MGE ENERGY INC
For the period ended Sep 30, 2024. Filed Nov 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 6, 2024
MGEE$80.26+2.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0000950170-24-092427
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsOther MattersCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-06.
0000950170-24-121952
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital ResourcesOther MattersThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 208 previous paragraphs and 222 current paragraphs.
135 unchanged; 54 reworded; 29 added; 16 removed; 3 previous and 4 current paragraphs rearranged.
Tables are not compared: 21 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
Growing renewable generation. MGE is seeking to acquire, or has acquired, a joint interest in several renewable generation projects. The forecasted capital expenditures include announced projects for 198 MW of solar, 97 MW of battery, and 18 MW of wind. See the 2024-2029 capital expenditures forecast included under "Liquidity and Capital Resources" below for information on those projects.
Current report
n.m. not meaningful
Current report
Electric revenue increased $8.9 million during the three months ended September 30, 2024, compared to the same period in the prior year, due to the following:
Current report
Gas revenue decreased $0.9 million during the three months ended September 30, 2024, compared to the same period in the prior year, due to the following:
Current report
Nine Months Ended September 30, 2024 and 2023
Current report
Electric revenue increased $6.7 million during the nine months ended September 30, 2024, compared to the same period in the prior year, due to the following:
Current report
Gas revenue decreased $26.9 million during the nine months ended September 30, 2024, compared to the same period in the prior year, due to the following:
Current report
Long-term Debt – MGE Energy and MGE
Current report
In October 2024, MGE entered into a private placement Note Purchase Agreement in which it committed to issue $50 million of senior unsecured notes. See Footnote 6.c. of Notes to Consolidated Financial Statements in this Report for further information on the senior note issuance.
Current report
Capital contributions in ATC and other investments decreased $1.6 million during the nine months ended September 30, 2024, when compared to the same period in the prior year.
Current report
The following table shows MGE Energy's forecasted capital expenditures for 2024 through 2029:
Current report
Includes actual capital expenditures already incurred in 2024 and estimated capital expenditures for the remainder of the year.
Current report
Forecasted capital expenditures are based upon management's assumptions with respect to future events, including the timing and amount of expenditures associated with environmental compliance initiatives, legislative and regulatory action, supply chain and market disruptions, customer demand and support for electrification and renewable energy resources, energy conservation programs, load growth, the timing of any required regulatory approvals, and the adequacy of rate recovery. Actual events may differ materially from these assumptions and result in material changes to those forecasted amounts.
Current report
MGE is targeting at least 80% carbon reduction from electric generation by 2030 (from 2005 levels) and net-zero carbon electricity by 2050. Solar, wind, and battery storage projects are a major step toward deep decarbonization and greater use of clean energy sources in pursuit of our goal. In addition, natural gas generation projects help enable MGE's clean energy transition and ensure reliability for customers as the energy supply is decarbonized. MGE continues to evaluate solar, wind, battery storage, and natural gas generation projects that align with its goals as legacy fossil fuel-fired facilities are retired.
Current report
The following table provides further detail of MGE Energy's forecasted capital expenditures, separating spending into capital project categories for 2025 through 2029:
Current report
Includes solar and wind generation and battery storage.
Current report
Our forecasted capital expenditures reflect the following significant renewable projects that are currently under construction or pending regulatory approval:
Current report
See Footnote 12 of Notes to Consolidated Financial Statements in the Report for information on costs incurred.
Current report
MGE continues to assess the potential impact of procurement disruptions on current and future solar projects that may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we have filed, and expect to continue to file, notifications with the PSCW and expect to request recovery of any increases in MGE's future rate proceedings. See further information on procurement disruptions discussed under "Other Matters" section below.
Current report
Columbia Energy Storage Project: In August 2024, MGE was included in a Joint Application to develop an Energy Dome closed-loop gas-to-liquid solution. This project would use vaporized liquid carbon dioxide to power an electric generating turbine. MGE holds a 19% ownership interest in this project.
