Form 10-Q


United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: June 30, 2023 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________
Commission File No.	Name of Registrant, State of Incorporation, Address of Principal Executive Offices, and Telephone No.	IRS Employer Identification No.
000-49965	MGE Energy, Inc. (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 \| mgeenergy.com	39-2040501
000-1125	Madison Gas and Electric Company (a Wisconsin Corporation) 133 South Blair Street Madison, Wisconsin 53788 (608) 252-7000 \| mge.com	39-0444025

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


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

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


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

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


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

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


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

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


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

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


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


Number of Shares Outstanding of Each Class of Common Stock as of July 31, 2023
MGE Energy, Inc.	Common stock, $1.00 par value, 36,163,370 shares outstanding.
Madison Gas and Electric Company	Common stock, $1.00 par value, 17,347,894 shares outstanding (all of which are owned beneficially and of record by MGE Energy, Inc.).

Table of Contents


PART I. FINANCIAL INFORMATION	3
Filing Format	3
Forward-Looking Statements	3
Where to Find More Information	3
Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report	4
Item 1. Financial Statements.	6
MGE Energy, Inc.	6
Consolidated Statements of Income (unaudited)	6
Consolidated Statements of Cash Flows (unaudited)	7
Consolidated Balance Sheets (unaudited)	8
Consolidated Statements of Common Equity (unaudited)	9
Madison Gas and Electric Company	10
Consolidated Statements of Income (unaudited)	10
Consolidated Statements of Cash Flows (unaudited)	11
Consolidated Balance Sheets (unaudited)	12
Consolidated Statements of Equity (unaudited)	13
MGE Energy, Inc., and Madison Gas and Electric Company - Notes to Consolidated Financial Statements (unaudited)	14
1. Summary of Significant Accounting Policies.	14
2. New Accounting Standards.	15
3. Investment in ATC and ATC Holdco.	15
4. Taxes.	16
5. Pension and Other Postretirement Plans.	16
6. Equity and Financing Arrangements.	17
7. Share-Based Compensation.	18
8. Commitments and Contingencies.	18
9. Rate Matters.	22
10. Derivative and Hedging Instruments.	23
11. Fair Value of Financial Instruments.	25
12. Joint Plant Construction Project Ownership.	28
13. Revenue.	29
14. Segment Information.	30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	31
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	48
Item 4. Controls and Procedures.	48
PART II. OTHER INFORMATION.	49
Item 1. Legal Proceedings.	49
Item 1A. Risk Factors.	49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	49
Item 3. Defaults Upon Senior Securities.	49
Item 4. Mine Safety Disclosures.	49
Item 5. Other Information.	49
Item 6. Exhibits.	50
Signatures - MGE Energy, Inc.	51
Signatures - Madison Gas and Electric Company	52

PART I. FINANCIAL INFORMATION.

Filing Format

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

Forward-Looking Statements

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

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

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

Where to Find More Information

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

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

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

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


MGE Energy and Subsidiaries:

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

Other Defined Terms:

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


PPA	Purchased Power Agreement
PSCW	Public Service Commission of Wisconsin
ROE	Return on equity
SEC	Securities and Exchange Commission
SIP	State Implementation Plan
SO2	Sulfur dioxide
Stock Plan	Direct Stock Purchase and Dividend Reinvestment Plan of MGE Energy
UFLPA	Uyghur Forced Labor Protection Act
USDOC	U.S. Department of Commerce
WCCF	West Campus Cogeneration Facility
WDNR	Wisconsin Department of Natural Resources
WEPCO	Wisconsin Electric Power Company, a subsidiary of WEC Energy Group, Inc.
West Riverside	West Riverside Energy Center in Beloit, Wisconsin
working capital	Current assets less current liabilities
WPDES	Wisconsin Pollutant Discharge Elimination System
WPL	Wisconsin Power and Light Company, a subsidiary of Alliant Energy Corporation
WRO	Withhold Release Order
XBRL	eXtensible Business Reporting Language

Item 1. Financial Statements.

MGE Energy, Inc.

Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Operating Revenues:
Electric revenues	$	121,707		$	112,164		$	238,998		$	222,291
Gas revenues		26,291			40,184			126,253			138,995
Total Operating Revenues		147,998			152,348			365,251			361,286

Operating Expenses:
Fuel for electric generation		13,599			13,880			27,406			27,365
Purchased power		5,845			13,621			21,231			26,164
Cost of gas sold		7,289			21,313			75,136			86,115
Other operations and maintenance		52,049			51,526			102,007			101,520
Depreciation and amortization		25,119			21,287			49,730			42,333
Other general taxes		5,707			5,263			11,317			10,468
Total Operating Expenses		109,608			126,890			286,827			293,965
Operating Income		38,390			25,458			78,424			67,321

