 million of City of Madison, Wisconsin Industrial Development Revenue Refunding Bonds, Series 2020A were remarketed. In August 2023, MGE entered into a private placement Note Purchase Agreement in which it committed to issue $75$70 million of new long-term debt. See Footnote 6.c. of Notes to Consolidated Financial Statements in this Report for further information on long-term debt issuance.information.
Liquidity and Capital Resources
MGE Energy and MGE expect to have adequate liquidity to support future operations and capital expenditures over the next twelve months. Available resources include cash and cash equivalents, operating cash flows, liquid assets, borrowing working capacity under revolving credit facilities, and access to equity and debt capital markets. MGE Energy expects to generate funds from operations and both long-term and short-term debt financing. See "Credit Facilities" under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the 20212022 Annual Report on Form 10-K for information regarding MGE Energy's and MGE's credit facilities.
42
Cash Flows
The following summarizes cash flows for MGE Energy and MGE during the nine months ended September 30, 20222023 and 2021:2022:
|
| MGE Energy |
| MGE |
| MGE Energy |
| MGE | ||||||||||||||||
(In thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 |
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||
Cash provided by (used for): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Operating activities |
| $ | 144,282 |
| $ | 141,297 |
| $ | 141,786 |
| $ | 135,451 |
| $ | 194,038 |
| $ | 144,282 |
| $ | 190,368 |
| $ | 141,786 |
Investing activities |
| (137,219) |
|
| (118,347) |
| (134,089) |
| (115,591) |
| (156,490) |
|
| (137,219) |
| (151,636) |
| (134,089) | ||||||
Financing activities |
| (12,663) |
|
| 1,656 |
| (8,400) |
| 31,930 |
| (39,309) |
|
| (12,663) |
| (41,626) |
| (8,400) |
Cash Provided by Operating Activities
Cash flows from operating activities for MGE Energy and MGE principally reflect the receipt of customer payments for electric and gas service and outflows related to fuel for electric generation, purchased power, gas, and operation and maintenance expenditures.
MGE Energy
MGE Energy's consolidated net cash provided by operating activities is derived mainly from the electric and gas operations of its principal subsidiary, MGE.
Cash provided by operating activities during the nine months ended September 30, 2022,2023, was $144.3$194.0 million, an increase of $3.0$49.8 million when compared to the same period in the prior year.year, driven by:
MGE Energy's federal and state taxes paid decreased $3.02022,2023, when compared to the prior year. This increase was driven by the 2023 rates approved by the PSCW, effective January 1, 2023.
Working capital accounts (excluding prepaid and accrued taxes) resulted in $17.7usedfrom lower payments for other operation and maintenance expenses.
These increases in net cash provided by operating activities were partially offset by:
Working capital accounts (excluding prepaid and accrued taxes) resulted in $9.1 million in cash used for operating activities during the nine months ended September 30, 2021. Actual purchased gas costs were $6.3 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 recovered throughout 2021. In addition, working capital accounts were impacted by increased accounts receivable and increased inventories, partially offset by increased other current liabilities, decreased unbilled revenues, and increased accounts payable.
Hosted software asset expenditures during the nine months ended September 30, 2022, were $0.5 million. This amount represents a decrease of $2.5 million of cash used2023, when compared to the prior year.
MGE
Cash provided by operating activities during the nine months ended September 30, 2022,2023, was $141.8$190.4 million, an increase of $6.3$48.6 million when compared to the same period in the prior year.year, driven by:
MGE's federal and state taxes paid decreased $4.22022,2023, when compared to the prior year. This increase was driven by the 2023 rates approved by the PSCW, effective January 1, 2023.
Working capital accounts (excluding prepaid and accrued taxes) resulted in $15.3usedfrom lower payments for other operation and maintenance expenses.