Current report
Electric and Gas Distribution: In 2024 through 2029, electric and gas capital expenditures include investment in enhanced metering solutions to provide customers with more timely and detailed energy use information. Investments in advanced metering infrastructure will provide additional benefits including outage and demand response and automated meter reading capabilities. Forecasted total capital expenditures for those years is approximately $57 million.
Removed paragraphs (16)
Previous report
Excluding AFUDC.
Previous report
As part of its order, the PSCW approved battery capacity with this project, which is no longer included in the current estimate. We will continue to evaluate timing, cost, and feasibility of the installation of batteries.
Previous report
Pending approval by the PSCW. Battery storage has been proposed as part of this project and has not been included in the 2024-2028 forecast. MGE will continue to evaluate timing, cost, and feasibility of the installation of batteries.
Previous report
Growing renewable generation. MGE is seeking to acquire a joint interest in several renewable generation projects. The forecasted capital expenditures include announced projects such as Paris (Solar and Battery; 20 MW/11 MW), Darien (Solar; 25 MW), Koshkonong (Solar; 30 MW), High Noon (Solar; 30 MW), Sunnyside (Solar and Battery; 20 MW/40 MW), and other projects expected to be announced in the future. See the
Previous report
2024-2028 capital expenditures forecast disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K.
Previous report
Electric revenue decreased $1.1 million during the three months ended June 30, 2024, compared to the same period in the prior year, due to the following:
Previous report
Gas revenue decreased $1.2 million during the three months ended June 30, 2024, compared to the same period in the prior year, due to the following:
Previous report
Electric distribution expenses were higher in 2024 primarily related to the May 2024 storm response costs.
Previous report
Six Months Ended June 30, 2024 and 2023
Previous report
Electric revenue decreased $2.2 million during the six months ended June 30, 2024, compared to the same period in the prior year, due to the following:
Previous report
Gas revenue decreased $26.0 million during the six months ended June 30, 2024, compared to the same period in the prior year, due to the following:
Previous report
All Other Operations - MGE Energy
Previous report
Other income
Previous report
MGE Energy's and MGE's liquidity are primarily affected by their capital expenditure requirements. During the six months ended June 30, 2024, capital expenditures for MGE Energy and MGE totaled $111.6 million, which included $107.6 million of utility capital expenditures. The utility capital expenditures include the purchase of an additional 25 MW of West Riverside, expenditures for renewable generation facilities, and investments in enhanced metering solutions.
Previous report
MGE does not currently expect any material changes to its total forecasted expenditures as presented in the 2024 through 2028 capital expenditure forecast included under Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the 2023 Annual Report on Form 10-K. MGE's plan to achieve its target of 80% carbon reduction by 2030 (from 2005 levels) is based on the transition away from coal, addition of new renewable generation, and additional generation sources that provide the reliable energy to serve demand dependably. The mix of generation sources presented in the 2024 through 2028 capital expenditure forecast may shift based on reliability needs as MGE continues on the path to achieve its carbon reduction goals. Additionally, MGE is monitoring import regulations under the Uyghur Forced Labor Protection Act and the U.S. Department of Commerce new solar tariffs. These disruptions have had and may continue to impact current and future solar projects by increasing costs or causing delays in construction timelines. As projects are delayed, timing of capital expenditures will be correspondingly shifted. See "Other Matters" below for additional information on the solar procurement disruptions.
Previous report
As a result of the May 2020 FERC order, our share of ATC's earnings reflected a $0.6 million reduction of our reserve. Additionally, our share of ATC's earnings reflected the derecognition of a possible refund related to the Second Complaint Period as ATC considered such a refund to be no longer probable. However, due to pending requests for rehearing, a loss related to the 2015 complaint remains possible. Our share of the estimated refund for the Second Complaint Period is approximately $2.3 million. MGE has not recorded a possible loss for the Second Complaint Period.
Reworded paragraphs (54)
Previous wording
During the three months ended June 30, 2024, MGE Energy's earnings were $23.8 million or $0.66 per share compared to $28.7 million or $0.79 per share during the same period in the prior year. MGE's earnings during the three months ended June 30, 2024, were $16.0 million compared to $22.2 million during the same period in the prior year.
