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What changed in MGE ENERGY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MGE ENERGY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+620 added−609 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in MGE ENERGY INC's 2023 10-K

620 paragraphs added · 609 removed · 485 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

33 edited+11 added−7 removed18 unchanged
Biggest changeBy contract, a total of 6,515,510 Dth of gas can be injected into ANR's storage fields in Michigan from April 1 through October 31. These gas supplies are then available for withdrawal during the subsequent heating season, November 1 through March 31.
Biggest changeMGE meets customer demand by using firm supplies under contracts finalized before the heating season, supplies in storage (injected during the summer), and other firm supplies purchased during the winter period. By contract, a total of approximately 6.5 million Dth of gas can be injected into ANR's storage fields in Michigan from April 1 through October 31.
MGE Energy operates in the following business segments: • Regulated electric utility operations – generating, purchasing, and distributing electricity through MGE. • Regulated gas utility operations – purchasing and distributing natural gas through MGE. • Nonregulated energy operations – owning and leasing electric generating capacity that assists MGE through MGE Energy's wholly owned subsidiaries MGE Power Elm Road and MGE Power West Campus. • Transmission investments – representing our investment in American Transmission Company LLC, a company engaged in the business of providing electric transmission services primarily in Wisconsin, and our investment in ATC Holdco LLC, a company created to facilitate out-of-state electric transmission development and investments. • All other – investing in companies and property that relate to the regulated operations and financing the regulated operations, through its wholly owned subsidiaries CWDC, MAGAEL, MGE State Energy Services, North Mendota, and Corporate functions.
MGE Energy operates in the following business segments: • Regulated electric utility operations – generating, purchasing, and distributing electricity through MGE. • Regulated gas utility operations – purchasing and distributing natural gas through MGE. • Nonregulated energy operations – owning and leasing electric generating capacity that assists MGE through MGE Energy's wholly owned subsidiaries MGE Power Elm Road and MGE Power West Campus. • Transmission investments – representing our investment in American Transmission Company LLC, a company engaged in the business of providing electric transmission services primarily in Wisconsin, and our investment in ATC Holdco LLC, a company created to facilitate out-of-state electric transmission development and investments. • All other – investing in companies and property that relate to the regulated operations and financing the regulated operations, through its wholly owned subsidiaries CWDC, MAGAEL, North Mendota, and Corporate functions.
Charge@Home, MGE's home EV charging program, makes it easy for EV drivers to charge efficiently and conveniently. We have continued to add EVs to our fleet and are targeting 100% all-electric or plug-in hybrid light-duty vehicles by 2030. Additionally, we are working with the City of Madison to further the electrification of its vehicles and buses.
Charge@Home, MGE's home EV charging program, 10 makes it easy for EV drivers to charge efficiently and conveniently. We have continued to add EVs to our fleet and are targeting 100% all-electric or plug-in hybrid light-duty vehicles by 2030. Additionally, we are working with the City of Madison to further the electrification of its vehicles and buses.
See "Nonregulated Energy Operations" below for more information regarding generating capacity leased to MGE by nonregulated subsidiaries. Purchased power MGE enters into short- and long-term purchase power commitments with third parties to meet a portion of its anticipated electric energy supply needs.
See " Nonregulated Energy Operations " below for more information regarding generating capacity leased to MGE by MGE Energy's nonregulated subsidiaries. Purchased power MGE enters into short- and long-term purchase power commitments with third parties to meet a portion of its anticipated electric energy supply needs.
The IPCC modeling available suggested that by 2050, emissions from electricity generation in industrialized countries should be 87% to 99% lower than the 2005 baseline. The study determined that our 2050 goal is in line with model benchmarks to limit global warming to 1.5 degrees Celsius above pre-industrial levels.
The IPCC modeling available suggested that by 2050, emissions from electricity generation in industrialized countries should be 87% to 99% lower than the 2005 baseline. The analysis determined that our 2050 goal is in line with model benchmarks to limit global warming to 1.5 degrees Celsius above pre-industrial levels.
Our Renewable Energy Rider and Shared Solar programs reduce MGE's carbon emissions while providing customers the ability to purchase renewable energy to meet their energy needs, and we have been working on many fronts in the community to further the electrification of transportation.
Our RER and Shared Solar programs reduce MGE's carbon emissions while providing customers the ability to purchase renewable energy to meet their energy needs, and we have been working on many fronts in the community to further the electrification of transportation.
These amounts are reflected in "Adjusted total fuel sources." MGE is working toward a more sustainable future for the benefit of all its investors, employees, customers and the broader community. MGE is targeting net-zero carbon electricity by 2050. In early 2022, MGE committed to achieving carbon reductions of at least 80% by 2030, from 2005 levels.
These amounts are reflected in "Adjusted total fuel sources." MGE is working toward a more sustainable future for the benefit of its investors, employees, customers and the broader community. MGE is targeting net-zero carbon electricity by 2050 and MGE has committed to achieving carbon reductions of at least 80% by 2030 (from 2005 levels).
As of December 31, 2022, MGE has 30 MW of a renewable purchase power commitment for each of the next five years. Gas Utility Operations MGE transports and distributes natural gas in a service area covering 1,684 square miles in seven south-central Wisconsin counties. The service area includes the city of Madison, Wisconsin and surrounding areas.
As of December 31, 2023, MGE has 30 MW of a renewable purchase power commitment for each of the next four years. Gas Utility Operations MGE transports and distributes natural gas in a service area covering 1,684 square miles in seven south-central Wisconsin counties. The service area includes the city of Madison, Wisconsin and surrounding areas.
MGE's contracts for firm transportation service of gas include winter maximum daily quantities of: • 185,650 Dth (including 116,078 Dth of storage withdrawals) on ANR. • 80,410 Dth on NNG. Nonregulated Energy Operations MGE Energy, through our subsidiaries, has developed generation sources that assist MGE in meeting the electricity needs of our customers.
MGE's contracts for firm transportation service of gas include winter maximum daily quantities of: • 185,650 Dth (including 116,078 Dth of storage withdrawals) on ANR. • 81,453 Dth on NNG. Nonregulated Energy Operations MGE Energy, through our subsidiaries, has developed generation sources that assist MGE in meeting the electricity needs of our customers.
MGE offers substantially all of its generation to the MISO market and purchases its load requirement from the MISO market in accordance with the MISO tariff. MGE also participates in the ancillary services market operated by MISO, which is an extension of the existing energy market.
MGE offers substantially all of its generation to the MISO market and purchases its electric supply, or load requirement from the MISO market in accordance with the MISO tariff. MGE also participates in the ancillary services market operated by MISO, which is an extension of the existing energy market.
By 2035, MGE expects that the Elm Road Units will be fully transitioned away from coal, which will eliminate coal as an owned generation source for MGE. 9 • Renewable generation - Our solar, wind, and battery storage projects, as described below, are a major step toward deep decarbonization and greater use of clean energy sources in pursuit of our net-zero carbon goal.
By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal, which will eliminate coal as an owned generation source for MGE. 9 • Renewable generation - Our solar, wind, and battery storage projects are a major step toward deep decarbonization and greater use of clean energy sources in pursuit of our net-zero carbon goal.
As of December 31, 2022, MGE supplied natural gas service to approximately 173,000 customers in the cities of Elroy, Fitchburg, Lodi, Madison, Middleton, Monona, Prairie du Chien, Verona, and Viroqua; 25 villages; and all or parts of 50 townships.
As of December 31, 2023, MGE supplied natural gas service to approximately 176,000 customers in the cities of Elroy, Fitchburg, Lodi, Madison, Middleton, Monona, Prairie du Chien, Verona, and Viroqua; 25 villages; and all or parts of 50 townships.
The table above nets purchases and sales within the same hour in the two MISO markets. For the years ended December 31, 2022, 2021, and 2020, the amount netted between Day-ahead and the Real-time MISO markets was 303,428 MWh, 232,764 MWh, and 319,483 MWh, respectively.
The table above nets purchases and sales within the same hour in the two MISO markets. For the years ended December 31, 2023, 2022, and 2021, the amount netted between Day-ahead and the Real-time MISO markets was 256,571 MWh, 303,428 MWh, and 232,764 MWh, respectively.
As of December 31, 2022, MGE supplied electric service to approximately 161,000 customers, with approximately 90% located in the cities of Fitchburg, Madison, Middleton, and Monona and 10% in adjacent areas. 7 Electric sales, customers, and revenues for 2022 were comprised of the following: Electric operations accounted for approximately 65.2%, 69.4%, and 73.2% of MGE's total 2022, 2021, and 2020 regulated revenues, respectively.
As of December 31, 2023, MGE supplied electric service to approximately 163,000 customers, with approximately 90% located in the cities of Fitchburg, Madison, Middleton, and Monona and 10% in adjacent areas. 7 Electric sales, customers, and revenues for 2023 were comprised of the following: Electric operations accounted for approximately 71%, 65%, and 69% of MGE's total 2023, 2022, and 2021 regulated revenues, respectively.
Renewable Energy Rider (RER) – Under this program, MGE partners with large energy users on customized renewable energy solutions. MGE owns the generation assets and RER customers are billed a contractual renewable resource rate for all costs associated with the construction and ongoing operations of the renewable generation facility.
Renewable Energy Rider (RER) – Under this program, MGE partners with large energy users, primarily governmental entities, on customized renewable energy solutions. MGE owns the generation assets and RER customers are billed a contractual renewable resource rate (as approved by the PSCW) for all costs associated with the construction and ongoing operations of the renewable generation facility.
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 goal.
Transition plans and costs will be subject to PSCW approval. 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 goal.
(b) Includes third-party purchased power and MISO market activity. A significant percentage of MGE's electric supply comes from internal generation sources. MGE supplements this internal generation with long-term purchase power agreements and spot purchases in the MISO market. (c) The MISO market consists of two energy markets, the Day-ahead market and the Real-time market.
A significant percentage of MGE's electric supply comes from internal generation sources. MGE supplements this internal generation with long-term purchase power agreements and spot purchases in the MISO market. (d) The MISO market consists of two energy markets, the Day-ahead market and the Real-time market.
Gas sales, customers, and revenues for 2022 were comprised of the following: 11 Gas operations accounted for approximately 34.8%, 30.6%, and 26.8% of MGE's total 2022, 2021, and 2020 regulated revenues, respectively. MGE can curtail gas deliveries to interruptible customers. These are customers who agree to reduce their load in the case of an emergency interruption.
Gas sales, customers, and revenues for 2023 were comprised of the following: Gas operations accounted for approximately 29%, 35%, and 31% of MGE's total 2023, 2022, and 2021 regulated revenues, respectively. 11 MGE can curtail gas deliveries to interruptible customers. These are customers who agree to reduce their load in the case of an emergency interruption.
MGE has completed construction of 42.5 MW of capacity for the RER program. Shared Solar Program – This program provides an opportunity for residential and small business customers the option to power their household or business with locally generated solar energy for up to half of their annual energy use.
MGE has developed approximately 42 MW of solar generation under the RER program. Shared Solar Program – This program provides an option for residential and small business customers to power their household or business with locally generated solar energy for up to half of their annual energy use.
MGE has a network of more than 45 charging stations, powered by renewable energy, serving the growing number of electric vehicles (EV) in our service area. The new EV fast charging hub began serving drivers in late 2021 and features some of the most powerful EV chargers in the Midwest.
MGE has established a network of more than 50 charging stations, powered by renewable energy, serving the growing number of electric vehicles (EV) in our service area. An EV fast charging hub features some of the most powerful EV chargers in the Midwest.
Using storage allows MGE to buy gas supplies during the summer season, when prices are normally lower, and withdraw these supplies during the winter season, when prices are typically higher. Storage also gives MGE more flexibility in meeting daily load fluctuations.
These gas supplies are then available for withdrawal during the subsequent heating season, November 1 through March 31. Using storage allows MGE to buy gas supplies during the summer season, when prices are normally lower, and withdraw these supplies during the winter season, when prices are typically higher. Storage also gives MGE more flexibility in meeting daily load fluctuations.
MGE expanded the program by completing construction of a second solar facility (Morey Field), which added 3.5 MW of capacity to the program. 10 Electrifying transportation - The electrification of transportation is a key strategy for reducing carbon emissions.
The first solar array associated with this program, owned by MGE, became operational in 2017 for 500 KW capacity. MGE expanded the program by completing construction of a second solar facility (Morey Field), which added 3.5 MW of capacity to the program. Electrifying transportation - The electrification of transportation is a key strategy for reducing carbon emissions.
Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors. By 2027, with the planned retirement of both units at Columbia, MGE will have eliminated approximately two-thirds of the company’s current coal-fired generation capacity. MGE's remaining use of coal is expected to be further reduced as the Elm Road Units transition to natural gas.
By 2027, with the planned retirement of both units at Columbia, MGE will have eliminated approximately two-thirds of the company’s current coal-fired generation capacity. MGE's remaining use of coal is expected to be further reduced as the Elm Road Units transition to natural gas. MGE is a minority owner of the coal-fired Elm Road Generating Station.
MGE is working to achieve a more sustainable energy future using the best, most cost-effective technologies as they become available. MGE's future path to achieve its new target of 80% carbon reduction by 2030 is based on the transition away from coal and the addition of new renewable generation to reach our ultimate target of net-zero carbon by 2050.
MGE's future path to achieve its target of 80% carbon reduction by 2030 (from 2005 levels) is based on the transition away from coal and the addition of new renewable generation to reach our ultimate target of net-zero carbon by 2050.
MGE already has taken action toward its goals: • Transition away from coal - In February 2021, MGE and the other co-owners of Columbia, a two-unit coal-fired generation facility located near Portage, Wisconsin, announced plans to retire that facility. MGE currently owns 19% of the facility. The co-owners intend to retire Unit 1 and Unit 2 by June 2026.
MGE already has taken action toward its goals: • Transition away from coal - MGE and the other co-owners of Columbia, a two-unit coal-fired generation facility, intend to retire Unit 1 and Unit 2 by June 2026. MGE currently owns 19% of the facility. Final timing and retirement dates are subject to change depending on operational, regulatory, and other factors.
Approximately 3% of retail gas deliveries in 2022, 2021 and 2020 were to interruptible customers. Gas supply MGE has physical interconnections with ANR Pipeline Company (ANR) and Northern Natural Gas Company (NNG). MGE's primary service territory, which includes Madison and the surrounding area, receives deliveries at one NNG and four ANR gate stations.
Gas supply MGE has physical interconnections with ANR Pipeline Company (ANR) and Northern Natural Gas Company (NNG). MGE's primary service territory, which includes Madison and the surrounding area, receives deliveries at one NNG and four ANR gate stations. MGE's outlying territory receives deliveries at NNG gate stations located in Elroy, Prairie du Chien, Viroqua, and Crawford County.
MGE's electric energy delivery requirements were satisfied from the following fuel sources: (in MWh) 2022 2021 2020 Coal 1,219,793 1,797,017 1,566,204 Natural gas 539,265 405,696 502,387 Renewable sources (a) 759,194 581,374 485,965 Fuel oil 475 884 472 Purchased power - other (b)(c) 919,052 726,008 789,058 Total fuel sources 3,437,779 3,510,979 3,344,086 Adjusted total fuel sources (c) 3,741,207 3,743,743 3,663,569 (a) Includes both internal generation and purchased power.
MGE's electric energy delivery requirements were satisfied from the following fuel sources: (in MWh) 2023 2022 2021 Coal (a) 1,359,691 1,219,793 1,797,017 Natural gas 566,972 539,265 405,696 Renewable sources (b) 715,369 759,194 581,374 Fuel oil 544 475 884 Purchased power - other (c)(d) 744,120 919,052 726,008 Total fuel sources 3,386,696 3,437,779 3,510,979 Adjusted total fuel sources (d) 3,643,267 3,741,207 3,743,743 (a) In 2023, MGE used more coal generation for electric supply, compared with 2022.
MGE's outlying territory receives deliveries at NNG gate stations located in Elroy, Prairie du Chien, Viroqua, and Crawford County. Interconnections with two major pipelines provide competition in interstate pipeline service and a more reliable and economical gas supply mix, which includes gas from Canada and the mid-continent and Gulf Coast regions of the United States.
Interconnections with two major pipelines provide competition in interstate pipeline service and a more reliable and economical gas supply mix, which includes gas from Canada and the mid-continent and Gulf Coast regions of the United States. During the winter months, when customer demand is high, MGE is primarily concerned with meeting its obligation to customers.
The City of Madison currently has a goal of 100% electric buses used for its' new Bus Rapid Transit system located in the downtown region. • Natural gas as a fuel source - In December 2022, the PSCW approved MGE's request for its purchase of an ownership interest in the West Riverside Energy Center, a highly efficient, state-of-the-art natural gas-fired plant in Beloit, Wisconsin.
The City of Madison currently has a goal of 100% electric buses used for its' new Bus Rapid Transit system located in the downtown region. • Natural gas as a fuel source - As part of MGE's continued energy transition plan, MGE plans to invest in additional natural gas plants and storage facilities.
(b) Battery storage timing to be determined. MGE is working to achieve a more sustainable energy future by investing in cost-effective renewable generation and innovative new technologies and services for customers. MGE has emphasized this innovation by developing customer programs to address climate change and encourage our customers to use clean energy.
If the Columbia Energy Storage project is approved by the PSCW, the project would be the first of its kind in the United States. MGE is working to achieve a more sustainable energy future by investing in cost-effective renewable generation and innovative new technologies and services for customers.
MGE currently expects to file in the first half of 2023 with the PSCW a request for a purchase of the additional 25 MW. Natural gas has much lower carbon emission rates compared to coal-fired generation. The investment in the West Riverside plant will help MGE to retire the Columbia coal-fired facility ahead of schedule.
Natural gas has lower carbon emission rates compared to coal-fired generation. The reliable energy supply provided by West Riverside plant will help MGE to retire the Columbia coal-fired facility. MGE has additional investments in natural gas generators planned for the future to ensure adequate dispatchable capacity requirements are met.
The following is a timeline of when these renewable energy projects have been completed, expected to be completed, or proposed to be completed, and MGE's share of capacity.
MGE offers cost-effective renewable energy solutions to customers, including the Renewable Energy Rider (RER) and Shared Solar Program, using a portion of this renewable capacity. These programs are described further below. The following includes renewable energy projects expected to be completed or proposed to be completed, and MGE's share of capacity.
Additionally, MGE seeks to reduce its use of fossil fuels and work to help customers with energy efficiency and electrification, including the electrification of transportation. Since 2015, MGE has announced several new joint and wholly-owned utility-scale wind and solar projects, which are expected to increase MGE's owned renewable capacity by more than nine times when completed.
Additionally, MGE seeks to reduce its use of fossil fuels and work to help customers with energy efficiency and electrification, including the electrification of transportation. Since 2015, MGE has added 196 MW of solar and 93 MW of wind generation facilities to its electric renewable generation portfolio. See Item 2. Properties below for further information on these facilities.
Removed
MGE is a minority owner of the coal-fired Elm Road Generating Station in Oak Creek, Wisconsin. In late 2021, MGE announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. Transition plans and costs will be subject to PSCW approval.
Added
Generation sources change based on lowest cost generation available. MGE continues to drive its commitment to achieve our emission reduction goals through the continuing addition of renewable generation and its transition plan to eliminate coal as a fuel source. (b) Includes both internal generation and purchased power. (c) Includes third-party purchased power and MISO market activity.