43
These increases in net cash provided by operating activities were partially offset by:
43
Working capital accounts (excluding prepaid and accrued taxes) resulted in $9.1 million in cash used for operating activities during the nine months ended September 30, 2021. Actual purchased gas costs were $6.3 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 recovered throughout 2021. In addition, working capital accounts were impacted by increased accounts receivable and increased inventories, partially offset by increased other current liabilities, decreased unbilled revenues, and increased accounts payable.
Hosted software asset expenditures during the nine months ended September 30, 2022, were $0.5 million. This amount represents a decrease of $2.5 million of cash used2023, when compared to the prior year.
Capital Requirements and Investing Activities
MGE Energy
MGE Energy's cash used for investing activities increased $18.9$19.3 million during the nine months ended September 30, 2022,2023, when compared to the same period in the prior year.
Capital expenditures during the nine months ended September 30, 2022,2023, were $133.4$150.3 million. This amount represents an increase of $19.3$16.9 million from the expenditures made in the same period in the prior year. This increase primarily reflects the increasepurchase of expenditures for Badger Hollow II25 MW of West Riverside and Paris.purchase of Red Barn wind farm.
Proceeds from the sale ofCapital contributions in ATC and other investments decreased $0.8increased $2.0 million during the nine months ended September 30, 2022,2023, when compared to the same period in the prior year.
MGE
MGE's cash used for investing activities increased $18.5$17.5 million during the nine months ended September 30, 2022,2023, when compared to the same period in the prior year.
Capital expenditures during the nine months ended September 30, 2022,2023, were $133.4$150.3 million. This amount represents an increase of $19.3$16.9 million from the expenditures made in the same period in the prior year. This increase primarily reflects the increasepurchase of expenditures for Badger Hollow II25 MW of West Riverside and Paris.purchase of Red Barn wind farm.
Capital Expenditures
The following table shows MGE Energy's forecasted capital expenditures for 20222023 through 2025:2028:
|
|
|
| Forecasted |
|
| Forecasted |
| |||||||||||||||||||||||||||||||||||||
(In thousands) |
|
|
| 2022(a) |
| 2023 |
|
| 2024 |
|
| 2025 |
|
| 2023(a) |
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| 2028 |
| |||||||||||||||
Electric |
|
| $ | 138,200 |
|
| $ | 181,000 |
|
| $ | 185,100 |
|
| $ | 174,400 |
|
| $ | 173,000 |
|
| $ | 177,000 |
|
| $ | 186,000 |
|
| $ | 193,000 |
|
| $ | 222,000 |
|
| $ | 207,000 |
| ||||
Gas |
|
|
| 25,300 |
|
|
| 26,200 |
|
|
| 25,600 |
|
|
| 23,200 |
|
|
| 33,000 |
|
|
| 28,000 |
|
|
| 29,000 |
|
|
| 32,000 |
|
|
| 29,000 |
|
|
| 28,000 |
| ||||
Utility plant total |
|
|
| 163,500 |
|
|
| 207,200 |
|
|
| 210,700 |
|
|
| 197,600 |
|
|
| 206,000 |
|
|
| 205,000 |
|
|
| 215,000 |
|
|
| 225,000 |
|
|
| 251,000 |
|
|
| 235,000 |
| ||||
Nonregulated |
|
|
| 7,700 |
|
|
| 7,900 |
|
|
| 7,800 |
|
|
| 6,100 |
|
|
| 6,000 |
|
|
| 9,000 |
|
|
| 10,000 |
|
|
| 7,000 |
|
|
| 6,000 |
|
|
| 8,000 |
| ||||
MGE Energy total |
|
| $ | 171,200 |
|
| $ | 215,100 |
|
| $ | 218,500 |
|
| $ | 203,700 |
|
| $ | 212,000 |
|
| $ | 214,000 |
|
| $ | 225,000 |
|
| $ | 232,000 |
|
| $ | 257,000 |
|
| $ | 243,000 |
|
Forecasted capital expenditures are based upon management's assumptions with respect to future events, including the timing and amount of expenditures associated with environmental compliance initiatives, legislative and regulatory action, supply chain and market disruptions, customer demand and support for electrification and renewable energy resources, energy conservation programs, load growth, the timing of any required regulatory approvals, and the adequacy of rate recovery. Actual events may differ materially from these assumptions and result in material changes to those forecasted amounts.