Current wording
During the three months ended September 30, 2024, MGE Energy's earnings were $40.9 million or $1.13 per share compared to $37.9 million or $1.05 per share during the same period in the prior year. MGE's earnings during the three months ended September 30, 2024, were $33.3 million compared to $30.5 million during the same period in the prior year.
Previous wording
During the six months ended June 30, 2024, MGE Energy's earnings were $57.6 million or $1.59 per share compared to $59.8 million or $1.65 per share during the same period in the prior year. MGE's earnings during the six months ended June 30, 2024, were $42.6 million compared to $46.4 million during the same period in the prior year.
Current wording
During the nine months ended September 30, 2024, MGE Energy's earnings were $98.5 million or $2.72 per share compared to $97.6 million or $2.70 per share during the same period in the prior year. MGE's earnings during the nine months ended September 30, 2024, were $75.9 million compared to $76.8 million during the same period in the prior year.
Previous wording
Our net income during the three and six months ended June 30, 2024, compared to the same periods in the prior year primarily reflects the effects of the following factors:
Current wording
Our net income during the three and nine months ended September 30, 2024, compared to the same periods in the prior year primarily reflects the effects of the following factors:
Previous wording
Unfavorable weather during 2024 has contributed to lowered electric earnings. Electric residential sales decreased approximately 4% during both the three and six months ended June 30, 2024, compared to the same periods in the prior year. Also contributing to lowered electric earnings is increased fuel costs during 2024 compared to the 2024 fuel cost plan approved by the PSCW. An increase in electric investments contributed to earnings for the three and six months ended June 30, 2024.
Current wording
An increase in electric investments, as part of the 2024 rate case, contributed to earnings for the three and nine months ended September 30, 2024. Unfavorable weather contributed to lower electric residential sales for the nine months ended September 30, 2024, compared to the same period in the prior year. Electric residential sales remained flat for the three months ended September 30, 2024, compared to the same period in the prior year. Also contributing to higher third quarter electric earnings is lower fuel costs during the three months ended September 30, 2024, compared to the 2024 fuel cost plan approved by the PSCW.
Previous wording
Lower gas retail sales resulting from warmer than normal weather in the first quarter of 2024 contributed to lower gas earnings for the six months ended June 30, 2024. Gas retail sales decreased approximately 8%. Heating degree days (a measure for determining the impact of weather during the heating season) decreased by approximately 9% in the first six months of 2024 compared to the same period in the prior year.
Current wording
Lower gas retail sales resulting from warmer than normal weather in the first quarter of 2024 contributed to lower gas earnings for the nine months ended September 30, 2024. Gas retail sales decreased approximately 7%. Heating degree days (a measure for determining the impact of weather during the heating season) decreased by approximately 9% in the first nine months of 2024 compared to the same period in the prior year.
Previous wording
The following events affected the first six months of 2024:
Current wording
The following events affected the first nine months of 2024:
Previous wording
In accordance with the 2024/2025 rate order from the PSCW, MGE will have an earnings sharing mechanism, under which, if MGE earns above the 9.7% ROE authorized in the rate order: (i) the utility will retain 100% of earnings for the first 15 basis points above the authorized ROE; (ii) 50% of the next 60 basis points will be required to be deferred and returned to customers; and (iii) 100% of any remaining excess earnings will be required to be refunded to customers. The earnings calculation excludes fuel rules adjustments.
Current wording
The 2024/2025 rate order includes an earnings sharing mechanism, under which, if MGE earns above the 9.7% ROE authorized in the rate order: (i) the utility will retain 100% of earnings for the first 15 basis points above the authorized ROE; (ii) 50% of the next 60 basis points will be required to be deferred and returned to customers; and (iii) 100% of any remaining excess earnings will be required to be refunded to customers. The earnings calculation excludes fuel rules adjustments.