Removed
Year of Commercial Operation Renewable Energy Project Fuel Type Share of Generation 2017 Shared Solar Solar .5 MW 2018 Forward Energy Center Wind 17.6 MW 2019 Saratoga Wind 66 MW 2020 Morey Field (RER/Shared Solar) Solar 2.5 MW/3.5 MW Two Creeks Solar 50 MW Dane County Airport (RER) Solar 10 MW 2021 Badger Hollow I Solar 50 MW O’Brien (RER) Solar 22 MW 2022 Hermsdorf (RER) Solar 8 MW 2023 Red Barn - under construction Wind 9.16 MW Badger Hollow II - under construction Solar 50 MW Paris - under construction Solar/Battery (b) 20 MW/11 MW Tyto - under construction Solar 6 MW 2024 Darien Solar/Battery (b) 25 MW/7.5 MW 2025 Koshkonong – proposed (a) Solar/Battery (b) 30 MW/16.5 MW (a) Pending approval by the PSCW.
Added
MGE is working to achieve a more sustainable energy future using the best, most cost-effective technologies as they become available.
Removed
This contractual rate is approved by the PSCW and subject to terms and conditions specified in the RER rate schedule. The program entitles RER customers to the contractually-specified energy output of the renewable energy resource. MGE will continue to recover the distribution system costs related to the energy consumed by these customers.
Added
Year of Commercial Operation Project Ownership Interest Source Share of Generation/Battery Storage 2024 Tyto Solar (a) - Online February 2024 100% Solar 6 MW Paris 10% Solar 20 MW Darien (b) 10% Solar 25 MW Strix Solar (a) 100% Solar 6 MW 2025 Paris 10% Battery 11 MW 2026 Koshkonong (b) 10% Solar 30 MW High Noon – proposed (c) 10% Solar 30 MW (a) Project located within MGE service territory.
Removed
Dane County Solar serves the Dane County municipal government. Morey Field RER serves the City of Middleton and Middleton-Cross Plains School District. The O'Brien Solar Fields primarily serve governmental entities such as UW-Madison, Wisconsin Department of Administration, and the City of Fitchburg. Hermsdorf serves the City of Madison and Madison Metropolitan School District.
Added
(b) 24 MW of battery storage has been approved by the PSCW as part of these projects, but is not included in the forecasted capital expenditures for 2024 through 2028. MGE will continue to evaluate timing, cost, and feasibility of the installation of battery storage.
Removed
It's an affordable option for customers who want to support local solar. The first solar array associated with this program, owned by MGE, became operational in 2017 and was fully subscribed for its capacity value of 500 KW.
Added
(c) A filed application is pending approval by the PSCW. 16.5 MW of battery storage has been proposed as part of this project, but is not included in the forecasted capital expenditures for 2024 through 2028. MGE will continue to evaluate timing, cost, and feasibility of the installation of battery storage.
Removed
MGE's share of West Riverside will be 25 MW. The acquisition of that ownership interest is expected to occur in March 2023. MGE also has an option to purchase an additional 25 MW of capacity from West Riverside until May 2025.
Added
MGE is partnering with the co-owners of Columbia to construct a compressed carbon dioxide long-duration energy storage system, known as the Columbia Energy Storage project. The 20 MW project was selected for a grant from the U.S Department of Energy.
Removed
During the winter months, when customer demand is high, MGE is primarily concerned with meeting its obligation to customers. MGE meets customer demand by using firm supplies under contracts finalized before the heating season, supplies in storage (injected during the summer), and other firm supplies purchased during the winter period.
Added
MGE has emphasized this innovation by developing customer programs to address climate change and encourage our customers to use clean energy.
Added
These power sources are vital to the success of our carbon reduction goals as they will provide reliable energy to dependably serve demand, while MGE continues to build out its renewable generation infrastructure and complete its full transition away from coal.
Added
In early 2023, MGE purchased 25 MW in the West Riverside Energy Center, a highly efficient, state-of-the-art natural gas-fired plant in Beloit, Wisconsin. In fall 2023, MGE requested approval from the PSCW to purchase an additional 25 MW of capacity in West Riverside. The closing and actual transfer of ownership is expected to occur in June 2024.
Added
Approximately 3% of retail gas deliveries in 2023, 2022 and 2021 were to interruptible customers. 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.
Added
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

93 edited+35 added−31 removed50 unchanged
Biggest changeThe following table provides further detail of MGE Energy's forecasted capital expenditures, separating spending into capital project categories for 2023 through 2027: (In thousands) Forecasted For the years ended December 31, 2023 2024 2025 2026 2027 Electric renewables (a) $76,300 $88,200 $98,400 $117,200 $85,600 Electric production 37,600 37,100 18,500 5,700 9,300 Electric distribution 60,600 60,900 64,900 62,800 66,200 Gas distribution 34,300 30,000 31,000 29,400 30,800 Utility plant total 208,800 216,200 212,800 215,100 191,900 Nonregulated 6,400 10,100 6,100 4,000 5,200 MGE Energy total $215,200 $226,300 $218,900 $219,100 $197,100 (a) Includes solar and wind generation and battery storage. 40 Our forecasted capital expenditures reflect the following significant renewable projects that are proposed or currently under construction: Project Source Ownership Interest Share of Generation/Battery Storage Share of Costs (c) Estimated Date of Commercial Operation Red Barn (a) Wind 10% 9.16MW $18 million (e) Early 2023 Badger Hollow II (a) Solar 33% 50MW $76 million (d)(e) Second Half of 2023 Paris (a) Solar/Battery 10% 20MW/11MW $51 million (d)(e) 2023 (f) Darien (a) Solar/Battery 10% 25MW/7.5MW $45 million (d) 2024 (f) Koshkonong (b) Solar/Battery 10% 30MW/16.5MW $65 million (d) 2025 (f) (a) Approved by the PSCW.
Biggest changeOur forecasted capital expenditures reflect the following significant renewable projects that are proposed or currently under construction: Project Source Ownership Interest Share of Generation/Battery Storage Share of Costs (b) Estimated Date of Commercial Operation Paris (a) Solar/Battery 10% 20MW/11MW $61 million (c)(d) 2024 Solar 2025 Battery Darien (a) Solar 10% 25MW $46 million (c)(d)(e) 2024 Strix Solar 100% 6MW $12 million 2024 High Noon (f) Solar 10% 30MW $65 million 2026 Koshkonong (a) Solar 10% 30MW $54 million (c)(e) 2026 (a) Approved by the PSCW.
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"). 45 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%.
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%.
To confirm the reasonableness of unbilled gas, the estimated unbilled consumption is compared to various other statistics, including percent of gas available for sale, change in unbilled month-to-month and change in unbilled compared to the prior year. Pension and Other Postretirement Benefit Plans MGE provides employees with certain retirement (pension) and postretirement (health care and life insurance) benefits.
To confirm the reasonableness of unbilled gas, the estimated unbilled consumption is compared to various other statistics, including percent of gas available for sale, change in unbilled month-to-month and change in unbilled compared to the prior year. 49 Pension and Other Postretirement Benefit Plans MGE provides employees with certain retirement (pension) and postretirement (health care and life insurance) benefits.
The Uyghur Forced Labor Protection Act, a federal law that became effective on June 21, 2022, further established that all goods mined, produced, or manufactured wholly or in part in Xinjiang or by certain defined entities are prohibited from U.S. importation.
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.
For cost recovery mechanisms, any over-collection of revenues resulting from costs authorized to be collected from customers in rates exceeding actual costs is recorded as a reduction of revenue in the period incurred, as the over-collection is expected to be refunded to customers in a subsequent period.
For cost recovery mechanisms, any over-collection of revenues resulting from costs authorized to be collected from customers in rates exceeding actual costs is recorded as a reduction of 37 revenue in the period incurred, as the over-collection is expected to be refunded to customers in a subsequent period.
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.
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 39 generating capacity to assist MGE.
MGE bases its assessment of recovery on precedents 46 established by the regulatory body. Regulatory liabilities represent previous collections from customers that are expected to be refunded to customers in future periods.
MGE bases its assessment of recovery on precedents established by the regulatory body. Regulatory liabilities represent previous collections from customers that are expected to be refunded to customers in future periods.
We believe the accounting estimate related to the valuation allowance is a critical accounting estimate because it is highly susceptible to change from period to period as it requires management to make assumptions about our future income over the lives of the deferred tax assets, and the impact of increasing or decreasing the valuation allowance is potentially material to our results of operations. 48
We believe the accounting 50 estimate related to the valuation allowance is a critical accounting estimate because it is highly susceptible to change from period to period as it requires management to make assumptions about our future income over the lives of the deferred tax assets, and the impact of increasing or decreasing the valuation allowance is potentially material to our results of operations.
The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income: Year Ended December 31, (In millions) 2022 2021 MGE Power Elm Road $ 14.3 $ 15.2 MGE Power West Campus 7.3 7.2 Liquidity and C apital Resources MGE Energy and MGE expect to have adequate liquidity to support future operations and capital expenditures over the next twelve months.
The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income: Year Ended December 31, (In millions) 2023 2022 MGE Power Elm Road $ 14.7 $ 14.3 MGE Power West Campus 7.2 7.3 Liquidity and C apital Resources MGE Energy and MGE expect to have adequate liquidity to support future operations and capital expenditures over the next twelve months.
The main drivers were increases in the costs of key commodities, labor, and solar modules resulting from supply chain and market disruptions. See Footnote 6 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.
The main drivers were increases in the costs of key commodities, labor, and solar modules resulting from supply chain and market disruptions. See Footnote 6 of Notes to Consolidated Financial Statements in this Report for more information on these projects. Furthermore, solar panel procurement disruptions have also shifted construction timelines.
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.
Department of Commerce announced a solar tariff investigation on solar panels from four Southeast Asian countries. This investigation could result in additional tariffs on solar panels. In June 2022, the U.S. Department of Commerce issued a 24-month exemption from tariffs for solar panel and module imports from these four countries.
For 2022 and 2021, net income at the nonregulated energy operations segment was $22.1 million and $21.4 million, respectively. Transmission Investment Operations - MGE Energy The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments.
For 2023 and 2022, net income at the nonregulated energy operations segment was $22.4 million and $22.1 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.
MGE Energy has available at any time a $50 million committed revolving credit agreement, expiring in November 2027. As of December 31, 2022, MGE Energy had no borrowings outstanding under this credit facility. (b) Amount includes two committed revolving credit agreements totaling $100 million expiring in November 2027. These credit facilities are used to support commercial paper issuances.
MGE Energy has available at any time a $50 million committed revolving credit agreement, expiring in November 2027. As of December 31, 2023, MGE Energy had no borrowings outstanding under this credit facility. (b) Amount includes two committed revolving credit agreements totaling $130 million expiring in November 2027. These credit facilities are used to support commercial paper issuances.
Holding other assumptions constant, a 0.5% decrease in the discount rate on the obligation balance as of December 31, 2022, would increase annual pension and other postretirement cost by approximately $1.9 million, before taxes. • Medical trend assumptions . The health care cost trend rate is the assumed rate of increase in per-capita health care charges. • Mortality rate assumption.
Holding other assumptions constant, a 0.5% decrease in the discount rate on the obligation balance as of December 31, 2023, would increase annual pension and other postretirement cost by approximately $1.2 million, before taxes. • Medical trend assumptions . The health care cost trend rate is the assumed rate of increase in per-capita health care charges. • Mortality rate assumption.
Holding other assumptions constant, for every 1% reduction in the expected rate of return on plan assets, annual pension and other postretirement cost would increase by approximately $5.2 million, before taxes. • Discount rate . The discount rate represents the rate at which pension obligations could effectively be settled on a present-value basis.
Holding other assumptions constant, for every 1% reduction in the expected rate of return on plan assets, annual pension and other postretirement cost would increase by approximately $4.0 million, before taxes. • Discount rate . The discount rate represents the rate at which pension obligations could effectively be settled on a present-value basis.
By 2035, MGE expects that the Elm Road Units will be fully transitioned away from coal, which will eliminate coal as an internal generation source for MGE. • Growing renewable generation. MGE is seeking to acquire a joint interest in several renewable generation projects.
By the end of 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. • Growing renewable generation. MGE is seeking to acquire a joint interest in several renewable generation projects.
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.
Actual events may differ materially from these assumptions and result in material changes to those forecasted amounts, particularly in the final forecasted years. MGE is targeting at least 80% carbon reduction from electric generation by 2030 (from 2005 levels) and net-zero carbon electricity by 2050.
(b) MGE received specific approval to recover 100% AFUDC on Badger Hollow II and Paris. After tax, MGE recognized $2.6 million and $0.8 million of AFUDC equity earnings through December 31, 2022, on Badger Hollow II and Paris, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.
(b) MGE received specific approval to recover 100% AFUDC on Badger Hollow II, Paris, and Darien. After tax, MGE recognized $5.6 million, $2.2 million, and $0.6 million of AFUDC equity earnings through December 31, 2023, on Badger Hollow II, Paris, and Darien, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.
MGE has included forecasted capital expenditures for the years 2023 through 2026 for projects to replace Columbia's generation.
MGE has included forecasted capital expenditures for the years 2024 through 2026 for projects to replace Columbia's generation.
Distributions to parent (MGE Energy) from noncontrolling interest, which represent distributions from MGE Power Elm Road and MGE Power West Campus, were $22.0 million for 2022, compared to $15.0 million in 2021. The noncontrolling interest arises from the accounting required for the entities, which are not owned by MGE but are consolidated as VIEs.
Distributions to parent (MGE Energy) from noncontrolling interest, which represent distributions from MGE Power Elm Road and MGE Power West Campus, were $20.5 million for 2023, compared to $22.0 million in 2022. The noncontrolling interest arises from the accounting required for the entities, which are not owned by MGE but are consolidated as VIEs.
MGE's thirteen month rolling average common equity ratio as of December 31, 2022, is 60.5%, as determined under the calculation used in the rate proceeding. This restriction did not restrict MGE's payment of dividends in 2022. Cash dividends of $33.5 million and $5.0 million, respectively, were paid by MGE to MGE Energy in 2022 and 2021.
MGE's thirteen month rolling average common equity ratio as of December 31, 2023, is 57.7%, as determined under the calculation used in the rate proceeding. This restriction did not restrict MGE's payment of dividends in 2023. Cash dividends of $41.0 million and $33.5 million, respectively, were paid by MGE to MGE Energy in 2023 and 2022.
Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions to the plans. The above amounts do not include future capital calls by ATC and ATC Holdco.
The contributions for years after 2024 are not yet currently estimated. Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions to the plans. The above amounts do not include future capital calls by ATC and ATC Holdco.
Projects eligible to earn 100% AFUDC are excluded from this balance and discussed further in the Management Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview section.
Projects eligible to earn 100% AFUDC are excluded from this balance and discussed further in the Management Discussion and Analysis of Financial Condition and Results of Operations - Significant Events section.
See " Other Matters " below for additional information on the 2022/2023 rate case settlement. Utility Solar: Large solar generation projects were recently completed or are under construction, as shown in the following table.
See " Other Matters " below for additional information on the 2022/2023 rate case settlement and 2023 Electric Limited Rate Case Reopener. 34 Utility Solar: Large solar generation projects were recently completed or are under construction, as shown in the following table.
MGE Energy's net income was derived from our business segments as follows: (In millions) Year Ended December 31, Business Segment: 2022 2021 Electric Utility $ 65.2 $ 63.9 Gas Utility 18.2 15.5 Nonregulated Energy 22.1 21.4 Transmission Investments 6.7 6.9 All Other (1.2 ) (1.9 ) Net Income $ 111.0 $ 105.8 Our net income during 2022 compared to 2021 primarily reflects the effects of the following factors: Electric Utility An increase in electric investments contributed to earnings for 2022.
MGE Energy's net income was derived from our business segments as follows: (In millions) Year Ended December 31, Business Segment: 2023 2022 Electric Utility $ 75.9 $ 65.2 Gas Utility 14.1 18.2 Nonregulated Energy 22.4 22.1 Transmission Investments 7.7 6.7 All Other (2.4 ) (1.2 ) Net Income $ 117.7 $ 111.0 Our net income during 2023 compared to 2022 primarily reflects the effects of the following factors: Electric Utility An increase in electric investments contributed to earnings for 2023.
In December 2021, the PSCW authorized MGE to increase 2022 rates for retail gas customers by 2.15%. MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas.
In December 2021, the PSCW authorized MGE to increase 2023 rates for retail gas customers by 0.96%. MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas.
MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenue above. 36 Consolidated operations and maintenance expenses For 2022, operations and maintenance expenses increased $10.5 million, compared to 2021.
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 For 2023, operations and maintenance expenses increased $6.1 million, compared to 2022.
In December 2021, the PSCW authorized MGE to increase 2022 rates for retail electric customers by approximately 8.81%. Rates charged to retail customers during 2022 were $38.0 million higher than those charged during 2021. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on rate increase.
In December 2022, the PSCW authorized MGE to increase 2023 rates for retail electric customers by approximately 9.01%. Rates charged to retail customers during 2023 were $42.4 million higher than those charged during 2022. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase.
See Footnote 13 of the Notes to Consolidated Financial Statements in this Report. (c) Amount represents interest expense on long-term debt. See Footnote 14 of the Notes to Consolidated Financial Statements in this Report for further discussion of the long-term debt outstanding as of December 31, 2022. (d) Leases.
(b) Short-term debt consisting of commercial paper for MGE. See Footnote 13 of the Notes to Consolidated Financial Statements in this Report. (c) Amount represents interest expense on long-term debt. See Footnote 14 of the Notes to Consolidated Financial Statements in this Report for further discussion of the long-term debt outstanding as of December 31, 2023. (d) Leases.
MGE Energy Cash provided by MGE Energy's financing activities was $25.5 million for 2022, compared to $8.8 million of cash used for financing activities in 2021. For 2022, cash dividends paid were $57.5 million compared to $54.8 million in 2021. The increase reflected a higher dividend rate per share ($1.59 vs. $1.52).
MGE Energy Cash used for MGE Energy's financing activities was $10.5 million for 2023, compared to $25.5 million of cash provided by financing activities in 2022. For 2023, cash dividends paid were $60.4 million compared to $57.5 million in 2022. The increase reflected a higher dividend rate per share ($1.67 vs. $1.59).
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.
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.
As of December 31, 2022, the ratio of consolidated debt to consolidated total capitalization for each of MGE Energy and MGE, as calculated under the credit agreements' covenant, were 39.6% and 42.4%, respectively. See Footnote 13 of the Notes to Consolidated Financial Statements in this Report for additional information regarding the credit facilities.
As of December 31, 2023, the ratio of consolidated debt to consolidated total capitalization for each of MGE Energy and MGE, as calculated under the credit agreements' covenant, were 40.1% and 43.2%, respectively. See Footnote 13 of the Notes to Consolidated Financial Statements in this Report for additional information regarding the credit facilities.
Item 1A. Risk Factors of this Report. During the year ended December 31, 2022, MGE Energy's earnings were $111.0 million or $3.07 per share compared to $105.8 million or $2.92 per share for the same period in the prior year.
Item 1A. Risk Factors of this Report. During the year ended December 31, 2023, MGE Energy's earnings were $117.7 million or $3.25 per share compared to $111.0 million or $3.07 per share for the same period in the prior year.
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 limited rate case reopener.
As part of that settlement agreement, the PSCW approved a 0.96% increase in 2023 gas rates and a 2023 electric rate change to be addressed through a limited rate case reopener. In December 2022, the PSCW approved an 9.01% increase to electric rates for 2023.
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.
In the event that such 48 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 cost increases in MGE's future rate proceedings.
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 2022 and 2021, other income at the transmission investment segment primarily reflects ATC's operations and was $9.1 million and $9.3 million, respectively.
ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. During 2023 and 2022, other income at the transmission investment segment primarily reflects ATC's operations and was $10.6 million and $9.1 million, respectively.
Details related to MGE's 2022/2023 approved settlement agreement and 2023 electric limited reopener are shown in the table below: (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) $ 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 (a) Average rate base amounts reflect MGE's allocated share of rate base and do not include construction work in progress (CWIP) or a cash working capital allowance and were calculated using a forecasted 13-month average for the test periods.
Details related to MGE's 2022/2023 approved settlement agreement, 2023 electric limited reopener, and 2024/2025 rate proceeding are shown in the table below: (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) $ 1,185,550 $ 10,727 9.7 % 56.13 % 1/1/2024 Gas (2024 Test Period) 335,533 7,160 9.7 % 56.13 % 1/1/2024 Electric (2025 Test Period) $ 1,241,502 $ 7,106 9.7 % 56.06 % 1/1/2025 Gas (2025 Test Period) 341,369 7,146 9.7 % 56.06 % 1/1/2025 (a) Average rate base amounts reflect MGE's allocated share of rate base and do not include construction work in progress (CWIP) or a cash working capital allowance and were calculated using a forecasted 13-month average for the test periods.
MGE's earnings for the year ended December 31, 2022, were $83.9 million compared to $78.4 million for the same period in the prior year.
MGE's earnings for the year ended December 31, 2023, were $90.5 million compared to $83.9 million for the same period in the prior year.
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 increased driving higher rates during 2022. The average retail rate per therm for 2022, increased approximately 18% compared to 2021, reflecting an increase in natural gas commodity costs (recovered through the PGA). • Volume.
Changes in PGA recoveries affect revenues but do not change net income in view of the pass-through treatment of the costs. Payments 38 for natural gas decreased driving lower rates during 2023. The average retail rate per therm for 2023 decreased approximately 10% compared to 2022, reflecting a decrease in natural gas commodity costs (recovered through the PGA). • Volume.
MGE During 2022, cash provided by MGE's financing activities was $27.7 million, compared to $26.0 million of cash provided by financing activities in 2021. Cash dividends to parent (MGE Energy) were $33.5 million in 2022, compared to $5.0 million in 2021.
MGE During 2023, cash used for MGE's financing activities was $11.6 million, compared to $27.7 million of cash provided by financing activities in 2022. Cash dividends to parent (MGE Energy) were $41.0 million in 2023, compared to $33.5 million in 2022.
Electric fuel and purchased power Year Ended December 31, (In millions) 2022 2021 $ Change Fuel for electric generation $ 61.3 $ 54.6 $ 6.7 Purchased power 46.8 39.4 7.4 The $6.7 million increase in fuel for electric generation was due to an approximately 25% increase in the average cost offset by an approximately 10% decrease in internal generation.
Electric fuel and purchased power Year Ended December 31, (In millions) 2023 2022 $ Change Fuel for electric generation $ 57.6 $ 61.3 $ (3.7 ) Purchased power 41.2 46.8 (5.6 ) The $3.7 million decrease in fuel for electric generation was due to an approximately 11% decrease in the average cost offset by an approximately 5% increase in internal generation.
See our 2023-2027 capital expenditures forecast included under " Liquidity and Capital Resources " below for information on these projects. • Natural gas as a fuel source. West Riverside: MGE received PSCW approval for its purchase of an ownership interest in West Riverside.
See our 2024-2028 capital expenditures forecast included under " Liquidity and Capital Resources " below for information on these projects. • Natural gas as a fuel source. West Riverside: MGE is seeking PSCW approval to purchase an additional ownership interest in West Riverside.
In 2023, the pension asset assumption will increase to 7.00% and the postretirement benefit assumption will increase to 6.59%. The annual expected rate of return is based on projected long-term equity and bond returns, maturities and asset allocations.
For 2023, MGE used an assumed return on assets of 7.00% for pension and 6.59% for other postretirement benefits. In 2024, the pension asset assumption will increase to 7.24% and the postretirement benefit assumption will increase to 6.81%. The annual expected rate of return is based on projected long-term equity and bond returns, maturities and asset allocations.
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.
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.
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. Solar Procurement Disruptions – Solar Tariff Investigation: In March 2022, the U.S.
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 cost increases in MGE's future rate proceedings. U.S. Department of Commerce Investigation In March 2022, the U.S.
(g) Other obligations are primarily related to investment commitments, environmental projects, and uncertain tax positions. The above amounts do not include any contributions for MGE's pension and postretirement plans. MGE does not expect to need to make any required contributions to the qualified plans for 2023. The contributions for years after 2023 are not yet currently estimated.
(f) Construction obligations consist primarily of Paris, Darien, and other renewable projects. (g) Other obligations are primarily related to investment commitments, environmental projects, and uncertain tax positions. The above amounts do not include any contributions for MGE's pension and postretirement plans. MGE does not expect to need to make any required contributions to the qualified plans for 2024.
As of December 31, 2022, approximately $650.1 million was available for the payment of dividends under this covenant.
As 44 of December 31, 2023, approximately $699.6 million was available for the payment of dividends under this covenant.
In the year the over-collection is refunded, rates are reduced and offset as revenue subject to refund. There is no net income impact in the year the costs are refunded. • Residential volume. During 2022, residential sales decreased by approximately 1% compared to 2021.
In the year the over-collection is refunded, rates are reduced and offset as revenue subject to refund. There is no net income impact in the year the costs are refunded.
MGE Energy's and MGE's commercial commitments as of December 31, 2022, representing commitments triggered by future events and including financing arrangements to secure obligations of MGE Energy and MGE, are as follows: 44 Expiration Within: Due After (In thousands) Total 1 Year 2-3 Years 4-5 Years 5 Years MGE Energy Lines of credit (a)(c) $ 150,000 $ — $ — $ 150,000 $ — MGE Lines of credit (b)(c) $ 100,000 $ — $ — $ 100,000 $ — (a) Amount includes the facilities discussed in (b) plus an additional line of credit.
The amount and timing of future capital calls to these entities is uncertain and primarily dependent on the operations and expansion of ATC and the development activities by ATC Holdco. 46 MGE Energy's and MGE's commercial commitments as of December 31, 2023, representing commitments triggered by future events and including financing arrangements to secure obligations of MGE Energy and MGE, are as follows: Expiration Within: Due After (In thousands) Total 1 Year 2-3 Years 4-5 Years 5 Years MGE Energy Lines of credit (a) $ 180,000 $ — $ — $ 180,000 $ — MGE Lines of credit (b) $ 130,000 $ — $ — $ 130,000 $ — (a) Amount includes the facilities discussed in (b) plus an additional line of credit.
Cash Flows The following summarizes cash flows for MGE Energy and MGE during 2022 and 2021: MGE Energy MGE (In thousands) 2022 2021 2022 2021 Cash provided by (used for): Operating activities $ 153,735 $ 137,527 $ 151,067 $ 130,240 Investing activities (180,145 ) (156,975 ) (176,095 ) (154,878 ) Financing activities 25,543 (8,756 ) 27,730 26,032 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.
Cash Flows The following summarizes cash flows for MGE Energy and MGE during 2023 and 2022: MGE Energy MGE (In thousands) 2023 2022 2023 2022 Cash provided by (used for): Operating activities $ 237,561 $ 153,735 $ 231,822 $ 151,067 Investing activities (230,020 ) (180,145 ) (224,027 ) (176,095 ) Financing activities (10,483 ) 25,543 (11,590 ) 27,730 40 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.
The following discussion is based on the business segments as discussed in Footnote 22 of the Notes to Consolidated Financial Statements in this Report.
See " Other Matters " below for additional information on solar procurement disruptions. 36 The following discussion is based on the business segments as discussed in Footnote 22 of the Notes to Consolidated Financial Statements in this Report.
For 2022 retail gas deliveries increased approximately 15% compared to 2021 primarily related to favorable weather conditions in the current year. • Other. Other revenues increased primarily related to increase in gas customers in 2022 increasing revenue recorded for fixed customer charge compared to 2021.
For 2023, retail gas deliveries decreased approximately 13% compared to 2022 primarily related to unfavorable weather conditions in the current year. • Other. Other revenues increased primarily related to an increase in the number of gas customers in 2023, which increased fixed customer charge revenue as compared to 2022.
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, was no longer just and reasonable.
See Footnote 9.a. of the 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, was no longer just and reasonable.
Cost of gas sold A $52.9 million increase in cost of gas sold driven by higher cost per therm of gas. Average cost per therm increased approximately 35%. An increase in volume of approximately 13% also contributed to the increase in cost.
Cost of gas sold A $45.9 million decrease in cost of gas sold was driven by lower cost per therm of gas. Average cost per therm decreased approximately 20%. A decrease in volume of approximately 13% also contributed to the decrease in cost.
Capital Expen ditures The following table shows MGE Energy's actual capital expenditures for both 2021 and 2022, and forecasted capital expenditures for 2023 through 2027: (In thousands) Actual Forecasted For the years ended December 31, 2021 2022 2023 2024 2025 2026 2027 Electric $ 115,234 $ 141,273 $ 174,500 $ 186,200 $ 181,800 $ 185,700 $ 161,100 Gas 34,071 27,656 34,300 30,000 31,000 29,400 30,800 Utility plant total 149,305 168,929 208,800 216,200 212,800 215,100 191,900 Nonregulated 3,864 6,101 6,400 10,100 6,100 4,000 5,200 MGE Energy total $ 153,169 $ 175,030 $ 215,200 $ 226,300 $ 218,900 $ 219,100 $ 197,100 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.
Capital Expen ditures The following table shows MGE Energy's actual capital expenditures for both 2022 and 2023, and forecasted capital expenditures for 2024 through 2028: (In thousands) Actual Forecasted For the years ended December 31, 2022 2023 2024 2025 2026 2027 2028 Electric $ 141,273 $ 180,743 $ 177,000 $ 186,000 $ 193,000 $ 222,000 $ 207,000 Gas 27,656 36,402 28,000 29,000 32,000 29,000 28,000 Utility plant total 168,929 217,145 205,000 215,000 225,000 251,000 235,000 Nonregulated 6,101 4,926 9,000 10,000 7,000 6,000 8,000 MGE Energy total $ 175,030 $ 222,071 $ 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.
See Footnote 10 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).
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).
Final timing and retirement dates for Units 1 and 2 are subject to change depending on operational, regulatory, and other factors. MGE continues to evaluate additional investments to replace the generation from Columbia while maintaining electric service reliability. These investments include cost-effective, clean energy projects to help achieve MGE's carbon reduction goals.
Final timing and retirement dates for Units 1 and 2 are subject to change depending on operational, regulatory, and other factors. MGE has a plan, which it continues to evaluate, to replace the generation from Columbia while maintaining electric service reliability.
Any reduction in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 5.9%, 6.7%, and 8.0%, respectively, of our net income for 2022, 2021, and 2020 from our investment in ATC. Inflation Reduction Act In August 2022, the Inflation Reduction Act (IRA) was signed into law.
Any reduction in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 6.4% and 5.9%, respectively, of our net income for 2023 and 2022 from our investment in ATC. Uyghur Forced Labor Protection Act In June 2021, the U.S.
The excess electricity is then sold to other utilities or power marketers in the MISO market. During 2022, sales were made at higher market prices and partially offset by decreased market volume compared to 2021, reflecting a decrease in sales. The revenue generated from these sales is included in fuel rules monitored costs.
The excess electricity is then sold to other utilities or power marketers in the MISO market. During 2023, sales were made at lower market prices compared to 2022. The revenue generated from these sales is included in fuel rules monitored costs. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements. • Volume.
See " Other Matters " below for additional information on the 2023 electric limited rate case reopener. 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.
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.
Results of Operations Year Ended December 31, 2022, Versus the Year Ended December 31, 2021 Electric sales and revenues The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the years indicated: Revenues Sales (kWh) (In thousands, except CDD) 2022 2021 % Change 2022 2021 % Change Residential $ 161,300 $ 151,646 6.4% 884,476 896,710 (1.4)% Commercial 232,057 210,475 10.3% 1,790,397 1,779,725 0.6% Industrial 13,303 12,529 6.2% 152,734 162,803 (6.2)% Other-retail/municipal 37,323 35,169 6.1% 363,213 360,292 0.8% Total retail 443,983 409,819 8.3% 3,190,820 3,199,530 (0.3)% Sales to the market 19,385 9,499 104.1% 132,079 211,270 (37.5)% Other revenues 1,799 968 85.8% — — —% Total $ 465,167 $ 420,286 10.7% 3,322,899 3,410,800 (2.6)% Cooling degree days (normal 699) 787 846 (7.0)% Electric revenue increased $44.9 million during 2022 compared to 2021, due to the following: (In millions) Rate changes $ 38.0 Sales to the market 9.9 Customer fixed and demand charges 1.2 Other 0.8 Net increase in commercial, industrial and other-retail/municipal volume 0.3 Revenue subject to refund, net (3.7 ) Decrease in residential volume (1.6 ) Total $ 44.9 34 • Rate changes.
Results of Operations Year Ended December 31, 2023, Versus the Year Ended December 31, 2022 Electric sales and revenues The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the years indicated: Revenues Sales (kWh) (In thousands, except CDD) 2023 2022 % Change 2023 2022 % Change Residential $ 171,137 $ 161,300 6.1% 871,558 884,476 (1.5)% Commercial 252,268 232,057 8.7% 1,772,483 1,790,397 (1.0)% Industrial 13,759 13,303 3.4% 151,283 152,734 (1.0)% Other-retail/municipal 40,815 37,323 9.4% 363,643 363,213 0.1% Total retail 477,979 443,983 7.7% 3,158,967 3,190,820 (1.0)% Sales to the market 10,163 19,385 (47.6)% 132,143 132,079 0.0% Other revenues 1,587 1,799 (11.8)% — — —% Total $ 489,729 $ 465,167 5.3% 3,291,110 3,322,899 (1.0)% Cooling degree days (normal 705) 780 787 (0.9)% Electric revenue increased $24.6 million during 2023 compared to 2022, due to the following: (In millions) Rate changes $ 42.4 Sales to the market (9.2 ) Decrease in volume (3.7 ) Customer fixed and demand charges (3.2 ) Revenue subject to refund, net (1.5 ) Other (0.2 ) Total $ 24.6 • Rate changes.
A decrease in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 5.9% and 6.7% of our net income for the years ended December 31, 2022 and 2021, respectively, from our investment in ATC.
We derived approximately 6.4% and 5.9% of our net income for the years ended December 31, 2023 and 2022, respectively, from our investment in ATC.
The following contributed to the net change: (In millions) Increased administrative and general costs $ 5.6 Increased customer accounts costs 2.9 Increased electric production expenses 0.7 Increased electric distribution expenses 0.6 Increased gas distribution expenses 0.6 Increased other expenses 0.1 Total $ 10.5 • Increased administrative and general costs are primarily related to an increase in pension and OPEB service costs. • Increased customer accounts are primarily related to increased costs associated with the new customer information system, which went live in September 2021.
The following contributed to the net change: (In millions) Increased administrative and general costs $ 6.4 Increased electric distribution expenses 0.7 Increased customer services 0.7 Increased gas distribution expenses 0.6 Increased other expenses 0.3 Decreased customer accounts costs (1.9 ) Decreased electric production expenses (0.7 ) Total $ 6.1 • Increased administrative and general costs are primarily related to an increase in employee payroll related costs including expenses recorded for the long-term incentive plan and pension and OPEB service costs. • Decreased customer accounts are primarily related to lower technology support costs which were higher in 2022 during the stabilization period of the new customer information system that went live in September 2021.
(c) Authorized returns on common equity may not be indicative of actual returns earned or projections of future returns, as actual returns will be affected by the volume of electricity or gas sold. See Footnote 9.a. of the Notes to Consolidated Financial Statements in this Report for further discussion of rate proceedings.
(c) Authorized returns on common equity may not be indicative of actual returns earned or projections of future returns, as actual returns will be affected by the volume of electricity or gas sold.
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.
Department of Commerce investigation on whether to impose new solar tariffs. These disruptions have a potential to impact current and future solar projects which may result in an increase in costs or delays in construction timelines.
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 2022 was $153.7 million, an increase of $16.2 million when compared to 2021. MGE Energy's net income increased $5.2 million for 2022 when compared to 2021.
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.
Project Ownership Interest Share of Generation Share of Estimated Costs (a) Costs Incurred as of December 31, 2022 (a) Estimated Date of Commercial Operation Red Barn 10% 9.16 MW $18 million $0.4 million (b) Early 2023 Badger Hollow II 33% 50 MW $76 million $52.0 million (b) Second half of 2023 (c) Paris 10% 31 MW $51 million $23.4 million 2023 (d) (a) Excluding AFUDC.
Project Ownership Interest Source Share of Generation Share of Estimated Costs (a) Costs Incurred as of December 31, 2023 (a) Date of Commercial Operation Red Barn 10% Wind 9.16 MW $18 million $16.7 million April 2023 Badger Hollow II 33% Solar 50 MW $86 million (e) $81.6 million (b)(c) December 2023 Paris 10% Solar/Battery 20 MW/11 MW $61 million (e) $35.0 million (b) 2024 (d) Solar 2025 (d) Battery Darien 10% Solar 25 MW $46 million (e)(f) $25.5 million (b) 2024 (d) (a) Excluding AFUDC.
Investments in advanced metering infrastructure will provide additional benefits including outage and demand response and automated meter reading capabilities. Forecasted capital expenditures in those years is approximately $36 million. Financing Activities The principal sources and uses of cash are related to short-term and long-term borrowings and repayments and the payment of cash dividends.
Forecasted total capital expenditures for those years is approximately $39 million. 43 Financing Activities The principal sources and uses of cash are related to short-term and long-term borrowings and repayments and the payment of cash dividends.
This amount represents a decrease of $2.9 million in cash used when compared to 2021. Capital Requirements and Investing Activities Cash outflows for MGE Energy and MGE principally reflect capital expenditures. See " Capital Expenditures " below for more information. MGE Energy MGE Energy's cash used for investing activities increased $23.2 million for 2022 when compared to 2021.
See " Capital Expenditures " below for more information. MGE Energy MGE Energy's cash used for investing activities increased $49.9 million for 2023 when compared to 2022. Capital expenditures for 2023 were $222.1 million. This amount represents an increase of $47.0 million from the expenditures made in 2022.
See Footnote 9.b. of the Notes to Consolidated Financial Statements in this Report for further information regarding fuel proceedings. During 2023, several items may affect us, including: 2021 Annual Fuel Proceeding: MGE under-recovered fuel costs in 2021. As of December 31, 2021, MGE had deferred $3.3 million of 2021 fuel costs.
These costs will be subject to the PSCW's annual review of 2023 fuel costs, expected to be completed during 2024. See Footnote 9.b. of the Notes to Consolidated Financial Statements in this Report for further information regarding fuel proceedings. 2022 Annual Fuel Proceeding: MGE under-recovered fuel costs in 2022.
There was no change to the costs to be recovered in the fuel rules proceedings from the amount MGE deferred in the previous year. 2023 Electric Limited Rate Case Reopener: In December 2022, the PSCW approved an 9.01% increase to electric rates for 2023.
There was no change to the costs to be recovered in the fuel rules proceedings from the amount MGE deferred in the previous year. During 2024, several items may affect us, including: 2024/2025 Rate Proceeding: In December 2023, the PSCW approved a 1.54% increase to electric rates and 2.44% increase to gas rates for 2024.
This assumption represents the rate of return on plan assets reflecting the average 47 rate of earnings expected on the funds invested (or to be invested) to provide for the benefits included in the projected benefit obligation. For 2022, MGE used an assumed return on assets of 6.75% for pension and 6.40% for other postretirement benefits.