MGE is targeting at least 80% carbon reduction from electric generation by 2030 (from 2005 levels) and net-zero carbon electricity by 2050. Solar, wind, and battery storage projects are a major step toward deep decarbonization and greater use of clean energy sources in pursuit of our goal. MGE continues to evaluate solar, wind, and battery
44
storage projects that align with its goals as legacy fossil fuel-fired facilities are retired. The target early retirement
44
date for Columbia is June 2026. MGE has included forecasted capital expenditures for the years 20222023 through 20252026 for projects to replace Columbia's generation. Additional replacement
The following table provides further detail of MGE Energy's forecasted capital expenditures, are expected to continue beyond 2025.separating spending into capital project categories for 2024 through 2028:
(In thousands) |
| Forecasted |
| |||||||||||||||||
For the years ended December 31, |
| 2024 |
|
| 2025 |
|
| 2026 |
|
| 2027 |
|
| 2028 |
| |||||
Electric renewables(a) |
| $ | 76,000 |
|
| $ | 102,000 |
|
| $ | 114,000 |
|
| $ | 146,000 |
|
| $ | 132,000 |
|
Electric production |
|
| 42,000 |
|
|
| 21,000 |
|
|
| 20,000 |
|
|
| 13,000 |
|
|
| 13,000 |
|
Electric distribution |
|
| 59,000 |
|
|
| 63,000 |
|
|
| 59,000 |
|
|
| 63,000 |
|
|
| 62,000 |
|
Gas distribution |
|
| 28,000 |
|
|
| 29,000 |
|
|
| 32,000 |
|
|
| 29,000 |
|
|
| 28,000 |
|
Utility plant total |
|
| 205,000 |
|
|
| 215,000 |
|
|
| 225,000 |
|
|
| 251,000 |
|
|
| 235,000 |
|
Nonregulated |
|
| 9,000 |
|
|
| 10,000 |
|
|
| 7,000 |
|
|
| 6,000 |
|
|
| 8,000 |
|
MGE Energy total |
| $ | 214,000 |
|
| $ | 225,000 |
|
| $ | 232,000 |
|
| $ | 257,000 |
|
| $ | 243,000 |
|
Our forecasted capital expenditures reflect the following significant renewable projects that are proposedcompleted or currently under construction:
Project | Source | Ownership Interest | Share of | Share of |
| |||||||
Red Barn(a) | Wind | 10% | 9.16MW | $18 million |
| |||||||
Badger Hollow II(a) | Solar | 33% | 50 MW | $ |
| |||||||
Paris(a) | Solar/Battery | 10% |
| $ |
| |||||||
Darien |
| Solar | 10% |
| 25 MW | $ | 2024(f) | |||||
Koshkonong |
| Solar | 10% |
| 30 MW | $ |
|
In 2022,2023, MGE notified the PSCW of increases in projected costs at Badger Hollow II, Paris, and Paris.Darien. The main drivers were increases in the costs of key commodities, labor, and solar modules resulting from supply chain and market disruptions. See Footnote 12 of Notes to Consolidated Financial Statements in this Report for more information on these projects. Furthermore, solar procurement disruptions have also shifted construction timelines for Darien and Koshkonong. Projected completion dates of these projects are one year later than originally anticipated.timelines. MGE continues to assess the potential impact of these disruptions on current and future solar projects whichthat may result in an increase in costs or delays in construction timelines. See further information on procurement disruptions discussed earlier under "Executive Overview."Other Matters" section below.