Previous wording
MGE received specific approval to recover 100% AFUDC. After tax, MGE recognized $3.3 million and $1.4 million of AFUDC equity through June 30, 2024, on Paris and Darien, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.
Current wording
MGE received specific approval to recover 100% AFUDC. After tax, MGE recognized $4.0 million and $2.0 million of AFUDC equity through September 30, 2024, on Paris and Darien, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.
Previous wording
2023 Annual Fuel Proceeding: MGE had fuel savings in 2023. As of December 31, 2023, MGE had deferred $7.2 million of 2023 fuel savings. The PSCW has completed the annual review of 2023 fuel costs and approved for MGE to return these savings over a 3-month period from October 2024 through December 2024. There was no change to the costs to be refunded in the fuel rule proceedings from the amount MGE deferred in the previous year.
Current wording
2023 Annual Fuel Proceeding: MGE had fuel savings in 2023. As of December 31, 2023, MGE had deferred $7.2 million of 2023 fuel savings. The PSCW has completed the annual review of 2023 fuel costs and approved MGE's return of these savings over a three-month period from October 2024 through December 2024. There was no change to the costs to be refunded as a result of the fuel rule proceedings from the amount MGE deferred in 2023.
Previous wording
ATC ROE: 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 Federal Energy Regulatory Commission (FERC). A decrease in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 6.7% and 6.2% of our net income during the six months ended June 30, 2024 and 2023, respectively, from our investment in ATC.
Current wording
ATC ROE: 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 the Federal Energy Regulatory Commission (FERC). A decrease in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. We derived approximately 6.0% and 5.7% of our net income during the nine months ended September 30, 2024 and 2023, respectively, from our investment in ATC.
Previous wording
Transitioning away from coal. Columbia: MGE, along with the other plant co-owners, announced plans to retire Columbia Unit 1 and Unit 2 by June 2026. 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.
Current wording
Transitioning away from coal. Columbia: MGE, along with the other plant co-owners, announced plans to retire Columbia Unit 1 and Unit 2. Final timing and retirement dates for Units 1 and 2 continue to be evaluated and depend upon operational, regulatory, capacity needs and availability, and other factors impacting one or more of the Columbia co-owners. MGE has a plan, which it continues to evaluate, to replace the generation from Columbia while maintaining electric service reliability.
Previous wording
Financing and Equity Issuance Plans: As of June 30, 2024, MGE has $330 million of remaining regulatory authority from the PSCW to issue long-term debt to finance authorized utility capital expenditures. MGE expects to use a portion of the remaining authority during the second half of 2024 to finance authorized utility capital expenditures. In the second half of 2024, MGE Energy expects to begin issuing new shares of common stock to participants in our Direct Stock Purchase and Dividend Reinvestment Plan.
Current wording
Equity Issuance Plans: In September 2024, MGE Energy began issuing new shares of common stock to participants in our Direct Stock Purchase and Dividend Reinvestment Plan.
Previous wording
Sales to the market. Sales to the market typically occur when MGE has more generation and purchases in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During the three months ended June 30, 2024, market volumes decreased compared to the same period in the prior year, reflecting a decrease in sales. Additionally, a decrease in the cost of capacity sold further contributed to the decrease in sales. The revenue generated from these sales is included in fuel rules costs. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements.
Current wording
Sales to the market. Sales to the market typically occur when MGE has more generation and purchases in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During the three months ended September 30, 2024, market volumes increased compared to the same period in the prior year, reflecting an increase in sales. Additionally, an increase in the cost of capacity sold further contributed to the increase in sales. The revenue generated from these sales is included in fuel rules costs. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements in this Report.
Previous wording
Rate changes. In December 2023, the PSCW authorized MGE to increase 2024 rates for retail electric customers by approximately 1.54%. Rates charged to retail customers during the three months ended June 30, 2024, were $1.2 million higher than those charged during the same period in the prior year. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs are generally offset in fuel and purchased power costs and do not have a significant impact on net income.