They are critical accounting estimates because they are subject to management's judgment and can materially affect financial performance. • Assumed return on assets . This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested (or to be invested) to provide for the benefits included in the projected benefit obligation.
During 2022, MGE issued $25.0 million of senior unsecured notes whose proceeds were used to assist with the payment of additional capital expenditures and other corporate obligations compared to $100.0 million of borrowings in 2021. For 2022, net short-term debt borrowings were $65.0 million compared to $47.0 million of repayments in 2021.
During 2023, MGE issued $120.0 million of senior unsecured notes that were used to repay $30 million of maturing unsecured senior notes and to assist with financing additional capital expenditures and other corporate obligations, compared to $25.0 million issued in 2022.
Projected completion dates of these projects are one year later than originally anticipated. MGE continues to assess the potential impact of these disruptions on current and future solar projects that may result in an increase in costs or delays in construction timelines.
MGE continues to assess the potential impact of these disruptions on current and future solar projects that may result in an increase in costs or delays in construction timelines. See further information on procurement disruptions discussed earlier under " Executive Overview ." West Riverside: In March 2023, MGE purchased 25 MW of capacity of West Riverside.
As of December 31, 2022, MGE had $70.5 million of commercial paper outstanding backed by the facilities but no borrowings outstanding. As of December 31, 2022, MGE had $0.7 million of letters of credit issued inside credit facilities. (c) In January 2023, MGE amended its credit agreement to increase the line of credit available an additional $30 million.
As of December 31, 2023, MGE had $38 million of commercial paper outstanding backed by the facilities but no borrowings outstanding. As of December 31, 2023, MGE had $0.7 million of letters of credit issued inside credit facilities. Other M atters Rate Matters In December 2021, the PSCW approved a settlement agreement for MGE's 2022 rate case.
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.
Capitalization Ratios MGE Energy's capitalization ratios were as follows: MGE Energy 2023 2022 Common shareholders' equity 59.9 % 60.4 % Long-term debt (a) 38.1 % 35.7 % Short-term debt 2.0 % 3.9 % (a) Includes the current portion of long-term debt. 45 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.
During 2022, MGE borrowed $25.0 million of senior unsecured notes whose proceeds were used to assist with the payment of additional capital expenditures and other corporate obligations compared to $100.0 million of borrowings in 2021. 41 For 2022, net short-term debt borrowings were $65.0 million, compared to $47.0 million of repayments in 2021.
During 2023, MGE issued $120.0 million of senior unsecured notes that were used to repay $30 million of maturing unsecured senior notes and to assist with financing additional capital expenditures and other corporate obligations, compared to $25.0 million issued in 2022.
See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the fuel rules bandwidth. 35 Gas deliveries and revenues The following table compares MGE's gas revenues and gas therms delivered by customer class during each of the years indicated: (In thousands, except HDD and average Revenues Therms Delivered rate per therm of retail customer) 2022 2021 % Change 2022 2021 % Change Residential $ 143,544 $ 110,442 30.0% 114,162 100,173 14.0% Commercial/Industrial 99,165 68,895 43.9% 106,911 92,554 15.5% Total retail 242,709 179,337 35.3% 221,073 192,727 14.7% Gas transportation 5,780 6,185 (6.5)% 78,966 76,217 3.6% Other revenues 183 98 86.7% — — —% Total $ 248,672 $ 185,620 34.0% 300,039 268,944 11.6% Heating degree days (normal 6,977) 7,210 6,619 8.9% Average rate per therm of retail customer $ 1.098 $ 0.931 17.9% Gas revenue increased $63.1 million during 2022 compared to 2021, due to the following: (In millions) Rate changes $ 45.3 Increase in volume 16.1 Other 1.8 Revenue subject to refund, net (0.1 ) Total $ 63.1 Rate changes.
Gas deliveries and revenues The following table compares MGE's gas revenues and gas therms delivered by customer class during each of the years indicated: (In thousands, except HDD and average Revenues Therms Delivered rate per therm of retail customer) 2023 2022 % Change 2023 2022 % Change Residential $ 116,640 $ 143,544 (18.7)% 97,326 114,162 (14.7)% Commercial/Industrial 75,410 99,165 (24.0)% 96,053 106,911 (10.2)% Total retail 192,050 242,709 (20.9)% 193,379 221,073 (12.5)% Gas transportation 7,399 5,780 28.0% 72,181 78,966 (8.6)% Other revenues 563 183 n.m.% — — —% Total $ 200,012 $ 248,672 (19.6)% 265,560 300,039 (11.5)% Heating degree days (normal 6,991) 6,167 7,210 (14.5)% Average rate per therm of retail customer $ 0.993 $ 1.098 (9.6)% n.m. not meaningful Gas revenue decreased $48.7 million during 2023 compared to 2022, due to the following: (In millions) Rate changes $ (31.7 ) Decrease in volume (18.5 ) Other 1.3 Revenue subject to refund, net 0.2 Total $ (48.7 ) Rate changes.
See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements. • Customer fixed and demand charges. During 2022, fixed and demand charges increased $1.2 million primarily attributable to the increase in demand charges for commercial customers. • Revenue subject to refund.
During 2023, fixed and demand charges decreased $3.2 million primarily attributable to the decrease in demand charges for commercial customers and decreased fixed residential customer charge. • Revenue subject to refund.
Electric and gas other income Electric other income increased $2.9 million and gas other income increased $5.6 million during 2022, compared to 2021, primarily related to the collection in 2021 of the deferred pension and other postretirement other than service costs from 2019.
The accelerated depreciation schedule, which began in 2023, for Columbia Unit 2 contributed to the increase in electric depreciation expense. Electric and gas other income and interest expense Electric other income increased $3.4 million and gas other income increased $0.4 million during 2023, compared to 2022, primarily related to pension and other postretirement other than service costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe are also exposed to the risk of accidents or other incidents that could result in damage to or destruction of our facilities or damage to persons or property. Such issues could adversely affect revenues or increase costs to repair and maintain our systems. 22 We could be adversely affected by production disruptions at our wind and solar generating facilities.
Biggest changeLack of gas or decreased gas pressure from interstate pipeline systems may result in unexpected energy interruptions and may lead to additional costs for alternative energy sources. We are also exposed to the risk of accidents or other incidents that could result in damage to or destruction of our facilities or damage to persons or property.
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.
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 unit retirement dates are subject to change depending on operational, regulatory, and other factors.
A terrorist attack, war, natural disaster, pandemic virus or disease, including the COVID-19 pandemic, or other catastrophic or unpredictable event could adversely affect our future revenues, expenses and operating results by: interrupting our normal business operations; causing employee absences or casualties, including loss of our key employees; interrupting or affecting supplier operations; requiring substantial expenditures and expenses to repair, replace and restore normal business operations; and reducing investor confidence.
A terrorist attack, war, natural disaster, pandemic virus or disease, including the recent COVID-19 pandemic, or other catastrophic or unpredictable event could adversely affect our future revenues, expenses and operating results by: interrupting our normal business operations; causing employee absences or casualties, including loss of our key employees; interrupting or affecting supplier operations; requiring substantial expenditures and expenses to repair, replace and restore normal business operations; and reducing investor confidence.
Such an event would have additional adverse effects, including environmental ramifications, increased security and insurance costs, as well as general economic volatility or uncertainty within 23 our service territories. The inability to maintain operational continuity and any additional costs incurred for repairing our facilities or making alternative arrangements could materially and adversely affect our financial condition and results of operations.
Such an event would have additional adverse effects, including environmental ramifications, increased security and insurance costs, as well as general economic volatility or uncertainty within our service territories. The inability to maintain operational continuity and any additional costs incurred for repairing our facilities or making alternative arrangements could materially and adversely affect our financial condition and results of operations.
Investors may also move away from investing in fossil fuel generated electricity for reputational or perceived risk-related reasons, which could raise our costs of attracting capital. • If we are not seen as being proactive in addressing concerns: o we may experience reputational issues among our customers and the communities that we serve.
Investors may also move away from investing in fossil fuel generated electricity for reputational or perceived risk-related reasons, which could raise our costs of attracting capital. • If we are not seen as being proactive in addressing concerns: 20 o we may experience reputational issues among our customers and the communities that we serve.
MGE must adhere in its electric distribution system to mandatory reliability standards established by NERC. These standards cover areas such as critical infrastructure protection, emergency preparedness, facility design, and transmission operations, among others. The critical infrastructure protection standards focus on physical and access security of cyber assets, as well as incident response and recovery planning.
MGE must adhere in its electric distribution system to mandatory reliability standards established by NERC. These standards cover areas such as critical infrastructure protection, emergency preparedness, facility design, and transmission operations, among others. The critical infrastructure protection standards focus on physical and 19 access security of cyber assets, as well as incident response and recovery planning.
In the case of our renewable generation projects, we may face delays in the completion of the necessary transmission system connections or upgrades to accommodate the project. If a capital project exceeds the approved project costs approved by the PSCW, we may not be able to recover those excess costs through regulated customer rates.
In the case of our renewable generation projects, we 24 may face delays in the completion of the necessary transmission system connections or upgrades to accommodate the project. If a capital project exceeds the approved project costs approved by the PSCW, we may not be able to recover those excess costs through regulated customer rates.
Many factors affect the volatility and price of our common stock in addition to our operating results and prospects, including changes in conditions locally and in the broader economy. These conditions include technological change, the level of interest rates and yields on other investments, and the effects of the other risk factors discussed in this report.
Many factors affect the volatility and price of our common 26 stock in addition to our operating results and prospects, including changes in conditions locally and in the broader economy. These conditions include technological change, the level of interest rates and yields on other investments, and the effects of the other risk factors discussed in this Report.
In addition to the regulations discussed below, MGE continues to track state and federal initiatives such as potential state and federal regulations governing surface water and/or groundwater containing per- and polyfluoroalkyl substances, potential changes to regulations governing polychlorinated biphenyl (PCB), potential changes to air and water standards, and potential climate change legislation.
In addition to the regulations discussed below, MGE continues to track state and federal initiatives such as potential state and federal regulations governing surface water and/or groundwater containing per- and polyfluoroalkyl substances (PFAS), potential changes to regulations governing polychlorinated biphenyl (PCB), potential changes to air and water standards, and potential climate change legislation.
In April 2022, the OSCE released Wisconsin's Clean Energy Plan. The plan includes a goal to achieve net zero carbon by 2050. MGE is engaged in this process by participating on a Stakeholder Advisory Team in a voluntary capacity.
In April 2022, the OSCE released Wisconsin's Clean Energy Plan. The plan includes a goal to achieve net zero carbon by 2050. MGE is engaged in this process by participating on a Stakeholder Advisory 15 Team in a voluntary capacity.
A decline in the market value of those assets may increase our current and longer-term funding requirements for these obligations. Changes in the value of trust fund assets may affect the level of required contributions to these trusts to meet benefit obligations.
A decline in the market value of those assets may increase our current and longer-term funding requirements for these 25 obligations. Changes in the value of trust fund assets may affect the level of required contributions to these trusts to meet benefit obligations.
If the technology systems were to fail or be breached by a cyber-attack, and not be recovered in a timely fashion, we may be unable to fulfill critical business functions and confidential data could be compromised, any additional costs may not be recoverable in rates, or may exceed insurance limits, or may not be covered by insurance and could adversely impact our results of operations.
If the technology systems were to fail or be breached by a cyber-attack, and not be recovered in a timely fashion, we may be unable to fulfill critical business functions, equipment may fail to work and confidential data could be compromised, any additional costs may not be recoverable in rates, or may exceed cyber insurance limits, or may not be covered by cyber insurance and could adversely impact our results of operations.
These permits must be renewed periodically. Various newly enacted and/or proposed federal and state initiatives may result in additional operating and capital expenditure costs for fossil-fueled electric generating units. 13 Ozone NAAQS The Elm Road Units are located in Milwaukee County, Wisconsin, a nonattainment area.
These permits must be renewed periodically. Various newly enacted and/or proposed federal and state initiatives may result in additional operating and capital expenditure costs for fossil-fueled electric generating units. 13 Ozone NAAQS The Elm Road Units are located in Milwaukee County, Wisconsin, a "moderate" nonattainment area for the 2015 Ozone NAAQS.
We may not be able to fully use tax credits if our future federal and state taxable income and related income tax liability is insufficient to permit their use or transfer tax credits to a third party.
We may not be able to fully use tax credits if our future federal and state taxable income and related income tax liability is insufficient to permit their use or if we are unable to transfer tax credits to a third party.
That interest is presently held by MGE Transco, a wholly-owned subsidiary of MGE Energy. As of December 31, 2022, MGE Transco held a 3.6% ownership interest in ATC.
That interest is presently held by MGE Transco, a wholly-owned subsidiary of MGE Energy. As of December 31, 2023, MGE Transco held a 3.6% ownership interest in ATC.
The EPA also solicited comments on whether to lower the annual standard further than the proposed level, and whether or not to also lower the maximum 24-hour limit to be consistent with recommendations from its Clean Air Scientific Advisory Committee (CASAC).
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).
Possible changes to MISO's methodology establishing capacity planning reserve margin requirements may impact new generating facilities such as solar and wind and its accredited energy capacity which may require adjustments to the current resource plan and the need to add additional resources to comply with MISO's proposal or procure capacity in the market whereby such costs might not be recovered in rates.
Possible changes to MISO's accredited capacity methodology may impact new generating facilities such as solar and wind which may require adjustments to the current resource plan. We may need to add additional resources to comply with MISO's planning reserve margin requirements or procure capacity in the market whereby such costs might not be recovered in rates.
While it is difficult to know the extent of possible legislation or 18 regulatory activity, it is expected there will be an increase in the number and scope of environmental laws and regulations aimed at fossil-fueled generation and the transportation of natural gas.
While it is difficult to know the extent of possible legislation or regulatory activity, it is expected there will be an increase in the number and scope of environmental laws and regulations aimed at carbon sources, including fossil-fueled generation and the transportation of natural gas.
MGE's Columbia plant and Elm Road Units are subject to this rule. See Footnote 16.a. of the Notes to the Consolidated Financial Statements in this Report for further discussion of compliance plans for Columbia and the Elm Road Units. Based on previous treatment of environmental compliance projects, management believes that any compliance costs will be recovered in future rates.
See Footnote 16.a. of the Notes to the Consolidated Financial Statements in this Report for further discussion of compliance plans for Columbia and the Elm Road Units. Based on previous treatment of environmental compliance projects, management believes that any compliance costs will be recovered in future rates.
The regulations adopted by the State and Federal agencies affect how we do business, our ability to undertake specified actions since pre-approval or authorization may be required for projects, the costs of operations, and the rates charged to recover those costs.
Our business is subject to regulation at the State and Federal levels. The regulations adopted by the State and Federal agencies affect how we do business, our ability to undertake specified actions since pre-approval or authorization may be required for projects, the costs of operations, and the rates charged to recover those costs.
As a holding company, we have no operations of our own, and our ability to pay dividends on our common stock is dependent on the earnings and cash flows of our operating subsidiaries and their ability to pay upstream dividends or to repay funds to us. Our subsidiaries have financial obligations that must be satisfied before funding us.
MGE Energy is a holding company, with no operations of its own, and its ability to pay dividends on our common stock is dependent on the earnings and cash flows of operating subsidiaries and their ability to pay upstream dividends or to repay funds to MGE Energy. Our subsidiaries have financial obligations that must be satisfied before funding MGE Energy.
(b) Executive officer of MGE. 17 Item 1A. Ris k Factors. MGE Energy and our subsidiaries, including MGE, operate in a regulated market environment that involves significant risks, many of which are beyond our control. The following risk factors may adversely affect our results of operations, cash flows and financial position and market price for our publicly traded securities.
MGE Energy and our subsidiaries, including MGE, operate in a regulated market environment that involves significant risks, many of which are beyond our control. The following risk factors may adversely affect our results of operations, cash flows and financial position and market price for our publicly traded securities.
Those issues could affect customers' energy choices, including efforts at self-supply, and could affect the handling and treatment of our rate requests and cost recovery. o we may experience difficulty in attracting investors, which could affect the availability and cost of capital and financing.
Those issues could affect customers' energy choices, including efforts at self-supply, and could affect the handling and treatment of our rate requests and cost recovery. o we may experience difficulty in attracting investors, which could affect the availability and cost of capital and financing. These matters represent uncertainties in the operation and management of our business.
Failure of contractual counterparties to perform their obligations under purchase power agreements, commodity supply arrangements, or other agreements may result in increased expenses for MGE as a result of being forced to cover the shortfall in the spot or short-term market, 25 where prices may be more volatile.
Failure of contractual counterparties to perform their obligations under purchase power agreements, commodity supply arrangements, or other agreements may result in increased expenses for MGE as a result of being forced to cover the shortfall in the spot or short-term market, where prices may be more volatile. That risk may be increased during periods of weak or stressed economic conditions.
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.
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 and operators of coal-fired power plants to stop transporting CCR and non-CCR wastewater to unlined surface impoundments. Columbia's obligations under this portion of the CCR Rule are now complete.
There is still uncertainty as to when or how credit rating agencies, capital markets, the FERC, or state public utility commissions will treat impacts of the Inflation Reduction Act or any new tax regulation. These impacts could subject us to credit rating downgrades.
There is also uncertainty as to when or how credit rating agencies, capital markets, the FERC, or state public utility commissions will treat impacts of any future federal or state tax regulation. These impacts could subject us to credit rating downgrades.
However, we will not know the impact of this rule with any certainty until it is finalized, counties' attainment status is determined by the EPA, and the State of Wisconsin develops an attainment implementation plan. MGE will continue to follow the rule's developments.
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.
This strategy is essential given our aging workforce. We value equity, diversity, and inclusion. We promote an inclusive, respectful work environment where individuals and groups can achieve their full potential. All employees have equitable access to employment and development opportunities.
Diversity, Equity, and Inclusion We value equity, diversity, and inclusion. We promote an inclusive, respectful work environment where individuals and groups can achieve their full potential. All employees have equitable access to employment and development opportunities.
In many cases, the cost of purchased power is tied to the cost of natural gas. In the event of an interruption in energy supply, whether due to equipment problems, transmission constraints, or otherwise, we may incur additional costs to obtain alternative sources of energy supply, in order to meet our contractual or regulatory obligations to our customers.
In the event of an interruption in energy supply, whether due to equipment problems, transmission constraints, or otherwise, we may incur additional costs to obtain alternative sources of energy supply, in order to meet our contractual or regulatory obligations to our customers.
Cooling Water Intake Rules (Section 316(b)) Section 316(b) of the Clean Water Act require cooling water intake structures at electric power plants meet best available technology (BTA) standards to reduce mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens). The EPA finalized its Section 316(b) rule for existing facilities in 2014.
Cooling Water Intake Rules (Section 316(b)) Section 316(b) of the Clean Water Act requires cooling water intake structures at electric power plants to meet best available technology (BTA) standards to reduce mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens).
Climate change and the regulatory response to it could significantly affect our operations in a number of ways, including increased operating costs and capital expenditures, restrictions on energy supply options, operational limits on our fossil fuel fired plants, permitting difficulties, and emission limits.
Climate change and the regulatory response to it could significantly affect our operations in a number of ways, including increased operating costs and capital expenditures, restrictions on energy supply options, operational limits on our fossil fuel fired plants, permitting difficulties, and emission limits. MGE would expect to seek and receive rate recovery of associated compliance costs, if and when required.