West Riverside: In 2016,March 2023, MGE entered into an agreement with WPL under which MGE may acquire up to 50purchased 25 MW of capacity in a gas-fired generating plant constructed by WPL at itsof West Riverside Energy Center in Beloit, Wisconsin, during the five-year period following the in-service date of the plant. The plant was placed in service in May 2020.Riverside. In January 2022,September 2023, MGE, along with joint applicants, filed an application with the PSCW requesting approval for a sale and purchase of additional ownership interests in West Riverside. If approved, MGE's share of West Riverside will beincrease 25 MW at a purchase price of approximately $25 million. The closing and actual transfer of ownership is expected to occur in March 2023. MGE also retains the option to purchase an additional 25 MW of capacity from West Riverside until May 2025. MGE currently expects to exercise this option in a future period.June 2024.
Electric and Gas Distribution: In 20222023 through 2025,2028, electric and gas capital expenditures include investment in enhanced metering solutions to provide customers with more timely and detailed energy use information. Investments in advanced metering infrastructure will provide additional benefits including outage and demand
45
response and automated meter reading capabilities. Forecasted total capital expenditures infor those years is approximately $24$47 million.
Cash Used for/Provided byfor Financing Activities
MGE Energy
Cash used for MGE Energy's financing activities was $12.7$39.3 million during the nine months ended September 30, 2022,2023, compared to cash proceeds of $1.7$12.7 million for the same period in the prior year.
During the nine months ended September 30, 2022,2023, dividends paid were $42.8$44.9 million compared to $40.8$42.8 million in the prior year. The increase reflected a higher dividend rate per share ($1.1831.243 vs. $1.128)$1.183).
45
During the nine months ended September 30, 2021,2023, MGE borrowed $100.0issued $90 million of senior unsecured notes which waswere used to repay $30 million of maturing unsecured senior notes and to assist with financing additional capital expenditures and other corporate obligations. In addition, $19.3 million of Industrial Development Revenue Bonds were tendered by their holders as required by the terms of the bonds and remarketed as permitted by those terms. There were no long-term debt borrowings during the nine months ended September 30, 2022.
During the nine months ended September 30, 2022,2023, net short-term debt borrowingsrepayments were $34.5$48.5 million, compared to $52.5$34.5 million of repaymentsborrowings in the same period in the prior year.
MGE
During the nine months ended September 30, 2022,2023, cash used for MGE's financing activities was $8.4$41.6 million, compared to cash proceeds of $31.9$8.4 million for the same period in the prior year.
CashDuring the nine months ended September 30, 2023, cash dividends to parent (MGE Energy) were $30.0 million, compared to $21.0 million during the nine months ended September 30, 2022. There were no cash dividends to parent in the same period in the prior year.
Distributions to parent from noncontrolling interest, which represent distributions from MGE Power Elm Road and MGE Power West Campus to MGE Energy, were $17.5$17.3 million during the nine months ended September 30, 2022,2023, compared to $10.5$17.5 million in the same period in the prior year.
During the nine months ended September 30, 2021,2023, MGE borrowed $100.0issued $90 million of senior unsecured notes which waswere used to repay $30 million of maturing unsecured senior notes and to assist with financing additional capital expenditures and other corporate obligations. In addition, $19.3 million of Industrial Development Revenue Bonds were tendered by their holders as required by the terms of the bonds and remarketed as permitted by those terms. There were no long-term debt borrowings during the nine months ended September 30, 2022.
During the nine months ended September 30, 2022,2023, net short-term debt borrowingsrepayments were $34.5$48.5 million, compared to $52.5$34.5 million of repaymentsborrowings in the same period in the prior year.
Capitalization Ratios
MGE Energy's capitalization ratios were as follows:
|
| MGE Energy |
| MGE Energy | ||||
|
| September 30, 2022 |
| December 31, 2021 |
| September 30, 2023 |
| December 31, 2022 |
Common shareholders' equity |
| 62.1% |
| 62.2% |
| 61.3% |
| 60.4% |
Long-term debt(a) |
| 35.6% |
| 37.5% |
| 37.5% |
| 35.7% |
Short-term debt |
| 2.3% |
| 0.3% |
| 1.2% |
| 3.9% |
46
Credit Ratings
MGE Energy's and MGE's access to the capital markets, including, in the case of MGE, the commercial paper market, and their respective financing costs in those markets, may depend on the credit ratings of the entity that is accessing the capital markets.
