Cover Table of Contents 2007 Highlights To Our Shareholders To Our Shareholders (2) To Our Shareholders (3) To Our Shareholders (4) New Energy Solutions at Work New Energy Solutions at Work (2) Putting Our Economy to Work Putting Our Economy to Work (2) Environmental Commitments that Work Environmental Commitments that Work (2) Community Connections at Work Community Connections at Work (2) Income Statements Cash Flow Statements Balance Sheets Capitalization Statements Five—Year Total Return Directors Officers Shareholder Information Corporate Profile Back Cover

Reducing emissions. We work to protect our environment while providing reliable energy. MGE anticipates its Energy 2015 plan will produce lower emission rates across the board—even though electric use is growing. Energy 2015 is a balanced plan that combines building more renewable energy, retiring older coal facilities, switching to cleaner coal generation and encouraging greater customer conservation. This combination is projected to lower emission rates for carbon dioxide, sulfur dioxide, nitrogen oxide, particulates and mercury by 2015.

Even though carbon dioxide (CO2) is not currently regulated, MGE is working to reduce CO2 emissions. We project a decrease in MGE’s CO2 emission rates. For more details, see our Environmental Responsibility Report on mgeenergy.com.

Renewable fuels. MGE has supported Virent Energy System’s groundbreaking work to turn plant sugars into fuel for generators and engines. Virent is a local company commercializing technology that can help us move from a fossil-fuel economy to one using renewable fuels. In a demonstration project, Virent’s SuperNatural™ gas prototype system fuels an internal combustion engine that can generate 10 kilowatts of electricity for MGE customers. We recognize how this type of visionary technology is needed to drive a cleaner future.

Greg Keenan, vice president of business development at Virent Energy Systems, leads engineering and business development. MGE was an early, local supporter of Virent that has grown significantly since it was founded in 2002.

Mercury free. MGE is a leader in installing mercury-free encoders in the meters on customers’ homes and businesses. When MGE decided to install an automated meter reading system, we asked the manufacturer to develop mercury-free encoders—which have now become the industry standard in the United States. We look for opportunities to go beyond compliance in day-to-day operations and pursue clean options.

This small encoder allows MGE to read meters remotely. With about 275,000 encoders throughout our service area, it was important to us that the devices be mecury free and environmentally friendly.

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