Facilities for electric generation, transmission, and gas and electric distribution are potential targets of terrorist threats and activities. A terrorist act or catastrophic event at our facilities or the facilities of other companies to which we are interconnected could result in a disruption of our ability to generate, transmit, transport, purchase, or distribute electricity or natural gas.
A terrorist act or catastrophic event at our facilities or the facilities of other companies to which we are interconnected could result in a disruption of our ability to generate, transmit, transport, purchase, or distribute electricity or natural gas.
We also face risk through our use of derivatives such as futures, forwards, and swaps, to manage our commodity price risk. We could experience increased costs as a result of volatility in the market values of those commodities.
We face commodity price risk exposure with respect to the purchase of natural gas, electricity, coal, oil, and environmental allowances. We also face risk through our use of derivatives such as futures, forwards, and swaps, to manage our commodity price risk. We could experience increased costs as a result of volatility in the market values of those commodities.
The safeguards we have may not always be effective due to the evolving nature of cyber-attacks. We cannot guarantee that such protections will be completely successful in the event of a cyber-attack.
While we have not been subject to cyber incidents that have had a material impact on operations to date, the safeguards we have may not always be effective due to the evolving nature of cyber-attacks. We cannot guarantee that such protections will be completely successful in the event of a cyber-attack.
Our capital projects, such as our renewable generation projects, are subject to various completion risks that could cause costs to increase or delays in completion.
We face risk in connection with the completion of significant capital projects. Our capital projects, such as our renewable generation projects, are subject to various completion risks that could cause costs to increase or delays in completion.
Our computer-based systems are vulnerable to interruption, the introduction of viruses, malware, ransomware, security breaches, fire, power loss, system malfunction, network outages and other events that may be beyond our control.
Our generation and distribution facilities and computer-based systems and other infrastructure or physical assets are vulnerable to interruption, the introduction of viruses, malware, ransomware, security breaches, terrorist-style attacks, fire, power loss, system malfunction, network outages, unauthorized access, and other events that may be beyond our control.
Review of the Elm Road Units has indicated that the costs to comply with this rule are not expected to be significant. See Footnote 16.a. of the Notes to the Consolidated Financial Statements in this Report for further discussion. Renewable Energy Standards Wisconsin law establishes a minimum amount of energy MGE must supply from renewable sources.
Review of the Elm Road Units has indicated that the costs to comply with this rule are not expected to be significant. See Footnote 16.a. of the Notes to the Consolidated Financial Statements in this Report for further discussion.
Everyone is responsible for helping to meet the objectives of our diversity and inclusion policy as well as supporting the concepts of equal opportunity and affirmative action. We believe that our diversity makes us stronger. "We power safety. Work safe. Home safe." That is our commitment at MGE, and it is embraced by our employees.
Everyone is responsible for helping to meet the objectives of our diversity and inclusion policy as well as supporting the concepts of equal opportunity and affirmative action. We believe that our diversity makes us stronger.
These matters represent uncertainties in the operation and management of our business. 19 We face risk for the recovery of fuel and purchased power costs. MGE has price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE burns natural gas in several of its peak electric generation facilities.
We face risk for the recovery of fuel and purchased power costs. MGE has price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE burns natural gas in several of its electric generation facilities. In many cases, the cost of purchased power is tied to the cost of natural gas.
Water Quality Effluent Limitations Guidelines and Standards for Steam Electric Power Generating Point Source Category The EPA has promulgated water Effluent Limitations Guidelines (ELG) and standards for steam electric power plants which focus on the reduction of metals and other pollutants in wastewater from new and existing power plants.
Water Quality Effluent Limitations Guidelines and Standards for Steam Electric Power Generating Point Source Category The EPA's promulgated water Effluent Limitations Guidelines (ELG) and standards for steam electric power plants focus on the reduction of metals and other pollutants in wastewater from new and existing power plants. MGE's Columbia plant and Elm Road Units are subject to this rule.
MGE will continue to monitor legal developments and any future updates to this rule. Global Climate Change MGE is a producer of greenhouse gas (GHG) emissions, primarily from the fossil fuel generating facilities it uses to meet customers' energy needs, as well as from its natural gas pipeline system and fleet vehicles.
Global Climate Change MGE produces greenhouse gas (GHG) emissions, primarily from the fossil fuel generating facilities it uses to meet customers' energy needs, as well as from its natural gas pipeline system and fleet vehicles.
Cross-State Air Pollution Rule (CSAPR): Proposed Ozone Season Update based on 2008 Ozone NAAQS The EPA's CSAPR and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and fine PM2.5 ambient air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states.
Rules regulating nitrogen oxide (NO x ) and sulfur dioxide (SO 2 ) emissions, including the Cross State Air Pollution Rule (CSAPR) and Clean Air Visibility Rule The EPA's CSAPR and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and PM2.5 ambient air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states.
The demand for electricity and gas is affected by weather. Very warm and very cold temperatures, especially for prolonged periods, can dramatically increase the demand for electricity and gas for cooling and heating, respectively, as opposed to the softening effect of more moderate temperatures.
Very warm and very cold temperatures, especially for prolonged periods, can dramatically increase the demand for electricity and gas for cooling and heating, respectively, as opposed to the softening effect of more moderate temperatures. Our electric revenues are sensitive to the summer cooling season and, to a lesser extent, the winter heating season.
In some cases, we outsource certain functions to vendors that could be targets of cyber-attacks. A significant theft, loss, or fraudulent use of personally identifiable information may cause our business reputation to be adversely impacted and could lead to potentially large costs to notify and protect the impacted persons and subject us to legal claims, fines, or penalties.
A significant theft, loss, or fraudulent use of personally identifiable information may cause our business reputation to be adversely impacted and could lead to potentially large costs to notify and protect the impacted persons and subject us to legal claims, fines, or penalties. We maintain security measures to protect our information technology and control systems, network infrastructure and other assets.
That risk may be increased during periods of weak or stressed economic conditions. As a holding company, we are dependent on upstream cash flows from our subsidiaries for the payment of dividends on our common stock.
As a holding company, we are dependent on upstream cash flows from our subsidiaries for the payment of dividends on our common stock.
Our business is subject to regulation at the State and Federal levels. We are subject to regulation as a holding company by the PSCW. The PSCW regulates MGE's rates; terms and conditions of service; various business practices and transactions; financing; the closure of generating facilities and related cost recovery; and transactions between it and its affiliates, including MGE Energy.
The PSCW regulates MGE's rates; terms and conditions of service; various business practices and transactions; financing; the closure of generating facilities and related cost recovery; and transactions between it and its affiliates, including MGE Energy. MGE is also subject to regulation by the FERC, which regulates certain aspects of its business. MGE is subject to oversight and monitoring by MISO.
In addition, any future disallowance of some or all of those tax credits as a result of legislation or an adverse determination by one of the applicable taxing jurisdictions could materially affect our tax obligations and financial results. Operating Risk We are affected by weather, which affects customer demand and can affect the operation of our facilities.
In addition, any future disallowance of some or all of those tax credits as a result of legislation or an adverse determination by one of the applicable taxing jurisdictions could materially affect our tax obligations and financial results. Our utility business currently owns and operates renewable energy generating facilities.
Effects of environmental compliance discussed below will depend upon the final approved retirement dates and compliance requirement dates.
Effects of the environmental compliance requirements discussed below will depend upon the final Columbia retirement dates approved, applicable regulations at that time, and required compliance dates.
While it is difficult to know the extent of possible legislation or regulatory activity, the federal government is likely to consider and pass some form of greenhouse gas legislation or regulations. In addition, litigation by environmental nongovernment organizations targeting GHG emissions from the electric power industry is also likely if the federal government fails to act on greenhouse gas initiatives.
In addition, litigation by environmental nongovernment organizations targeting GHG emissions from the electric power industry is also likely if the federal government fails to act on greenhouse gas initiatives.
Regulatory initiatives, proposed rules, and court challenges to adopted rules, have the potential to have a material effect on our capital expenditures and operating costs.
These regulations affect the manner in which we conduct our operations, the costs of those operations, as well as capital and operating expenditures. Regulatory initiatives, proposed rules, and court challenges to adopted rules, have the potential to have a material effect on our capital expenditures and operating costs.
Improvements in energy storage technology, including batteries and fuel cells, could also better position customers to meet their around-the-clock electricity requirements. It is possible that legislation or regulations could be adopted supporting the use of these technologies that permit third-party sales from such facilities, and allow these facilities to interconnect to our distribution system.
It is possible that legislation or regulations could be adopted supporting the use of these technologies that permit third-party sales from such facilities, and allow these facilities to interconnect to our distribution system. Improvements in the energy efficiency of lighting, appliances, and equipment will also affect energy consumption by customers.
MGE is following the development of recommendations and plans developed by agencies as a result of IRA and executive orders, as well as other executive actions taken by the Biden administration, to determine their applicability to MGE's decarbonization plans and to evaluate any potential impact to our operations. 15 State and Regional Action on Climate Change In August 2019, Wisconsin Governor Tony Evers signed an executive order to establish the Office of Sustainability and Clean Energy (OSCE).
MGE is following the development of recommendations and plans developed by agencies as a result of IRA and executive orders, as well as other executive actions taken by the Biden administration, to determine their applicability to MGE's decarbonization plans and to evaluate any potential impact to our operations.
Inflationary pressures in the economy could lead to higher expenses which may adversely impact our financial condition and results of operations. 21 The ability to obtain an adequate supply of coal could limit the ability to operate the co-owned coal-fired facilities from which we receive a significant portion of our electric supply.
The ability to obtain an adequate supply of coal could limit the ability to operate the co-owned coal-fired facilities from which we receive a significant portion of our electric supply.
In 2016, ATC Holdco was formed by several of the members of ATC, including MGE Energy, to facilitate electric transmission development and investments outside of Wisconsin, which typically have long development and investment lead times before becoming operational. ATC Holdco's future transmission development activities have been suspended for the near term.
In 2016, ATC Holdco was formed by several of the members of ATC, including MGE Energy, to explore electric transmission development and investments outside of Wisconsin, which typically have long development and investment lead times before becoming operational. MGE Energy's ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary.
We are also subject to multiple collective bargaining agreements covering approximately 322 employees. Future negotiation of these collective bargaining agreements could lead to work stoppages or other disruptions to our operations, which could adversely affect our financial condition and results of operations.
Future negotiation of these collective bargaining agreements could lead to work stoppages or other disruptions to our operations, which could adversely affect our financial condition and results of operations. Financial Risk We are exposed to commodity price risk relating to our purchases of natural gas, electricity, coal, oil, and environmental allowances.
System interruptions or failures, whether isolated or more widespread, could impact our ability to provide service to our customers, which could have a material adverse effect on our operations and financial performance. Catastrophic and unpredictable events, including the ongoing COVID-19 pandemic, could have a material adverse effect on our business.
System interruptions or failures, whether isolated or more widespread, could impact our ability to provide service to our customers, which could have a material adverse effect on our operations and financial performance. Generation, transmission systems, and natural gas pipelines are part of an interconnected system.
However, if the annual PM2.5 NAAQS is lowered further than the EPA's currently proposed value, the county where the Elm Road Units are located may be in nonattainment with the standard. A nonattainment designation would require the State of Wisconsin to develop a plan to get into attainment.
Neither the proposed annual PM2.5 NAAQS nor the 24-hour limit recommended by the CASAC are expected to impact the attainment status of 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.
Environ mental 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 we conduct our operations, the costs of those 12 operations, as well as capital and operating expenditures.
As of December 31, 2023, MGEE Transco held a 4.4% ownership interest in ATC Holdco. Environ mental 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 12 waste disposal.
Our journey to safety excellence is guided by our Safety Steering Team. The team meets regularly to examine safety topics and to identify and to prioritize continuous improvement opportunities. For about two years during the COVID-19 pandemic, about half of MGE employees worked remotely.
Home safe." That is our commitment at MGE, and it is embraced by our employees. Our journey to safety excellence is guided by our Safety Steering Team. The team meets regularly to examine safety topics and to identify and to prioritize continuous improvement opportunities.
In addition, our rate proceedings may not always result in rates that fully recover our costs or provide a reasonable return on equity. Certain costs and revenues are deferred as regulatory assets and liabilities for future recovery or refund to customers, as authorized by our regulators.
Any reduction of sales from these factors may not result in rates that fully recover our costs and require adjustments to our rates. Under applicable accounting for regulated operations, certain costs and revenues are deferred as regulatory assets and liabilities for future recovery or refund to customers, as authorized by our regulators.
Rate regulation is based on providing an opportunity to recover costs that have been reasonably incurred and the ability to earn a reasonable rate of return on invested capital. However, we have no assurance that our regulators will consider all of our costs to have been reasonably incurred.
Decisions are subject to judicial review, potentially leading to additional uncertainty associated with the approval proceedings. Rate regulation is based on providing an opportunity to recover costs that have been reasonably incurred and the ability to earn a reasonable rate of return on invested capital.
Wisconsin's 2021 SIP argues that Wisconsin will meet its current regional haze goals based on expected emissions reductions, which include Columbia unit retirements. Given that the Wisconsin SIP recognizes the Columbia unit retirements as part of its emission reduction plan, MGE does not anticipate further obligations with this rule at Columbia.
Given that the Wisconsin SIP recognizes the Columbia unit retirements as part of its emission reduction plan, MGE does not anticipate further obligations with this rule at Columbia. MGE will continue to monitor legal developments and any future updates to this rule.
Bushek (a) Vice President – Finance, Chief Information Officer and Treasurer 09/01/2020 7 Age: 42 Assistant Vice President – Chief Information Officer 07/23/2015 Lynn K. Hobbie (b) Executive Vice President – Marketing and Communications 03/01/2017 28 Age: 64 Tamara J.
Hobbie (b) Executive Vice President – Marketing and Communications 03/01/2017 29 Age: 65 Tamara J. Johnson (a) Vice President – Chief Accounting Officer and Controller 03/01/2023 8 Age: 59 Vice President – Accounting and Controller 03/01/2020 Assistant Vice President – Controller 07/23/2015 James J.
Clean Air Visibility Rule (CAVR) Columbia is subject to the best available retrofit technology (BART) regulations, a subsection of CAVR, which may require pollution control retrofits. Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR equals compliance with BART, should mean that Columbia will not need to do additional work to meet BART requirements.
Clean Air Visibility Rule Columbia is subject to the best available retrofit technology (BART) regulations, a subsection of Clean Air Visibility Rule, which may require pollution control retrofits.
The EPA is undertaking a new rulemaking under section 111(d) of the Clean Air Act to establish emission guidelines and limit GHG emissions from existing fossil fuel-fired EGUs.
Greenhouse Gas Reduction Guidelines under the Clean Air Act 111(d) Rule In May 2023, the EPA proposed a rule under section 111 of the Clean Air Act to establish New Source Performance Standards and emission guidelines to limit GHG emissions from existing fossil fuel-fired electric generating units and new, modified, and/or reconstructed fossil fuel-fired power plants.
Our revenues and the timing of the recovery of our costs could be adversely affected by improvements in power generation, storage, and use technology. Advancements in power generation technology, including commercial and residential solar generation installations and commercial micro turbine installations, are improving the cost-effectiveness of customer self-supply of electricity.
Advancements in power generation technology, including commercial and residential solar generation installations and commercial micro turbine installations, are improving the cost-effectiveness of customer self-supply of electricity. Improvements in energy storage technology, including batteries and fuel cells, could also better position customers to meet their around-the-clock electricity requirements.
Our ability to attract capital also depends, in part, upon our ability to recover our costs and obtain a fair return for shareholders. Our utility revenues are subject to regulatory proceedings, which can affect our ability to recover, and the timing of recovery of, costs that we incur in our operations.
Our utility revenues are subject to regulatory proceedings and/or negotiated settlements, which can affect our ability to recover, and the timing of recovery of, costs that we incur in our operations. Our utility customer rates have a material impact on our financial condition, results of operations, and liquidity.
Some of the challenges include lack of resources, loss of knowledge, and time required for replacement employees to develop necessary skills. Failure to identify qualified replacement employees could result in decreased productivity and increased safety costs. If we are unable to attract and retain an appropriately qualified workforce, our operations could be negatively affected.
Failure to identify qualified replacement employees could increase costs as a result of decreased productivity and increased safety incidents. If we are unable to attract and retain an appropriately qualified workforce, our operations could be negatively affected. We are also subject to multiple collective bargaining agreements covering approximately 317 employees.
Solid Waste Coal Combustion Residuals Rule The CCR rule regulates as a solid waste coal ash from burning coal for the purpose of generating electricity and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash.
MGE will continue to evaluate this plan for its applicability to MGE's decarbonization plans and to evaluate potential impact to our operations. Solid Waste Coal Combustion Residuals (CCR) Rule The CCR rule regulates the disposal of solid waste coal ash and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash.
These assumptions may differ materially from actual future results. Accordingly, we may not achieve our stated long-term goals in the timeframe projected or at all. 24 We do not own all of the land on which our facilities are located, and interruption in access rights could disrupt our operations.
These assumptions may differ materially from actual future results. Accordingly, we may not achieve our stated long-term goals in the timeframe projected or at all. Failure to attract and retain an appropriately qualified workforce could affect our operations. We must attract, train, and retain a workforce to meet current and future needs.
Changes in federal income tax policy may adversely affect our financial condition, results of operations, and cash flows, as well as our credit ratings. We currently own and operate renewable energy generating facilities. These facilities generate production tax credits and investment tax credits that we use to reduce our federal tax obligations.
Changes in federal income tax policy or our inability to use or generate tax credits may adversely affect our financial condition, results of operations, and cash flows, as well as our credit ratings. If corporate tax rates or policies are changed, we may be required to take material charges against earnings.
Our electric revenues are sensitive to the summer cooling season and, to a lesser extent, the winter heating season. Similarly, very cold temperatures can dramatically increase the demand for gas for heating. A significant portion of our gas system 20 demand is driven by heating.
Similarly, very cold temperatures can dramatically increase the demand for gas for heating. A significant portion of our gas system demand is driven by heating. Extreme summer conditions or storms may stress electric systems, resulting in increased maintenance costs and limiting the ability to meet peak customer demand.
Columbia's operator received a permit in 2019 requiring studies of intake structures to be submitted to the WDNR by November 2023 to help determine BTA. BTA improvements may not be required given that Columbia is scheduled to retire both units by June 2026.
Columbia's permit renewal application is due in 2024 and in November 2023 the Columbia operator timely submitted its renewal application to the WDNR. BTA improvements required by the future renewal permit may be coordinated with the owners' plan to retire both units by June of 2026.
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 plants based on final designations. Fine Particulate Matter (PM2.5) NAAQS In January 2023, the EPA published a proposed rule to lower the average annual PM2.5 NAAQS from its current level.
Fine Particulate Matter (PM2.5) NAAQS In January 2023, the EPA published a proposed rule to lower the average annual PM2.5 NAAQS from its current level.
In addition, certain financial metrics used by credit rating agencies, such as our funds from operations-to-debt percentage, could be negatively impacted by future rulings. We may not be able to use or transfer to a third party all tax credits for which we are eligible.
In addition, certain financial metrics used by credit rating agencies, such as our funds from operations-to-debt percentage, could be negatively impacted by future rulings. 21 Operating Risk We are affected by weather, which affects customer demand and can affect the operation of our facilities. The demand for electricity and gas is affected by weather.
We must attract, train, and retain a workforce to meet current and future needs. Events such as an aging workforce without appropriate replacements, mismatch of skill sets to future needs, or unavailability of contract resources may lead to operating challenges and increased costs.