None of MGE Energy's or MGE's borrowing is subject to default or prepayment as a result of a downgrading of credit ratings, although a downgrading of MGE's credit ratings would increase fees and interest charges under both MGE Energy's and MGE's credit agreements.
Environmental Matters
See the discussion of environmental matters included in the 20212022 Annual Report on Form 10-K, as updated by Footnote 8.a. of Notes to Consolidated Financial Statements in this Report.
46
Other Matters
Rate Matters
In December 2021, the PSCW approved a settlement agreement for MGE's 2022 rate case. The settlement agreement provides for an 8.81%to increase to electric rates and a 2.15% increase to gas rates for 2022. As part of that settlement agreement, the PSCW approved a 0.96% increase in 2023 gas rates and a potential 2023 electric rate change to be addressed through a limited rate case reopener.
In AprilDecember 2022, MGE filed with the PSCW approved the 2023 electric rate case limited reopener. The reopener provides for a limited rate reopener proposing a 4.38%9.01% increase to electric rates for 2023.
In April 2023, MGE filed a 2024/2025 rate application with a proposed increase of 3.75% for electric rates and a 2.56% increase for gas rates in 2024. The application also proposes a 3.41% increase for electric rates and a 1.66% increase to gas rates for 2025. PSCW approval is pending. A final order is expected before the end of 2023.
Details related to MGE's 2022/2023 approved settlement agreement and pending2023 electric limited reopener:reopener, and 2024/2025 proposed rate proceeding are as follows:
(Dollars in thousands) |
| Authorized Average Rate Base(a) |
| Authorized Average CWIP(b) |
| Authorized Return on Common Equity(c) |
| Common Equity Component of Regulatory Capital Structure |
| Effective Date | ||
Electric (2022 Test Period) |
| $ | 1,044,362 |
| $ | 19,976 |
| 9.8% |
| 55.63% |
| 1/1/2022 |
Gas (2022 Test Period) |
| $ | 299,319 |
| $ | 11,410 |
| 9.8% |
| 55.63% |
| 1/1/2022 |
Electric (2023 Test Period)(d) |
| $ | 1,159,155 |
| $ | 19,976 |
| 9.8% |
| 55.63% |
| 1/1/2023 |
Gas (2023 Test Period) |
| $ | 312,270 |
| $ | 8,228 |
| 9.8% |
| 55.63% |
| 1/1/2023 |
(Dollars in thousands) |
| Authorized Average Rate Base(a) |
| Authorized Average CWIP(b) |
| Authorized Return on Common Equity(c) |
| Common Equity Component of Regulatory Capital Structure |
| Effective Date | ||
Electric (2023 Test Period) |
| $ | 1,162,516 |
| $ | 19,976 |
| 9.8% |
| 55.63% |
| 1/1/2023 |
Gas (2023 Test Period) |
| $ | 312,270 |
| $ | 8,228 |
| 9.8% |
| 55.63% |
| 1/1/2023 |
Electric (2024 Test Period)(d) |
| $ | 1,202,123 |
| $ | 13,995 |
| 9.8% |
| 56.12% |
| 1/1/2024 |
Gas (2024 Test Period)(d) |
| $ | 338,417 |
| $ | 3,701 |
| 9.8% |
| 56.12% |
| 1/1/2024 |
Electric (2025 Test Period)(d) |
| $ | 1,281,236 |
| $ | 13,871 |
| 9.8% |
| 56.05% |
| 1/1/2025 |
Gas (2025 Test Period)(d) |
| $ | 345,463 |
| $ | 3,341 |
| 9.8% |
| 56.05% |
| 1/1/2025 |
See Footnote 9 of Notes to Consolidated Financial Statements in this Report for further discussion of rate proceedings.