Other income, net		4,937			7,696			10,292			14,668
Interest expense, net		(7,760	)		(6,463	)		(15,247	)		(13,034	)
Income before income taxes		35,567			26,691			73,469			68,955
Income tax provision		(6,886	)		(4,930	)		(13,710	)		(12,774	)
Net Income	$	28,681		$	21,761		$	59,759		$	56,181

Earnings Per Share of Common Stock
Basic	$	0.79		$	0.60		$	1.65		$	1.55
Diluted	$	0.79		$	0.60		$	1.65		$	1.55

Dividends per share of common stock	$	0.408		$	0.388		$	0.815		$	0.775

Weighted Average Shares Outstanding
Basic		36,163			36,163			36,163			36,163
Diluted		36,186			36,174			36,183			36,173

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

MGE Energy, Inc.

Consolidated Statements of Cash Flows (unaudited)

(In thousands)


	Six Months Ended
	June 30,
	2023			2022
Operating Activities:
Net income	$	59,759		$	56,181
Items not affecting cash:
Depreciation and amortization		49,730			42,333
Deferred income taxes		12,713			11,990
Provision for doubtful receivables		882			882
Employee benefit plan cost (credit)		(1,227	)		(4,146	)
Equity earnings in investments		(5,240	)		(5,127	)
Other items		(885	)		(865	)
Changes in working capital items:
Decrease in current assets		34,098			4,800
Decrease in accounts payable		(20,508	)		(610	)
(Decrease) increase in other current liabilities		(2,105	)		7,059
Dividends from investments		4,248			3,959
Cash contributions to pension and other postretirement plans		(3,540	)		(3,351	)
Other noncurrent items, net		(934	)		(1,829	)
Cash Provided by Operating Activities		126,991			111,276

Investing Activities:
Capital expenditures		(107,701	)		(65,959	)
Capital contributions to investments		(3,376	)		(3,330	)
Other		(682	)		226
Cash Used for Investing Activities		(111,759	)		(69,063	)

Financing Activities:
Cash dividends paid on common stock		(29,473	)		(28,027	)
Repayments of long-term debt		(21,791	)		(2,429	)
Issuance of long-term debt		69,300			—
Repayments of short-term debt		(28,500	)		(5,500	)
Other		(1,479	)		(612	)
Cash Used for Financing Activities		(11,943	)		(36,568	)

Change in cash, cash equivalents, and restricted cash		3,289			5,645
Cash, cash equivalents, and restricted cash at beginning of period		17,968			18,835
Cash, cash equivalents, and restricted cash at end of period	$	21,257		$	24,480

Supplemental disclosures of cash flow information:
Significant noncash investing activities:
Accrued capital expenditures	$	6,446		$	40,434

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

MGE Energy, Inc.

Consolidated Balance Sheets (unaudited)

(In thousands)


	June 30,		December 31,
ASSETS	2023		2022
Current Assets:
Cash and cash equivalents	$	16,507	$	11,604
Accounts receivable, less reserves of $6,147 and $7,050, respectively		41,025		55,407
Other accounts receivable, less reserves of $1,472 and $1,323, respectively		15,198		11,418
Unbilled revenues		26,650		43,086
Materials and supplies, at average cost		33,757		33,465
Fuel for electric generation, at average cost		12,524		7,962
Stored natural gas, at average cost		25,601		32,848
Prepaid taxes		20,025		19,132
Regulatory assets - current		16,347		9,541
Other current assets		14,897		19,017
Total Current Assets		222,531		243,480
Regulatory assets		97,801		103,900
Pension benefit asset		72,349		68,872
Other deferred assets and other		22,326		24,365
Property, Plant, and Equipment:
Property, plant, and equipment, net		1,903,143		1,865,352
Construction work in progress		132,980		105,748
Total Property, Plant, and Equipment		2,036,123		1,971,100
Investments		108,938		105,883
Total Assets	$	2,560,068	$	2,517,600

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year	$	35,079	$	54,314
Short-term debt		42,000		70,500
Accounts payable		38,571		59,334
Accrued interest and taxes		8,750		7,868
Accrued payroll related items		10,337		13,064
Regulatory liabilities - current		15,831		11,925
Other current liabilities		8,831		8,057
Total Current Liabilities		159,399		225,062
Other Credits:
Deferred income taxes		266,807		252,190
Investment tax credit - deferred		47,785		48,735
Regulatory liabilities		153,549		156,988
Accrued pension and other postretirement benefits		54,179		53,607
Finance lease liabilities		17,860		17,108
Other deferred liabilities and other		96,251		96,990
Total Other Credits		636,431		625,618
Capitalization:
Common shareholders' equity		1,112,584		1,081,674
Long-term debt