Events such as an aging workforce without appropriate replacements, mismatch of skill sets to future needs, labor market conditions, evolving employee culture expectations, or unavailability of contract resources may lead to operating challenges and increased costs. Some of the challenges include lack of resources, loss of knowledge, and time required for replacement employees to develop necessary skills.
We could also be forced to replace lost generation capacity with additional power purchases from third parties, potentially leading to increased costs. These factors could have an adverse impact on our financial condition and results of operations, which could be material depending upon the cause of the disruption and its duration.
Any of the considerations mentioned above could have an adverse impact on our financial condition and results of operations, which could be material depending upon the cause of the disruption and its duration.
Various operating and economic factors, including transmission constraints, unfavorable trends in pricing for wind or solar energy, adverse weather conditions and the breakdown or failure of equipment, could significantly reduce the production tax credits generated by our wind or solar farms, resulting in increased federal income tax expense.
The amount of tax credits we earn depends on the date the qualifying generating facilities are placed in service and various operating and economic factors, including facility generation, transmission constraints, unfavorable trends in pricing for wind or solar energy, adverse weather conditions, the breakdown or failure of equipment, and the applicable tax credit rate.
In April 2022, MGE formally began a hybrid work schedule for remote-enabled employees. 16 As of December 31, 2022, MGE had 701 employees, 322 of which are covered by collective bargaining agreements as described below: Union Number of Employees Represented Expiration of Collective Bargaining Agreement Local Union 2304 of the International Brotherhood of Electrical Workers 231 April 30, 2023 Local Union No. 39 of the Office and Professional Employees International Union 86 May 31, 2023 Local Union No. 2006, Unit 6 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial, and Service Workers International Union 5 October 31, 2023 Financial Information About Segments See Footnote 22 of the Notes to the Consolidated Financial Statements in this Report for financial information relating to MGE Energy's and MGE's business segments.
As of December 31, 2023, MGE had 719 employees, 317 of which are covered by collective bargaining agreements as described below: Union Number of Employees Represented Expiration of Collective Bargaining Agreement Local Union 2304 of the International Brotherhood of Electrical Workers 227 April 30, 2028 Local Union No. 39 of the Office and Professional Employees International Union 85 May 31, 2028 Local Union No. 2006, Unit 6 of the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial, and Service Workers International Union 5 October 31, 2028 Governance The Human Resources and Compensation Committee of the Board of Directors of MGE Energy oversees MGE's human resource strategies around diversity, equity and inclusion, workplace environment and culture, employee engagement, talent development, retention and recruitment.
Extreme summer conditions or storms may stress electric systems, resulting in increased maintenance costs and limiting the ability to meet peak customer demand. We could be adversely affected by changes in the development, and utilization by our customers, of power generation, storage, and use technologies.
We could be adversely affected by changes in the development, and utilization by our customers, of power generation, storage, and use technologies. Our revenues and the timing of the recovery of our costs could be adversely affected by improvements in power generation, storage, and use technology.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBusiness and Footnote 16.a. of the Notes to Consolidated Financial Statements in this Report for a description of several environmental proceedings involving MGE. See Footnote 16b . of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data in this Report for a description of other legal matters. Item 4. Min e Safety Disclosures.
Biggest changeBusiness and Footnote 16.a. of the Notes to Consolidated Financial Statements in this Report for a description of several environmental proceedings affecting MGE. See Footnote 16b. of the Notes to Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data in this Report for a description of other legal matters. Item 4. Min e Safety Disclosures.
MGE Energy and MGE - Not applicable. 29 PAR T II.
MGE Energy and MGE - Not applicable. 31 PAR T II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere is no market for shares of common stock of MGE. Stock Performance Graph The performance graph below illustrates a five-year comparison of cumulative total returns based on an initial investment of $1,000 in MGE Energy common stock, as compared with the Russell 2000 and the EEI Index for the period 2017 through 2022.
Biggest changeStock Performance Graph The performance graph below illustrates a five-year comparison of cumulative total returns based on an initial investment of $1,000 in MGE Energy common stock, as compared with the Russell 2000 and the EEI Index for the period 2019 through 2023. The EEI Index reflects the consolidated performance of Edison Electric Institute investor-owned electric utilities.
For additional information regarding dividends and dividend restrictions, see Footnote 15 of the Notes to the Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data in this Report. MGE As of January 31, 2023, there were 17,347,894 outstanding shares of MGE common stock, all of which were held by MGE Energy.
For additional information regarding dividends and dividend restrictions, see Footnote 15 of the Notes to the Consolidated Financial Statements under Item 8. Financial Statements and Supplementary Data in this Report. MGE As of January 31, 2024, there were 17,347,894 outstanding shares of MGE common stock, all of which were held by MGE Energy.
Item 5. Ma rket for Registrants' Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market for Common Equity MGE Energy MGE Energy common stock is traded on Nasdaq under the symbol MGEE. As of January 31, 2023, there were 39,837 shareholders of record.
Item 5. Ma rket for Registrants' Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities. Market for Common Equity MGE Energy MGE Energy common stock is traded on Nasdaq under the symbol MGEE. As of January 31, 2024, there were 40,660 shareholders of record.
Cumulative Five-Year Total Return Comparison (assumes $1,000 invested on 12/31/2017 with dividends reinvested) Value of Investment as of December 31, 2017 2018 2019 2020 2021 2022 MGEE $ 1,000 $ 971 $ 1,302 $ 1,181 $ 1,417 $ 1,238 Russell 2000 1,000 890 1,117 1,340 1,539 1,224 EEI Index 1,000 1,037 1,304 1,289 1,510 1,527 Item 6. [ R eserved] 30
Cumulative Five-Year Total Return Comparison (assumes $1,000 invested on 12/31/2018 with dividends reinvested) Value of Investment as of December 31, 2018 2019 2020 2021 2022 2023 MGEE $ 1,000 $ 1,341 $ 1,216 $ 1,458 $ 1,275 $ 1,340 Russell 2000 1,000 1,255 1,506 1,729 1,376 1,608 EEI Index 1,000 1,258 1,243 1,456 1,473 1,344 Item 6. [ R eserved] 32
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The EEI Index reflects the consolidated performance of Edison Electric Institute investor-owned electric utilities.
Added
There is no market for shares of common stock of MGE. Equity Compensation Plans See Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters below in this report.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeGeneral MGE Energy is an investor-owned public utility holding company operating through subsidiaries in five business segments: • Regulated electric utility operations, conducted through MGE, • Regulated gas utility operations, conducted through MGE, • Nonregulated energy operations, conducted through MGE Power and its subsidiaries, • Transmission investments, representing our equity investment in ATC and ATC Holdco, and • All other, which includes corporate operations and services.
Biggest changeGeneral MGE Energy is an investor-owned public utility holding company operating through subsidiaries in five business segments: • Regulated electric utility operations, conducted through MGE, which generate and distribute electricity to approximately 163,000 customers in Dane County, Wisconsin, • Regulated gas utility operations, conducted through MGE, which distribute natural gas to approximately 176,000 customers in seven south-central and western Wisconsin counties, • Nonregulated energy operations, conducted through MGE Power and its subsidiaries, which owns interests in electric generating capacity that is leased to MGE, • Transmission investments, representing our equity investment in ATC, which owns and operates electric transmission facilities primarily in Wisconsin, and ATC Holdco, a company created to facilitate out-of-state electric transmission development and investments, and • All other, which includes corporate operations and services.
The earnings and cash flows from the utility business are sensitive to various external factors, including: • Weather, and its impact on customer sales, • Economic conditions, including current business activity and employment and their impact on customer demand, • Regulation and regulatory issues, and their impact on the timing and recovery of costs, 31 • Energy commodity prices, including natural gas prices, • Equity price risk pertaining to pension related assets, • Credit market conditions, including interest rates and our debt credit rating, • Environmental laws and regulations, including adopted and pending environmental rule changes, and • Other factors listed in
The earnings and cash flows from the utility business are sensitive to various external factors, including: • Weather, and its impact on customer sales, • Economic conditions, including current business activity and employment and their impact on customer demand, • Rates, regulation and regulatory issues, and their impact on the timing and recovery of costs, • Energy commodity prices, including natural gas prices, • Equity price risk pertaining to pension related assets, 33 • Credit market conditions, including interest rates and our debt credit rating, • Environmental laws and regulations, including adopted and pending environmental rule changes, and • Other factors listed in
We have not included a discussion of results of operations and changes in financial position for the year ended December 31, 2021, as compared to the year ended December 31, 2020. That discussion can be found in Item 7.
We have not included a discussion of results of operations and changes in financial position for the year ended December 31, 2022, as compared to the year ended December 31, 2021. That discussion can be found in Item 7.
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 ownership/leasing structure for our nonregulated energy operations 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 23, 2022.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 22, 2023.
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.
Execut ive Overview 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.
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.
That responsibility is manifested in actions intended to achieve 80% carbon reduction by 2030 (from 2005 levels) and net-zero carbon by 2050, including: • reducing the proportion that coal generation represents in its generation mix, as evidenced by its announcements of the retirement of Columbia (a coal generation plant) and the planned change in the Elm Road Units fuel source from coal to natural gas, and • growing ownership of renewable generation sources.
Execut ive 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.
Our primary focus is our core utility customers at MGE as well as creating long-term value for our shareholders. MGE seeks to meet its customers' expectations for reasonably priced, reliable electric and gas service provided in a reasonable manner.
Removed
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.
Removed
MGE generates, purchases, and distributes electricity to approximately 161,000 customers in Dane County, Wisconsin, including the city of Madison, and purchases and distributes natural gas to approximately 173,000 customers in the Wisconsin counties of Columbia, Crawford, Dane, Iowa, Juneau, Monroe, and Vernon. Our nonregulated energy operations own interests in electric generating capacity that is leased to MGE.
Removed
MGE works on meeting this challenge by investing in more efficient generation projects, including renewable energy sources.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

253 edited+51 added−51 removed176 unchanged
Biggest changeConsolidated Statements of Common Equity (In thousands, except per share amounts) Accumulated Additional Other Common Stock Paid-in Retained Comprehensive Shares Value Capital Earnings Income/(Loss) Total 2020 Beginning balance - December 31, 2019 34,668 $ 34,668 $ 316,268 $ 504,740 $ — $ 855,676 Net income 92,418 92,418 Common stock dividends declared ($ 1.45 per share) ( 51,729 ) ( 51,729 ) Common stock issued, net 1,495 1,495 78,140 79,635 Ending balance - December 31, 2020 36,163 36,163 394,408 545,429 — 976,000 2021 Net income 105,761 105,761 Common stock dividends declared ($ 1.52 per share) ( 54,788 ) ( 54,788 ) Equity-based compensation plans and other 495 495 Ending balance - December 31, 2021 36,163 36,163 394,903 596,402 — 1,027,468 2022 Net income 110,952 110,952 Common stock dividends declared ($ 1.59 per share) ( 57,500 ) ( 57,500 ) Equity-based compensation plans and other 754 754 Ending balance - December 31, 2022 36,163 $ 36,163 $ 395,657 $ 649,854 $ — $ 1,081,674 The accompanying notes are an integral part of the above consolidated financial statements. 60 Madison Gas and Electric Company Consolidated Statements of Income (In thousands) For the Years Ended December 31, 2022 2021 2020 Operating Revenues: Electric revenues $ 465,847 $ 420,964 $ 394,372 Gas revenues 248,672 185,620 144,261 Total Operating Revenues 714,519 606,584 538,633 Operating Expenses: Fuel for electric generation 61,329 54,633 41,684 Purchased power 46,821 39,395 42,883 Cost of gas sold 152,570 99,690 63,697 Other operations and maintenance 209,007 198,552 185,450 Depreciation and amortization 85,549 76,983 74,188 Other general taxes 20,627 19,269 19,750 Total Operating Expenses 575,903 488,522 427,652 Operating Income 138,616 118,062 110,981 Other income, net 17,626 9,121 15,019 Interest expense, net ( 26,687 ) ( 24,153 ) ( 23,642 ) Income before income taxes 129,555 103,030 102,358 Income tax provision ( 24,063 ) ( 2,248 ) ( 16,835 ) Net Income $ 105,492 $ 100,782 $ 85,523 Less Net Income Attributable to Noncontrolling Interest, net of tax ( 21,576 ) ( 22,391 ) ( 22,393 ) Net Income Attributable to MGE $ 83,916 $ 78,391 $ 63,130 The accompanying notes are an integral part of the above consolidated financial statements. 61 Madison Gas and E lectric Company Consolidated Statements of Cash Flows (In thousands) For the Years Ended December 31, 2022 2021 2020 Operating Activities: Net income $ 105,492 $ 100,782 $ 85,523 Items not affecting cash: Depreciation and amortization 85,549 76,983 74,188 Deferred income taxes 22,767 3,654 8,543 Provision for doubtful receivables 1,764 1,550 1,415 Employee benefit plan (credit) cost ( 8,142 ) ( 2,203 ) ( 3,716 ) Other items 672 2,002 ( 1,828 ) Changes in working capital items: Accounts receivable and unbilled revenues ( 16,697 ) ( 24,680 ) ( 5,453 ) Inventories ( 22,226 ) ( 6,342 ) ( 842 ) Prepaid taxes 912 ( 4,531 ) 616 Other current assets ( 3,774 ) ( 148 ) ( 1,157 ) Accounts payable 5,104 2,775 14,603 Accrued interest and taxes ( 2,737 ) 244 1,651 Other current liabilities ( 2,541 ) ( 11,107 ) ( 4,909 ) Cash contributions to pension and other postretirement plans ( 7,308 ) ( 6,935 ) ( 6,296 ) Other noncurrent items, net ( 7,768 ) ( 1,804 ) 3,980 Cash Provided by Operating Activities 151,067 130,240 166,318 Investing Activities: Capital expenditures ( 175,030 ) ( 153,169 ) ( 203,139 ) Other ( 1,065 ) ( 1,709 ) ( 2,122 ) Cash Used for Investing Activities ( 176,095 ) ( 154,878 ) ( 205,261 ) Financing Activities: Cash dividends paid to parent by MGE ( 33,500 ) ( 5,000 ) — Distributions to parent from noncontrolling interest ( 22,000 ) ( 15,000 ) ( 21,500 ) Capital contribution from parent — — 30,000 Repayment of long-term debt ( 4,889 ) ( 4,771 ) ( 38,959 ) Issuance of long-term debt 25,000 100,000 19,300 Proceeds from (repayments of) short-term debt 65,000 ( 47,000 ) 52,500 Other ( 1,881 ) ( 2,197 ) ( 1,523 ) Cash Provided by Financing Activities 27,730 26,032 39,818 Change in cash, cash equivalents, and restricted cash 2,702 1,394 875 Cash, cash equivalents, and restricted cash at beginning of period 7,798 6,404 5,529 Cash, cash equivalents, and restricted cash at end of period $ 10,500 $ 7,798 $ 6,404 Supplemental disclosures of cash flow information: Interest paid $ 25,957 $ 23,502 $ 23,898 Significant noncash investing activities: Accrued capital expenditures $ 5,970 $ 14,414 $ 5,719 The accompanying notes are an integral part of the above consolidated financial statements. 62 Madison Gas and Elect ric Company Consolidated Balance Sheets (In thousands) As of December 31, ASSETS 2022 2021 Current Assets: Cash and cash equivalents $ 4,136 $ 6,401 Accounts receivable, less reserves of $ 7,050 and $ 6,940 , respectively 55,407 46,205 Other accounts receivable, less reserves of $ 1,323 and $ 1,364 , respectively 11,416 16,092 Unbilled revenues 43,086 34,812 Materials and supplies, at average cost 33,465 29,863 Fuel for electric generation, at average cost 7,962 6,429 Stored natural gas, at average cost 32,848 15,668 Prepaid taxes 18,467 19,379 Regulatory assets - current 9,541 1,465 Other current assets 19,479 11,629 Total Current Assets 235,807 187,943 Affiliate receivable long-term 1,059 1,589 Regulatory assets 103,900 107,547 Pension and other postretirement benefit asset 68,872 58,757 Other deferred assets and other 23,758 27,907 Property, Plant, and Equipment: Property, plant, and equipment, net 1,865,380 1,828,199 Construction work in progress 105,748 50,603 Total Property, Plant, and Equipment 1,971,128 1,878,802 Investments 115 230 Total Assets $ 2,404,639 $ 2,262,775 LIABILITIES AND CAPITALIZATION Current Liabilities: Long-term debt due within one year $ 54,314 $ 4,889 Short-term debt 70,500 5,500 Accounts payable 59,317 64,130 Accrued interest and taxes 7,912 10,649 Accrued payroll related items 13,064 12,951 Regulatory liabilities - current 11,925 9,365 Other current liabilities 6,062 8,108 Total Current Liabilities 223,094 115,592 Other Credits: Deferred income taxes 219,258 198,885 Investment tax credit - deferred 48,735 44,836 Regulatory liabilities 156,988 154,298 Accrued pension and other postretirement benefits 53,607 73,085 Finance lease liabilities 17,108 17,322 Other deferred liabilities and other 98,217 92,152 Total Other Credits 593,913 580,578 Capitalization: Common shareholder's equity: Common Stock - $ 1 par value - 50,000 shares authorized; 17,348 shares outstanding 17,348 17,348 Additional paid-in capital 252,917 252,917 Retained earnings 583,958 533,542 Total Common Shareholder's Equity 854,223 803,807 Noncontrolling interest 148,163 148,587 Total Equity 1,002,386 952,394 Long-term debt 585,246 614,211 Total Capitalization 1,587,632 1,566,605 Commitments and contingencies (see Footnote 16) Total Liabilities and Capitalization $ 2,404,639 $ 2,262,775 The accompanying notes are an integral part of the above consolidated financial statements. 63 Madison Gas and Elec tric Company Consolidated Statements of Equity (In thousands) Accumulated Additional Other Non- Common Stock Paid-in Retained Comprehensive Controlling Shares Value Capital Earnings Income/(Loss) Interest Total 2020 Beginning balance - December 31, 2019 17,348 $ 17,348 $ 222,917 $ 397,021 $ — $ 140,303 $ 777,589 Net income 63,130 22,393 85,523 Capital contributions from parent 30,000 30,000 Distributions to parent from noncontrolling interest ( 21,500 ) ( 21,500 ) Ending balance - December 31, 2020 17,348 $ 17,348 $ 252,917 $ 460,151 $ — $ 141,196 $ 871,612 2021 Net income 78,391 22,391 100,782 Cash dividends paid to parent by MGE ( 5,000 ) ( 5,000 ) Distributions to parent from noncontrolling interest ( 15,000 ) ( 15,000 ) Ending balance - December 31, 2021 17,348 $ 17,348 $ 252,917 $ 533,542 $ — $ 148,587 $ 952,394 2022 Net income 83,916 21,576 105,492 Cash dividends paid to parent by MGE ( 33,500 ) ( 33,500 ) Distributions to parent from noncontrolling interest ( 22,000 ) ( 22,000 ) Ending balance - December 31, 2022 17,348 $ 17,348 $ 252,917 $ 583,958 $ — $ 148,163 $ 1,002,386 The accompanying notes are an integral part of the above consolidated financial statements. 64 Notes to Consolidated Financial Statements December 31, 2022, 2021, and 2020 This report is a combined report of MGE Energy and MGE.