47
ATC
MISO transmission owners, including ATC, are involved in two complaints filed at FERC by several parties challenging that the base ROE in effect for MISO transmission owners, including ATC, wasas being no longer just and reasonable. Each complaint provided for a 15-month statutory refund period: November 12, 2013 through February 11, 2015 (the "First Complaint Period") and February 12, 2015 through May 11, 2016 (the "Second Complaint Period").
In May 2020, FERC issued an order further refining the methodology for setting authorized ROE. This refined methodology increased the authorized ROE from 9.88% to 10.02%. This base ROE is effective for the First Complaint Period and for all periods following September 2016. This order also dismissed the second complaint. Accordingly, no refunds were ordered for the Second Complaint Period.
As a result of the May 2020 FERC order, our share of ATC's earnings reflected a $0.6 million reduction of our reserve. Additionally, our share of ATC's earnings reflected the derecognition of a possible refund related to the Second Complaint Period as ATC considered such a refund to be no longer probable. However, due to pending requests for rehearing, a loss related to the 2015 complaint remains possible. Our share of the estimated refund for the Second Complaint Period is approximately $2.3 million. MGE has not recorded a possible loss for the Second Complaint Period.
Several petitions for review of FERC’s prior orders were filed with the U.S. Court of Appeals for the D.C. Circuit (the "Court")(Court) and an oral argument was held in November 2021. In August 2022, the Court ruled that four of the five
47
arguments made by the complaining parties were unpersuasive. However, the Court agreed that FERC’s decision to reintroduce a risk-premium model into its ROE methodology was arbitrary and capricious. The Court vacated the underlying orders for the First Complaint Period and remanded to FERC for further proceedings. In September 2022, our share of ATC's earnings reflected an estimated possible loss of approximately $0.8$0.9 million, inclusive of interest and net of tax, for a possible additional refund for the First Complaint Period and for the period following the Second Complaint Period. Although the Court agreed that FERC was correct to use the base ROE established in the first complaint to adjudicate the second, and that FERC was right to dismiss the second complaint, the second complaint was also remanded for FERC to reopen proceedings. Any reduction in ATC's ROE could result in lower equity earnings and distributions from ATC in the future.
We derived approximately 5.1%5.7% and 5.7%5.1% of our net income during the nine months ended September 30, 20222023 and 2021,2022, respectively, from our investment in ATC.
Inflation ReductionUyghur Forced Labor Protection Act
In AugustJune 2021, the U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) against silica-based products made by Hoshine Silicon Industry Co. Ltd., a company located in China's Xinjiang Uyghur Autonomous Region. As a result of this WRO, CBP is holding many solar panels imported into the United States until importers can prove that the panels do not contain materials originating from this region. The Uyghur Forced Labor Protection Act (UFLPA), a federal law that became effective on June 21, 2022, further established that all goods mined, produced, or manufactured wholly or in part in Xinjiang or by certain defined entities are prohibited from U.S. importation. Suppliers for MGE's current solar projects were able to provide the CBP sufficient documentation to meet WRO compliance requirements, and MGE expects the same will be true for UFLPA purposes, however we cannot currently predict what, if any, impact the UFLPA will have on the overall supply of solar panels into the United States and the related impact to timing and cost of solar projects included in our capital plan. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we have filed and expect to continue to file a notification with the PSCW and expect to request recovery of any increases in MGE's future rate proceedings.