Current wording
Rate changes. In December 2023, the PSCW authorized MGE to increase 2024 rates for retail electric customers by approximately 1.54%. Rates charged to retail customers during the three months ended September 30, 2024, were $2.0 million higher than those charged during the same period in the prior year. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs are generally offset in fuel and purchased power costs and do not have a significant impact on net income.
Previous wording
The $2.4 million decrease in fuel for electric generation was due to an approximately 16% decrease in the average cost primarily driven by lower market prices. Internal generation decreased approximately 2%.
Current wording
The $2.4 million decrease in fuel for electric generation was due to an approximately 16% decrease in the average cost primarily driven by lower market prices. Internal generation increased approximately 5%.
Previous wording
Excluding deferred fuel costs, purchased power increased $1.8 million. The increase in purchased power was due to an approximately 42% increase in average cost. The increase was partially offset by an approximately 5% decrease in market purchases as a result of lower customer sales. Deferred fuel cost recovered during the three months ended June 30, 2024, was $2.1 million compared to $0.8 million in the same period of the prior year.
Current wording
Excluding deferred fuel costs, purchased power decreased $0.5 million. The decrease in purchased power was due to an approximately 10% decrease in average cost. The decrease was partially offset by an approximately 2% increase in market purchases as a result of higher customer sales. Deferred fuel cost recovered during the three months ended September 30, 2024, was $2.4 million compared to $0.8 million in the same period of the prior year.
Previous wording
The average retail rate per therm for the three months ended June 30, 2024, increased approximately 4% compared to the same period in the prior year, reflecting a decrease in natural gas commodity costs (recovered through the PGA).
Current wording
The average retail rate per therm for the three months ended September 30, 2024, decreased approximately 2% compared to the same period in the prior year, reflecting a decrease in natural gas commodity costs (recovered through the PGA).
Previous wording
Cost of gas sold decreased $1.0 million during the three months ended June 30, 2024, compared to the same period in the prior year. Therms delivered decreased approximately 9% and average cost per therm decreased approximately 5%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenue above.
Current wording
Cost of gas sold decreased $0.5 million during the three months ended September 30, 2024, compared to the same period in the prior year. Average cost per therm decreased approximately 10% and therms delivered decreased approximately 1%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenue above.
Previous wording
During the three months ended June 30, 2024, operations and maintenance expenses increased $4.7 million, compared to the same period in the prior year. The following contributed to the net change:
Current wording
During the three months ended September 30, 2024, operations and maintenance expenses increased $3.1 million, compared to the same period in the prior year. The following contributed to the net change:
Previous wording
Electric other income decreased $0.6 million and gas other income decreased $1.6 million during the three months ended June 30, 2024, compared to the same period in the prior year, primarily related to pension and other postretirement excluding service costs.
Current wording
Electric other income decreased $4.3 million and gas other income decreased $1.5 million during the three months ended September 30, 2024, compared to the same period in the prior year, primarily related to pension and other postretirement excluding service costs.
Previous wording
The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During the three months ended June 30, 2024 and 2023, net income at the nonregulated energy operations segment was $6.0 million and $5.5 million, respectively.
Current wording
The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During the three months ended September 30, 2024 and 2023, net income at the nonregulated energy operations segment was $6.1 million and $5.6 million, respectively.
Previous wording
The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. During the three months ended June 30, 2024 and 2023, other income at the transmission investment segment primarily reflects ATC's operations and was $2.8 million and $2.6 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and "Other Matters" below for additional information concerning ATC.
Current wording
The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. During the three months ended September 30, 2024 and 2023, other income at the transmission investment segment primarily reflects ATC's operations and was $2.9 million and $2.7 million, respectively. In October 2024, FERC issued a ruling eliminating the risk premium in the ROE calculation resulting in a 4-basis point reduction in the base ROE from 10.02% to 9.98%. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and "Other Matters" below for additional information concerning ATC and FERC ruling on ROE.