Biggest changeConsolidated Statements of Common Equity (In thousands, except per share amounts) Accumulated Additional Other Common Stock Paid-in Retained Comprehensive Shares Value Capital Earnings Income/(Loss) Total 2021 Beginning balance - December 31, 2020 36,163 $ 36,163 $ 394,408 $ 545,429 $ — $ 976,000 Net income 105,761 105,761 Common stock dividends declared ($ 1.52 per share) ( 54,788 ) ( 54,788 ) Equity-based compensation plans and other 495 495 Ending balance - December 31, 2021 36,163 36,163 394,903 596,402 — 1,027,468 2022 Net income 110,952 110,952 Common stock dividends declared ($ 1.59 per share) ( 57,500 ) ( 57,500 ) Equity-based compensation plans and other 754 754 Ending balance - December 31, 2022 36,163 36,163 395,657 649,854 — 1,081,674 2023 Net income 117,699 117,699 Common stock dividends declared ($ 1.67 per share) ( 60,393 ) ( 60,393 ) Equity-based compensation plans and other 1,093 1,093 Ending balance - December 31, 2023 36,163 $ 36,163 $ 396,750 $ 707,160 $ — $ 1,140,073 The accompanying notes are an integral part of the above consolidated financial statements. 62 Madison Gas and Electric Company Consolidated Statements of Income (In thousands) For the Years Ended December 31, 2023 2022 2021 Operating Revenues: Electric revenues $ 490,419 $ 465,847 $ 420,964 Gas revenues 200,012 248,672 185,620 Total Operating Revenues 690,431 714,519 606,584 Operating Expenses: Fuel for electric generation 57,627 61,329 54,633 Purchased power 41,224 46,821 39,395 Cost of gas sold 106,647 152,570 99,690 Other operations and maintenance 214,897 209,007 198,552 Depreciation and amortization 100,352 85,549 76,983 Other general taxes 22,301 20,627 19,269 Total Operating Expenses 543,048 575,903 488,522 Operating Income 147,383 138,616 118,062 Other income, net 21,365 17,626 9,121 Interest expense, net ( 30,651 ) ( 26,687 ) ( 24,153 ) Income before income taxes 138,097 129,555 103,030 Income tax provision ( 25,727 ) ( 24,063 ) ( 2,248 ) Net Income $ 112,370 $ 105,492 $ 100,782 Less Net Income Attributable to Noncontrolling Interest, net of tax ( 21,868 ) ( 21,576 ) ( 22,391 ) Net Income Attributable to MGE $ 90,502 $ 83,916 $ 78,391 The accompanying notes are an integral part of the above consolidated financial statements. 63 Madison Gas and E lectric Company Consolidated Statements of Cash Flows (In thousands) For the Years Ended December 31, 2023 2022 2021 Operating Activities: Net income $ 112,370 $ 105,492 $ 100,782 Items not affecting cash: Depreciation and amortization 100,352 85,549 76,983 Deferred income taxes 21,536 22,767 3,654 Provision for doubtful receivables 1,764 1,764 1,550 Employee benefit plan (credit) cost ( 5,796 ) ( 8,142 ) ( 2,203 ) Other items ( 241 ) 672 2,002 Changes in working capital items: Accounts receivable and unbilled revenues 11,130 ( 16,697 ) ( 24,680 ) Inventories ( 850 ) ( 22,226 ) ( 6,342 ) Prepaid taxes ( 3,871 ) 912 ( 4,531 ) Other current assets 5,032 ( 3,774 ) ( 148 ) Accounts payable ( 5,209 ) 5,104 2,775 Accrued interest and taxes 1,413 ( 2,737 ) 244 Other current liabilities ( 3,272 ) ( 2,541 ) ( 11,107 ) Cash contributions to pension and other postretirement plans ( 7,747 ) ( 7,308 ) ( 6,935 ) Other noncurrent items, net 5,211 ( 7,768 ) ( 1,804 ) Cash Provided by Operating Activities 231,822 151,067 130,240 Investing Activities: Capital expenditures ( 222,071 ) ( 175,030 ) ( 153,169 ) Other ( 1,956 ) ( 1,065 ) ( 1,709 ) Cash Used for Investing Activities ( 224,027 ) ( 176,095 ) ( 154,878 ) Financing Activities: Cash dividends paid to parent by MGE ( 41,000 ) ( 33,500 ) ( 5,000 ) Distributions to parent from noncontrolling interest ( 20,500 ) ( 22,000 ) ( 15,000 ) Repayment of long-term debt ( 54,314 ) ( 4,889 ) ( 4,771 ) Issuance of long-term debt 139,300 25,000 100,000 (Repayments of) proceeds from short-term debt ( 32,500 ) 65,000 ( 47,000 ) Other ( 2,576 ) ( 1,881 ) ( 2,197 ) Cash (Used for) Provided by Financing Activities ( 11,590 ) 27,730 26,032 Change in cash, cash equivalents, and restricted cash ( 3,795 ) 2,702 1,394 Cash, cash equivalents, and restricted cash at beginning of period 10,500 7,798 6,404 Cash, cash equivalents, and restricted cash at end of period $ 6,705 $ 10,500 $ 7,798 Supplemental disclosures of cash flow information: Interest paid $ 29,526 $ 25,957 $ 23,502 Significant noncash investing activities: Accrued capital expenditures $ 17,247 $ 5,970 $ 14,414 The accompanying notes are an integral part of the above consolidated financial statements. 64 Madison Gas and Elect ric Company Consolidated Balance Sheets (In thousands) As of December 31, ASSETS 2023 2022 Current Assets: Cash and cash equivalents $ 2,819 $ 4,136 Accounts receivable, less reserves of $ 6,537 and $ 7,050 , respectively 46,734 55,407 Other accounts receivable, less reserves of $ 1,561 and $ 1,323 , respectively 15,616 11,416 Unbilled revenues 33,181 43,086 Materials and supplies, at average cost 33,385 33,465 Fuel for electric generation, at average cost 13,423 7,962 Stored natural gas, at average cost 25,840 32,848 Prepaid taxes 22,338 18,467 Regulatory assets - current 20,979 9,541 Other current assets 16,088 19,479 Total Current Assets 230,403 235,807 Regulatory assets 81,589 103,900 Pension and other postretirement benefit asset 93,896 68,872 Other deferred assets and other 20,780 24,817 Property, Plant, and Equipment: Property, plant, and equipment, net 2,018,149 1,865,380 Construction work in progress 110,091 105,748 Total Property, Plant, and Equipment 2,128,240 1,971,128 Investments 60 115 Total Assets $ 2,554,968 $ 2,404,639 LIABILITIES AND CAPITALIZATION Current Liabilities: Long-term debt due within one year $ 5,146 $ 54,314 Short-term debt 38,000 70,500 Accounts payable 65,434 59,317 Accrued interest and taxes 9,325 7,912 Accrued payroll related items 15,888 13,064 Regulatory liabilities - current 15,296 11,925 Other current liabilities 6,502 6,062 Total Current Liabilities 155,591 223,094 Other Credits: Deferred income taxes 244,634 219,258 Investment tax credit - deferred 46,892 48,735 Regulatory liabilities 162,316 156,988 Accrued pension and other postretirement benefits 55,058 53,607 Asset retirement obligations 54,430 50,260 Finance lease liabilities 18,039 17,108 Other deferred liabilities and other 45,930 47,957 Total Other Credits 627,299 593,913 Capitalization: Common shareholder's equity: Common Stock - $ 1 par value - 50,000 shares authorized; 17,348 shares outstanding 17,348 17,348 Additional paid-in capital 252,917 252,917 Retained earnings 633,460 583,958 Total Common Shareholder's Equity 903,725 854,223 Noncontrolling interest 149,531 148,163 Total Equity 1,053,256 1,002,386 Long-term debt 718,822 585,246 Total Capitalization 1,772,078 1,587,632 Commitments and contingencies (see Footnote 16) Total Liabilities and Capitalization $ 2,554,968 $ 2,404,639 The accompanying notes are an integral part of the above consolidated financial statements. 65 Madison Gas and Elec tric Company Consolidated Statements of Equity (In thousands) Accumulated Additional Other Non- Common Stock Paid-in Retained Comprehensive Controlling Shares Value Capital Earnings Income/(Loss) Interest Total 2021 Beginning balance - December 31, 2020 17,348 $ 17,348 $ 252,917 $ 460,151 $ — $ 141,196 $ 871,612 Net income 78,391 22,391 100,782 Cash dividends paid to parent by MGE ( 5,000 ) ( 5,000 ) Distributions to parent from noncontrolling interest ( 15,000 ) ( 15,000 ) Ending balance - December 31, 2021 17,348 $ 17,348 $ 252,917 $ 533,542 $ — $ 148,587 $ 952,394 2022 Net income 83,916 21,576 105,492 Cash dividends paid to parent by MGE ( 33,500 ) ( 33,500 ) Distributions to parent from noncontrolling interest ( 22,000 ) ( 22,000 ) Ending balance - December 31, 2022 17,348 $ 17,348 $ 252,917 $ 583,958 $ — $ 148,163 $ 1,002,386 2023 Net income 90,502 21,868 112,370 Cash dividends paid to parent by MGE ( 41,000 ) ( 41,000 ) Distributions to parent from noncontrolling interest ( 20,500 ) ( 20,500 ) Ending balance - December 31, 2023 17,348 $ 17,348 $ 252,917 $ 633,460 $ — $ 149,531 $ 1,053,256 The accompanying notes are an integral part of the above consolidated financial statements. 66 Notes to Consolidated Financial Statements December 31, 2023, 2022, and 2021 This report is a combined report of MGE Energy and MGE.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accounting for Rate Regulation As described in Notes 1 and 8 to the consolidated financial statements, the Company applies the authoritative guidance for accounting for certain types of regulation, which requires the Company to record regulatory assets and regulatory liabilities.
Accounting for Rate Regulation As described in Notes 1 and 8 to the consolidated financial statements, the Company applies the authoritative guidance for accounting for certain types of regulation, which requires the Company to record regulatory assets and regulatory liabilities.
Regulatory assets represent costs which are deferred due to the probable future recovery from customers through regulated rates while regulatory liabilities represent the excess recovery of costs or accrued credits which were deferred because management believes it is probable such amounts will be returned to customers through future regulated rates.
Regulatory assets represent costs which are deferred due to the probable future recovery from customers through regulated rates while regulatory liabilities represent the excess recovery of costs or accrued credits which were deferred because management believes it is probable such amounts will be returned to customers through future regulated rates.
As disclosed by management, management continually assesses whether the regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. This assessment considers factors such as changes in the regulatory environment, recent rate orders to other regulated entities under the same jurisdiction, and the status of any pending or potential deregulation legislation.
As disclosed by management, management continually assesses whether the regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. This assessment considers factors such as changes in the regulatory environment, recent rate orders to other regulated entities under the same jurisdiction, and the status of any pending or potential deregulation legislation.
The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of rate regulation is a critical audit matter are the significant judgment by management in estimating the probability of future recovery of regulatory assets and refunds of regulatory liabilities; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the recoverability of regulatory assets and the refund of regulatory liabilities.
The principal considerations for our determination that performing procedures relating to the Company’s accounting for the effects of rate regulation is a critical audit matter are the significant judgment by management in estimating the probability of future recovery of regulatory assets and refunds of regulatory liabilities; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the recoverability of regulatory assets and the refund of regulatory liabilities.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment of the probability of recoverability of regulatory assets and refunds of regulatory liabilities.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s assessment of the probability of recoverability of regulatory assets and refunds of regulatory liabilities.
Assets for Columbia Unit 1 and Unit 2 are currently included in rate base, and MGE continues to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW that included retirement dates of 2029 for Unit 1.
Assets for Columbia Unit 1 and Unit 2 are currently included in rate base, and MGE continues to depreciate them on a straight-line basis using the composite depreciation rates approved by the PSCW that included retirement dates of 2029 for Unit 1 and Unit 2.
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.
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.
Under that Note Purchase Agreement: (i) note holders have the right to require MGE to repurchase their notes at par in the event of an acquisition of beneficial ownership of 30 % or more of the outstanding voting stock of MGE Energy, (ii) MGE must maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65 %, and (iii) MGE cannot issue "Priority Debt" in an amount exceeding 20 % of its consolidated assets.
Under that Note Purchase Agreement: (i) note holders have the right to require MGE to repurchase their notes at par in the event of an acquisition of beneficial ownership of 30% or more of the outstanding voting stock of MGE 92 Energy, (ii) MGE must maintain a ratio of its consolidated indebtedness to consolidated total capitalization not to exceed a maximum of 65%, and (iii) MGE cannot issue "Priority Debt" in an amount exceeding 20% of its consolidated assets.
These costs are recognized in "Other operations and maintenance" expense in the consolidated statements of income and are amortized on a straight-line basis over the term of the hosted contract, which includes renewable option periods. Software assets for hosted arrangements have terms ranging from three to ten years. 69 u. Impairment of Long-Lived Assets - MGE Energy and MGE.
These costs are recognized in "Other operations and maintenance" expense in the consolidated statements of income and are amortized on a straight-line basis over the term of the hosted contract, which includes renewable option periods. Software assets for hosted arrangements have terms ranging from three to ten years. u. Impairment of Long-Lived Assets - MGE Energy and MGE.
Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR equals compliance with BART, should mean that Columbia 95 will not need to do additional work to meet BART requirements. Wisconsin's 2021 SIP argues that Wisconsin will meet its current regional haze goals based on expected emissions reductions, which include Columbia unit retirements.
Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR equals compliance with BART, should mean that Columbia will not need to do additional work to meet BART requirements. Wisconsin's 2021 SIP argues that Wisconsin will meet its current regional haze goals based on expected emissions reductions, which include Columbia unit retirements.
(b) In November 2022, MGE entered into a private placement Note Purchase Agreement in which it committed to issue $ 25 million of new long-term debt (Series A), $ 15 million of new long-term debt (Series B), carrying an interest rate of 5.43 % 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-year life.
(f) In November 2022, MGE entered into a private placement Note Purchase Agreement in which it committed to issue $ 25 million of new long-term debt (Series A), $15 million of new long-term debt (Series B), carrying an interest rate of 5.43% 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-year life.
Also driving the requested electric increase were higher fuel and purchased power costs as well as the completion in 2021 of the one-time return of the electric excess deferred tax credit related to the 2017 Tax Act not restricted by IRS normalization rules. Included in the electric residential rate is a reduction in the customer charge.
Also driving the requested electric increase were higher fuel and purchased power costs as well as the completion in 2021 of the one-time return of the electric excess deferred tax credit related to the 2017 Tax Act not restricted by IRS normalization rules. Included in the electric residential rate is a reduction in the customer fixed charge.
Cash flows from such derivative instruments are classified on a basis consistent with the nature of the underlying hedged item. h. Regulatory Assets and Liabilities - MGE Energy and MGE. Regulatory assets and regulatory liabilities are recorded consistent with regulatory treatment. Regulatory assets represent costs which are deferred due to the probable future recovery from customers through regulated rates.
Cash flows from such derivative instruments are classified on a basis consistent with the nature of the underlying hedged item. h. Regulatory Assets and Liabilities - MGE Energy and MGE. Regulatory assets and regulatory liabilities are recorded consistent with regulatory treatment. Regulatory assets represent costs which are deferred due to the probable future recovery from 68 customers through regulated rates.
The threshold is defined for recognizing tax return positions in the financial statements as "more likely than not" that the position is sustainable, based on its merits. Subsequent recognition, derecognition, and measurement is based on management's best judgment given the facts, circumstances, and information available at the reporting date.
The threshold is defined for recognizing tax return positions in the financial statements as "more likely than not" that the position is 71 sustainable, based on its merits. Subsequent recognition, derecognition, and measurement is based on management's best judgment given the facts, circumstances, and information available at the reporting date.
Insurance Continuance Fund (ICF) – The ICF is a supplemental retirement plan that includes assets that have been segregated and restricted to pay retiree term life insurance premiums. Fixed Rate Fund – The Fixed Rate fund is supported by an underlying portfolio of fixed income securities, including public bonds, commercial mortgages, and private placement bonds.
Insurance Continuance Fund – The Insurance Continuance Fund is a supplemental retirement plan that includes assets that have been segregated and restricted to pay retiree term life insurance premiums. Fixed Rate Fund – The Fixed Rate fund is supported by an underlying portfolio of fixed income securities, including public bonds, commercial mortgages, and private placement bonds.
The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism. b. Notional Amounts.
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. b. Notional Amounts.
Based on the nature and terms of the contractual agreements, MGE is expected to absorb a majority of the expected losses or residual value associated with the ownership of the generation assets by MGE Power Elm Road and MGE Power West Campus and therefore MGE holds a variable interest despite the absence of an equity interest.
Based on the nature and terms of the contractual agreements, MGE is expected to absorb a majority of the expected losses or residual value associated with the ownership of the 72 generation assets by MGE Power Elm Road and MGE Power West Campus and therefore MGE holds a variable interest despite the absence of an equity interest.
In November 2021, MGE announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. 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.
In 2021, MGE announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. 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.
Changes in measurement are reported in earnings. Equity security investments with readily determinable fair values are carried at fair value. Realized and unrealized gains and losses are included in earnings. See Footnote 7 for further information on investments and Footnote 19 for further information on fair value of investments. s. Capitalized Software Costs - MGE Energy and MGE.
Changes in measurement are reported in earnings. Equity security investments with readily determinable fair values are carried at fair value. Realized and unrealized gains and losses are included in earnings. See Footnote 7 for further information on investments and Footnote 19 for further information on fair value of investments. 70 s. Capitalized Software Costs - MGE Energy and MGE.
Change in control events are defined as (i) a failure by MGE Energy to hold 100 % of the 90 outstanding voting equity interest in MGE or (ii) the acquisition of beneficial ownership of 30 % or more of the outstanding voting stock of MGE Energy by one person or two or more persons acting in concert. 14.
Change in control events are defined as (i) a failure by MGE Energy to hold 100 % of the outstanding voting equity interest in MGE or (ii) the acquisition of beneficial ownership of 30 % or more of the outstanding voting stock of MGE Energy by one person or two or more persons acting in concert. 14.
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.
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 and operators of coal-fired power plants to stop transporting CCR and non-CCR wastewater to unlined surface impoundments.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable 53 assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable 55 assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Commodity Price Risk MGE has commodity price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE's electric operations burn natural gas in several of its peaking power plants and, in many cases, the cost of purchased power is tied to the cost of natural gas.
Commodity Price Risk MGE has commodity price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE's electric operations burn natural gas in several of its power plants and, in many cases, the cost of purchased power is tied to the cost of natural gas.
These estimates could affect reported amounts of assets, liabilities, and disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management's estimates. 65 d. Cash, Cash Equivalents, and Restricted Cash – MGE Energy and MGE.
These estimates could affect reported amounts of assets, liabilities, and disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management's estimates. d. Cash, Cash Equivalents, and Restricted Cash – MGE Energy and MGE.
The UW owns a controlling interest in the chilled-water and steam plants, which are used to meet the 74 needs for air-conditioning and steam-heat capacity for the UW campus. MGE Power West Campus owns a controlling interest in the electric generation plant, which is leased and operated by MGE.
The UW owns a controlling interest in the chilled-water and steam plants, which are used to meet the needs for air-conditioning and steam-heat capacity for the UW campus. MGE Power West Campus owns a controlling interest in the electric generation plant, which is leased and operated by MGE.
(d) The ratio calculation excludes assets, liabilities, revenues, and expenses included in MGE's financial statements as the result of the consolidation of VIEs, such as MGE Power West Campus and MGE Power Elm Road. A change in control constitutes a default under the agreements.
(d) The ratio calculation excludes assets, liabilities, revenues, and expenses included in MGE's financial statements as the result of the consolidation of VIEs, such as MGE Power West Campus and MGE Power Elm Road. A change in control constitutes a 91 default under the agreements.