U.S. Department of Commerce Investigation
In March 2022, the Inflation Reduction Act (IRA) was signed into law. Among other provisions,U.S. Department of Commerce (USDOC) announced a solar tariff investigation on solar panels from four Southeast Asian countries. This investigation could result in additional tariffs on solar panels. In June 2022, the IRA: extends current PTC and ITC for renewable technologies (e.g., wind and solar); restores full value of the PTC and ITC for qualifying facilities placed into service after 2021 that satisfy prevailing wage and apprenticeship requirements; createsUSDOC issued a PTC24-month exemption from tariffs for solar clean hydrogenpanel and nuclear; establishesmodule imports from these four
48
countries. MGE is currently assessing the potential impact of these disruptions on current and future solar projects which may result in an ITCincrease in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for energy storage, microgrids,specific projects, we have filed and interconnection facilities; and allows companies to monetize or sell credits to unrelated parties. In addition, the IRA created a new corporate alternative minimum tax (AMT). MGE Energy does not expect to be subjectcontinue to file a notification with the AMTPSCW and expect to request recovery of any increases in the near term. Implementation of IRA provisions is subject to the issuance of additional guidance by the U.S. Treasury Department. While the final impact cannot be determined at this time, the IRA is not expected to have a material impact on MGE Energy and MGE for the year ending December 31, 2022.MGE's future rate proceedings.
Adoption of Accounting Principles and Recently Issued Accounting Pronouncements
See Footnote 2 of Notes to Consolidated Financial Statements in this Report for discussion of new accounting pronouncements.
4849
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There were no material changes to the market risks disclosed in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 20212022 Annual Report on Form 10-K, except as noted below..
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 23% during the nine months ended September 30, 2022.
Item 4. Controls and Procedures.
During the third quarter of 2022,2023, each registrant's management, including the principal executive officer and principal financial officer, evaluated its disclosure controls and procedures related to the recording, processing, summarization, and reporting of information in its periodic reports that it files with the SEC. These disclosure controls and procedures have been designed to ensure that material information relating to that registrant, including its subsidiaries, is accumulated and made known to that registrant's management, including these officers, by other employees of that registrant and its subsidiaries as appropriate to allow timely decisions regarding required disclosure, and that this information is recorded, processed, summarized, evaluated, and reported, as applicable, within the time periods specified in the SEC's rules and forms. The evaluations take into account changes in the internal and external operating environments that may impact those controls and procedures. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision making can be faulty and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Also, MGE Energy does not control or manage certain of its unconsolidated entities and thus, its access and ability to apply its procedures to those entities is more limited than is the case for its consolidated subsidiaries.
As of September 30, 2022,2023, each registrant's principal executive officer and principal financial officer concluded that its disclosure controls and procedures were effective. Each registrant intends to strive continually to improve its disclosure controls and procedures to enhance the quality of its financial reporting.
During the quarter ended September 30, 2022,2023, there were no changes in either registrant's internal controls over financial reporting that materially affected, or are reasonably likely to affect materially, that registrant's internal control over financial reporting.
49
50
PART II. OTHER INFORMATION.
Item 1. Legal Proceedings.
MGE Energy and MGE
MGE Energy and its subsidiaries, including MGE, from time to time are involved in various legal proceedings that are handled and defended in the ordinary course of business. See Footnote 8.a. and 8.b. of Notes to Consolidated Financial Statements in this Report for more information.
Item 1A Risk Factors.
There were no material changes from the risk factors disclosed in Item 1A. Risk Factors in our 20212022 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Under the MGE Energy, Inc. Direct Stock Purchase and Dividend Reinvestment Plan (Stock Plan), common stock shares purchased by plan participants may be either shares issued by MGE Energy or shares purchased on the open market, as determined from time to time by MGE Energy. Shares issued by MGE Energy are covered by an existing registration statement. Shares purchased in the open market are purchased at the direction of the plan participants by MGE Energy's transfer agent's securities broker-dealer for the accounts of those plan participants. Subject to the plan's restrictions, the timing and amount of open market purchases is determined by the plan participants and the broker-dealer. MGE Energy is not involved in the open market purchases. During 2022,2023, shares purchased under the Stock Plan have been purchased in the open market.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable to MGE Energy and MGE.
Item 5. Other Information.
Expected Issuance of Notes
During the three months ended September 30, 2023, no director or officer of MGEE Energy or Madison Gas and Electric
On November 1, 2022, MGE entered intoadopted or terminated a private placement Note Purchase AgreementRule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as defined in which it committed to issue $25 millionItem 408(a) of 5.43% senior notes, Series A, due December 1, 2032, $15 million of 5.43% senior notes, Series B, due February 15, 2033, and $35 million of 5.53% senior notes, Series C, due February 15, 2035. Funding will occur on December 1, 2022 for Series A notes and on February 28, 2023 for Series B notes and Series C notes. The proceeds of the notes will be used to assist with capital expenditures and other corporate obligations.Regulation S-K.
The Series A, Series B, and Series C notes are redeemable at any time at MGE's option at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued interest to the redemption date and a make-whole premium (not less than zero) equal to the excess, if any, of the discounted present value of the remaining scheduled payments of principal and interest on the notes to be redeemed over the principal amount of the notes to be redeemed, except that no make-whole premium is due on a note that is redeemed during the 90-day period immediately preceding and ending on its maturity date. Following a change in control event, MGE must offer to prepay the notes at a price equal to 100% of the principal amount of the notes, plus accrued interest to the date of prepayment, but without any make-whole premium. The prepayment offer expires if not accepted by a holder of notes within a defined period. A change in control event is deemed to have occurred if MGE does not have an investment grade rating for its senior, unsecured, long-term indebtedness from at least two of Standard & Poor's Rating Services, Moody's Investors Service or any other nationally recognized statistical rating agency, within 90 days after an acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE Energy, Inc. by one person, or two or more persons acting in concert.
50
Events of default under the Note Purchase Agreement include failures to pay principal, make-whole premium or interest on the notes; defaults in the performance of various covenants; cross-defaults to specified other indebtedness; failure to pay specified judgments; and certain bankruptcy-related events; subject to any applicable cure periods. The Note Purchase Agreement requires MGE to maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%. Both consolidated indebtedness and consolidated total capitalization are determined in accordance with generally accepted accounting principles, except that amounts included within MGE's indebtedness and capitalization from "variable interest entities" as a result of the application of FASB Interpretation No. 46, Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51, as modified, are excluded.
The Note Purchase Agreement also restricts MGE from issuing "Priority Debt" in an amount exceeding 20% of its consolidated assets. MGE has agreed not to use the capacity to issue Priority Debt to grant a lien to secure its principal credit facility indebtedness without simultaneously providing that the notes be equally and ratably secured with the principal credit facility indebtedness so long as such indebtedness is so secured. Priority Debt is defined as any indebtedness of MGE secured by liens other than specified liens permitted by the Note Purchase Agreement and certain unsecured indebtedness of certain subsidiaries. Principal credit facility indebtedness means the indebtedness under MGE's Amended and Restated Credit Agreements dated as of February 7, 2019, with the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, and with the lenders party thereto and US Bank National Association, as Administrative Agent, or, in each case, any replacement credit agreement, including amendments and restatements.
51
Item 6. Exhibits.
Ex. No. | Exhibit Description | |
|
| |
* | 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. | |
* | 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. | |
* | 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 | |
* | 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 | |
** | 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. | |
** | 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. | |
** | 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 | |
** | 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. |
52
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 | /s/ Jeffrey M. Keebler |
Jeffrey M. Keebler Chairman, President and Chief Executive Officer (Duly Authorized Officer) | |
Date: November | /s/ Jared J. Bushek |
Jared J. Bushek Vice President - (Chief Financial Officer) | |
Date: November | /s/ Tamara J. Johnson |
Tamara J. Johnson Vice President - Chief Accounting Officer and Controller (Chief Accounting Officer) |
53
Signatures – Madison Gas and Electric Company
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MADISON GAS AND ELECTRIC | |
Date: November | /s/ Jeffrey M. Keebler |
Jeffrey M. Keebler Chairman, President and Chief Executive Officer (Duly Authorized Officer) | |
Date: November | /s/ Jared J. Bushek |
Jared J. Bushek Vice President - (Chief Financial Officer) | |
Date: November | /s/ Tamara J. Johnson |
Tamara J. Johnson Vice President - Chief Accounting Officer and Controller (Chief Accounting Officer) |
54