Depending on the nature of the instrument, the gain or loss associated with 98 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.
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.
The PSCW has allowed rate recovery on unamortized issuance costs for extinguished debt facilities. When the facility replacing the old facility is 77 deemed by the PSCW to be more favorable for the ratepayers, the PSCW will allow rate recovery of any unamortized issuance costs related to the old facility.
The PSCW has allowed rate recovery on unamortized issuance costs for extinguished debt facilities. When the facility replacing the old facility is deemed by the PSCW to be more favorable for the ratepayers, the PSCW will allow rate recovery of any unamortized issuance costs related to the old facility.
The fuel rules bandwidth is set at plus or minus 1 % in 2022 and increased to 2 % in 2023.The electric fuel-related costs are subject to an excess revenues test.
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.
These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability. 103 20. Revenue - MGE En ergy and MGE.
These derivatives are therefore marked to fair value and are offset in the financial statements with a corresponding regulatory asset or liability. 20. Revenue - MGE En ergy and MGE.
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. As of December 31, 2022 and 2021, early retirement of Columbia was probable. See Footnote 4 for further information. (b) Two coal-fired generating units in Oak Creek, Wisconsin.
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. As of December 31, 2023 and 2022, early retirement of Columbia was probable. See Footnote 4 for further information. (b) Two coal-fired generating units in Oak Creek, Wisconsin.
MGE is permitted by PSCW order to recover lease payments made to MGE Power Elm Road and MGE Power West Campus in customer rates. 71 4. Property, Plant, and Equipment - MGE Energy and MGE.
MGE is permitted by PSCW order to recover lease payments made to MGE Power Elm Road and MGE Power West Campus in customer rates. 4. Property, Plant, and Equipment - MGE Energy and MGE.
For the years ended December 31, 2022, 2021, and 2020, MGE recorded $ 1.3 million, $ 2.9 million, and $ 1.3 million, 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 Incentive Plan in "Other operations and maintenance" on the consolidated statements of income. 2013 Director Incentive Plan and 2006 Performance Unit Plan - Liability Awards - Under MGE Energy's 2013 Director Incentive Plan and its 2006 Performance Unit Plan, non-employee directors and eligible employees, respectively, could receive performance units that entitled the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the performance period set in the award.
For the years ended December 31, 2023, 2022, and 2021, MGE recorded $ 2.7 million, $ 1.3 million, and $ 2.9 million, 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 Incentive Plan in "Other operations and maintenance" on the consolidated statements of income. 2013 Director Incentive Plan and 2006 Performance Unit Plan - Liability Awards - Under the 2013 Director Incentive Plan and 2006 Performance Unit Plan, non-employee directors and eligible employees, respectively, could receive performance units that entitled the holder to receive a cash payment equal to the value of a designated number of shares of MGE Energy's common stock, plus dividend equivalent payments thereon, at the end of the performance period set in the award.
Allowance for funds used during construction is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a return on shareholder's capital used for 68 construction purposes.
Allowance for funds used during construction is included in utility plant accounts and represents the cost of borrowed funds used during plant construction and a return on shareholder's capital used for construction purposes.
The following descriptions are the categories of underlying plan assets held within the pension and other postretirement benefit plans as of December 31, 2022: Cash and Cash Equivalents – This category includes highly liquid investments with maturities of less than three months which are traded in active markets. Equity Securities – These securities consist of U.S. and international stock funds.
The following descriptions are the categories of underlying plan assets held within the pension and other postretirement benefit plans as of December 31, 2023: Cash and Cash Equivalents – This category includes highly liquid investments with maturities of less than three months which are traded in active markets. Equity Securities – These securities consist of U.S. and international stock funds.
An impairment loss would be recorded for the difference of the remaining net book value of the generating unit that is greater than the present value of the amount expected to be recovered from ratepayers. There was no significant impairment of long-lived assets during 2022, 2021, and 2020. v. Income Taxes and Excise Taxes - MGE Energy and MGE.
An impairment loss would be recorded for the difference of the remaining net book value of the generating unit that is greater than the present value of the amount expected to be recovered from ratepayers. There was no significant impairment of long-lived assets during 2023, 2022, and 2021 . v. Income Taxes and Excise Taxes - MGE Energy and MGE.
Additionally, if a counterparty were to default and MGE were to liquidate all contracts with that entity, MGE's credit loss could include: the loss in value of mark-to-market contracts, the amount owed for settled transactions, and additional payments to settle unrealized losses. As of December 31, 2022, no counterparties had defaulted.
Additionally, if a counterparty were to default and MGE were to liquidate all contracts with that entity, MGE's credit loss could include: the loss in value of mark-to-market contracts, the amount owed for settled transactions, and additional payments to settle unrealized losses. As of December 31, 2023, no counterparties had defaulted.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Changes in management's assumptions regarding settlement dates, settlement methods, or assigned probabilities could have a material effect on the liabilities and the associated regulatory asset recorded as of December 31, 2022. MGE also may have AROs relating to the removal of various assets, such as certain electric and gas distribution facilities.
Changes in management's assumptions regarding settlement dates, settlement methods, or assigned probabilities could have a material effect on the liabilities and the associated regulatory asset recorded as of December 31, 2023. MGE also may have AROs relating to the removal of various assets, such as certain electric and gas distribution facilities.
The value of employee benefit plans trusts' assets have decreased in value by approximately 18% for the year ended December 31, 2022 and increased 15% for the year ended December 31, 2021. Credit Risk - Counterparty Credit risk is the loss that may result from counterparty nonperformance. MGE is exposed to credit risk primarily through its merchant energy business.
The value of employee benefit plans trusts' assets have increased in value by approximately 15% for the year ended December 31, 2023 and decreased 18% for the year ended December 31, 2022. Credit Risk - Counterparty Credit risk is the loss that may result from counterparty nonperformance. MGE is exposed to credit risk primarily through its merchant energy business.
As of December 31, 2022 , there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in MGE pension and postretirement benefit plan assets. f. Fair Value Measurements of Plan Assets. Pension and other postretirement benefit plan investments are recorded at fair value. See Footnote 19 for more information regarding the fair value hierarchy.
As of December 31, 2023 , there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in MGE pension and postretirement benefit plan assets. f. Fair Value Measurements of Plan Assets. Pension and other postretirement benefit plan investments are recorded at fair value. See Footnote 19 for more information regarding the fair value hierarchy.
MGE does no t expect to need to make any required contributions to the qualified plans for 2023. The contributions for years after 2023 are not yet currently estimated. MGE has adopted the asset smoothing as permitted in accordance with the Pension Protection Act of 2006, including modifications made by WRERA.
MGE does no t expect to need to make any required contributions to the qualified plans for 2024. The contributions for years after 2024 are not yet currently estimated. MGE has adopted the asset smoothing as permitted in accordance with the Pension Protection Act of 2006, including modifications made by WRERA.
On the grant date, the cost of the director or employee services received in exchange for a performance unit award is measured based on the current market value of MGE Energy common stock. The fair value of the awards is remeasured quarterly, including as of December 31, 2022, as required by applicable accounting standards.
On the grant date, the cost of the director or employee services received in exchange for a performance unit award is measured based on the current market value of MGE Energy common stock. The fair value of the awards is remeasured quarterly, including as of December 31, 2023, as required by applicable accounting standards.
Changes in fair value as well as the original grant are recognized as compensation cost. Since this amount is remeasured throughout the vesting period, the compensation cost is subject to 88 variability. For nonretirement eligible employees under the 2006 Performance Unit Plan, stock-based compensation costs are accrued and recognized using the graded vesting method.
Changes in fair value as well as the original grant are recognized as compensation cost. Since this amount is remeasured throughout the vesting period, the compensation cost is subject to variability. For nonretirement eligible employees under the 2006 Performance Unit Plan, stock-based 89 compensation costs are accrued and recognized using the graded vesting method.
Based on results for the year ended December 31, 2022, no one customer constituted more than 10% of total operating revenues for MGE Energy and MGE. Credit risk for electric and gas is managed by MGE's credit and collection policies, which are consistent with state regulatory requirements.
Based on results for the year ended December 31, 2023, no one customer constituted more than 10% of total operating revenues for MGE Energy and MGE. Credit risk for electric and gas is managed by MGE's credit and collection policies, which are consistent with state regulatory requirements.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
The debt is secured by a collateral assignment of lease payments that MGE makes to MGE Power Elm Road for use of the Elm Road Units pursuant to the related long-term leases. MGE Power West Campus's long-term debt includes debt issuance costs of $ 0.1 million as of December 31, 2022 and 2021.
The debt is secured by a collateral assignment of lease payments that MGE makes to MGE Power Elm Road for use of the Elm Road Units pursuant to the related long-term leases. MGE Power West Campus's long-term debt includes debt issuance costs of $ 0.1 million as of December 31, 2023 and 2022.
Performance units under the 2021 Incentive Plan can be paid out in shares of MGE Energy common stock, cash or a combination of cash and stock. MGE assumes it will make future payouts of its performance units granted in cash; therefore, these performance units are accounted 89 for as liability awards.
Performance units under the 2021 Incentive Plan can be paid out in shares of MGE Energy common stock, cash or a combination of cash and stock. MGE assumes it will make 90 future payouts of its performance units granted in cash; therefore, these performance units are accounted for as liability awards.
The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of the Elm Road Units pursuant to long-term leases. As of December 31, 2022 , MGE Power Elm Road was in compliance with the covenant requirements. b. Long-Term Debt Maturities.
The notes are secured by a collateral assignment of lease payments that MGE is making to MGE Power Elm Road for use of the Elm Road Units pursuant to long-term leases. As of December 31, 2023 , MGE Power Elm Road was in compliance with the covenant requirements. b. Long-Term Debt Maturities.
Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of December 31, 2022 and 2021 , no counterparties were in a net liability position. Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss.
Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of December 31, 2023 and 2022 , no counterparties were in a net liability position. Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss.
MGE Power and its subsidiaries are part of MGE Energy's nonregulated energy operations, which were formed to own and lease electric generation projects to assist MGE. MGE Transco and MGEE Transco are nonregulated entities formed to own the investments in ATC and ATC Holdco, respectively. MGE did not own any subsidiaries as of December 31, 2022.
MGE Power and its subsidiaries are part of MGE Energy's nonregulated energy operations, which were formed to own and lease electric generation projects to assist MGE. MGE Transco and MGEE Transco are nonregulated entities formed to own the investments in ATC and ATC Holdco, respectively. MGE did not own any subsidiaries as of December 31, 2023.
The PSCW order restricts any dividends, above the PSCW authorized amount that MGE may pay MGE Energy if MGE's common equity ratio, calculated in the manner used in the rate proceeding, is less than 55 %. This restriction did not restrict MGE's payment of dividends in 2022.
The PSCW order restricts any dividends, above the PSCW authorized amount that MGE may pay MGE Energy if MGE's common equity ratio, calculated in the manner used in the rate proceeding, is less than 55 %. This restriction did not restrict MGE's payment of dividends in 2023.
Segment Information. 105 51 MGE Energy Management's Re port on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Segment Information. 105 53 MGE Energy Management's Re port on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).
Based on our assessment under the framework in the Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2022. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Based on our assessment under the framework in the Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2023. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The effectiveness of MGE Energy ' s internal control over financial reporting as of December 31, 2022, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
The effectiveness of MGE Energy ' s internal control over financial reporting as of December 31, 2023, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Based on our assessment under the framework in the Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2022. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Based on our assessment under the framework in the Internal Control - Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2023. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
(b) In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For both the years ended December 31, 2022 and 2021, the subsidy due to MGE was $ 0.3 million.
(b) In 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 was signed into law authorizing Medicare to provide prescription drug benefits to retirees. For both the years ended December 31, 2023 and 2022, the subsidy due to MGE was $ 0.3 million.
The EPA has also solicited comments on whether to lower the annual standard further than the proposed level, and whether or not to also lower the maximum 24-hour limit to be consistent with recommendations from its Clean Air Scientific Advisory Committee (CASAC).
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).
In addition, MGE Energy has a three -year agreement with a venture debt fund expiring in December 2025. MGE Energy has committed to invest up to a total of $ 1.5 million into this fund. As of December 31, 2022 , MGE Energy has $ 0.9 million remaining in commitments.
In addition, MGE Energy has a three -year agreement with a venture debt fund expiring in December 2025. MGE Energy has committed to invest up to a total of $ 1.5 million into this fund. As of December 31, 2023 , MGE Energy has $ 0.9 million remaining in commitments.
Sales of newly issued shares under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC. For the years ended December 31, 2022 and 2021 , MGE Energy issued no new shares of common stock under 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. For the years ended December 31, 2023 and 2022 , MGE Energy issued no new shares of common stock under the Stock Plan.
We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
These procedures also included, among others, evaluating (i) management’s assessment of correspondence with regulators, (ii) the reasonableness of management’s judgments regarding the probability of recovery of regulatory assets and refund of regulatory liabilities, and (iii) the application of the impacts of changes to new or existing commission orders. /s/ PricewaterhouseCoopers LLP Chicago, Illinois February 22, 2023 We have served as the Company's auditor since 1993. 54 Report of Indepen dent Registered Public Accounting Firm To the Board of Directors and Shareholder of Madison Gas and Electric Company Opinion on the Financial Statements We have audited the consolidated financial statements, including the related notes, as listed in the index appearing under Item 15(a)(1), and the financial statement schedule listed in the index appearing under Item 15(a)(2), of Madison Gas and Electric Company and its subsidiaries (the “Company”) (collectively referred to as the “consolidated financial statements”).
These procedures also included, among others, evaluating (i) management’s assessment of correspondence with regulators, (ii) the reasonableness of management’s judgments regarding the probability of recovery of regulatory assets and refund of regulatory liabilities, and (iii) the application of the impacts of changes to new or existing commission orders. /s/ PricewaterhouseCoopers LLP Chicago, Illinois February 21, 2024 We have served as the Company's auditor since 1993. 56 Report of Indepen dent Registered Public Accounting Firm To the Board of Directors and Shareholder of Madison Gas and Electric Company Opinion on the Financial Statements We have audited the consolidated financial statements, including the related notes, as listed in the index appearing under Item 15(a)(1), and the financial statement schedule listed in the index appearing under Item 15(a)(2), of Madison Gas and Electric Company and its subsidiaries (the “Company”) (collectively referred to as the “consolidated financial statements”).
MGE has limited concentrations of credit risk from customer accounts receivable because of the large number of customers and relatively strong economy in its service territory. 50 Item 8. Financial Statements and Supplementary Data.
MGE has limited concentrations of credit risk from customer accounts receivable because of the large number of customers and relatively strong economy in its service territory. 52 Item 8. Financial Statements and Supplementary Data.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
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 December 31, 2022 , no counterparties had defaulted. 100 19. Fair Value of Financial Instru ments - MGE Energy and MGE.
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 December 31, 2023 , no counterparties had defaulted. 19. Fair Value of Financial Instru ments - MGE Energy and MGE.
The interest component recoverable in rates is offset by a regulatory asset. As of December 31, 2022, 2021, and 2020, MGE Energy and MGE have an unrecognized tax benefit primarily related to temporary tax differences associated with the change in income tax method of accounting for electric generation and electric and gas distribution repairs.
The interest component recoverable in rates is offset by a regulatory asset. As of December 31, 2022, and 2021, MGE Energy and MGE had an unrecognized tax benefit primarily related to temporary tax differences associated with the change in income tax method of accounting for electric generation and electric and gas distribution repairs.
A liability is recorded for the fair value of an asset retirement obligation (ARO) to be recognized in the period in which it is incurred if it can be reasonably estimated. The offsetting associated asset retirement costs are capitalized as a long-lived asset and depreciated over the asset's useful life.
Asset Retirement Obligations - MGE Energy and MGE. A liability is recorded for the fair value of an asset retirement obligation (ARO) to be recognized in the period in which it is incurred if it can be reasonably estimated. The offsetting associated asset retirement costs are capitalized as a long-lived asset and depreciated over the asset's useful life.
Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions. In 2022, MGE made $ 7.3 million in employer contributions to its pension and postretirement plans. h. Benefit Payments.
Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions. In 2023, MGE made $ 7.7 million in employer contributions to its pension and postretirement plans. h. Benefit Payments.
The asset allocation for MGE's pension plans as of December 31, 2022 and 2021, and the target allocation for 2023, by asset category, follows: Target Percentage of Plan Assets at Year End Allocation 2022 2021 Equity securities (a) 63.0 % 65.0 % 65.0 % Fixed income securities 30.0 % 26.0 % 29.0 % Real estate 7.0 % 9.0 % 6.0 % Total 100.0 % 100.0 % 100.0 % (a) Target allocations for equity securities are broken out as follows: 45.5 % United States equity and 17.5 % non-United States equity.
The asset allocation for MGE's pension plans as of December 31, 2023 and 2022, and the target allocation for 2024, by asset category, follows: Target Percentage of Plan Assets at Year End Allocation 2023 2022 Equity securities (a) 63.0 % 64.0 % 65.0 % Fixed income securities 30.0 % 30.0 % 26.0 % Real estate 7.0 % 6.0 % 9.0 % Total 100.0 % 100.0 % 100.0 % (a) Target allocations for equity securities are broken out as follows: 45.5 % United States equity and 17.5 % non-United States equity.
These facilities are generally located on property owned by third parties, on which MGE is permitted to operate by lease, permit, easement, license, or service agreement. The asset 97 retirement obligations associated with these facilities cannot be reasonably determined due to the indeterminate life of the related agreements. The following table summarizes the change in AROs.
These facilities are generally located on property owned by third parties, on which MGE is permitted to operate by lease, permit, easement, license, or service agreement. The asset retirement obligations associated with these facilities cannot be reasonably determined due to the indeterminate life of the related agreements. The following table summarizes the change in AROs. Amounts include conditional AROs .
Notes Payable to Banks, Commercial Paper, and Lines of Credit. 90 14. Long-Term Debt. 91 15. Common Equity. 92 16. Commitments and Contingencies. 93 17. Asset Retirement Obligations. 97 18. Derivative and Hedging Instruments. 98 19. Fair Value of Financial Instruments. 101 20. Revenue. 104 21. Noncontrolling Interest. 105 22.
Notes Payable to Banks, Commercial Paper, and Lines of Credit. 91 14. Long-Term Debt. 92 15. Common Equity. 93 16. Commitments and Contingencies. 94 17. Asset Retirement Obligations. 98 18. Derivative and Hedging Instruments. 99 19. Fair Value of Financial Instruments. 101 20. Revenue. 104 21. Noncontrolling Interest. 105 22.
For the years ended December 31, 2022, 2021, and 2020, MGE recorded $ 10.8 , million, $ 5.7 million and $ 5.1 million, respectively, of amortization expense. MGE implemented a new customer information system which went live in September 2021. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the assets.
For the years ended December 31, 2023, 2022, and 2021, MGE recorded $ 10.4 million, $ 10.8 million and $ 5.7 million, respectively, of amortization expense. MGE implemented a new customer information system which went live in September 2021. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the assets.
The allowance for credit losses is estimated based on historical write-off experience, regional economic data, review of the accounts receivable aging, and reasonable and supportable forecasts that affect the collectability of the reported amount. As of December 31, 2022 and 2021, MGE had a reserve balance of $ 8.4 million and $ 8.3 million, respectively, against accounts receivable.
The allowance for credit losses is estimated based on historical write-off experience, regional economic data, review of the accounts receivable aging, and reasonable and supportable forecasts that affect the collectability of the reported amount. As of December 31, 2023 and 2022, MGE had a reserve balance of $ 8.1 million and $ 8.4 million, respectively, against accounts receivable.

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