Previous wording
Rate changes. In December 2023, the PSCW authorized MGE to increase 2024 rates for retail electric customers by approximately 1.54%. Rates charged to retail customers during the six months ended June 30, 2024, were $3.2 million higher than those charged during the same period in the prior year. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs are generally offset in fuel and purchased power costs and do not have a significant impact on net income.
Current wording
Rate changes. In December 2023, the PSCW authorized MGE to increase 2024 rates for retail electric customers by approximately 1.54%. Rates charged to retail customers during the nine months ended September 30, 2024, were $5.3 million higher than those charged during the same period in the prior year. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs are generally offset in fuel and purchased power costs and do not have a significant impact on net income.
Previous wording
Customer fixed and demand charges. During the six months ended June 30, 2024, fixed and demand charges increased $1.7 million primarily attributable to the increase in demand charges for commercial customers.
Current wording
Customer fixed and demand charges. During the nine months ended September 30, 2024, fixed and demand charges increased $2.3 million primarily attributable to the increase in demand charges for commercial customers.
Previous wording
Volume. During the three months ended June 30, 2024, residential sales decreased by approximately 4% compared to the same period in the prior year. This decrease was driven by weather conditions during the heating months. This change was a result of a warmer April 2023 compared to 2024 which impacted residential sales.
Current wording
Volume. During the nine months ended September 30, 2024, residential sales decreased by approximately 2% compared to the same period in the prior year. This decrease was driven by weather conditions during the heating months. This change was a result of a warmer April 2023 compared to 2024 which impacted residential sales.
Previous wording
Sales to the market. Sales to the market typically occur when MGE has more generation and purchases in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During the six months ended June 30, 2024, market volumes increased compared to the same period in the prior year, reflecting an increase in sales. However, the cost of capacity sold decreased offsetting the revenue generated from increased sales to the market from excess generation and purchases. The revenue generated from these sales is included in fuel rules costs. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements.
Current wording
Sales to the market. Sales to the market typically occur when MGE has more generation and purchases in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During the nine months ended September 30, 2024, market volumes increased compared to the same period in the prior year, reflecting an increase in sales. However, the cost of capacity sold decreased offsetting the revenue generated from increased sales to the market from excess generation and purchases. The revenue generated from these sales is included in fuel rules costs. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements in this Report.
Previous wording
The $3.5 million decrease in fuel for electric generation was due to an approximately 21% decrease in the average cost partially offset by an approximately 11% increase in internal generation. Renewable generation increased approximately 29% driven by new generation sources including Badger Hollow II. Columbia generation was higher during the six months ended June 30, 2024, compared to the same period in the prior year as a result of market prices.
Current wording
The $5.9 million decrease in fuel for electric generation was due to an approximately 19% decrease in the average cost partially offset by an approximately 9% increase in internal generation. Renewable generation increased approximately 29% driven by new generation sources including Badger Hollow II.
Previous wording
Excluding deferred fuel costs, purchased power decreased $5.4 million. The decrease in purchased power was due to an approximately 30% decrease in market purchases as a result of lower customer sales and increased internal generation. This decrease was partially offset by an approximately 3% increase in average cost. Deferred fuel cost recovered during the six months ended June 30, 2024, was $4.1 million compared to $1.6 million in the same period of the prior year.
Current wording
Excluding deferred fuel costs, purchased power decreased $5.9 million. The decrease in purchased power was due to an approximately 22% decrease in market purchases as a result of lower customer sales and increased internal generation. In addition, there was an approximately 1% decrease in average cost. Deferred fuel cost recovered during the nine months ended September 30, 2024, was $6.5 million compared to $2.5 million in the same period of the prior year.
Previous wording
MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. Changes in PGA recoveries affect revenues but do not change net income in view of the pass-through treatment of the costs. Payments for natural gas decreased driving lower rates during the six months ended June 30, 2024.
Current wording
MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. Changes in PGA recoveries affect revenues but do not change net income in view of the pass-through treatment of the costs. Payments for natural gas decreased driving lower rates during the nine months ended September 30, 2024.
Previous wording
The average retail rate per therm excluding customer fixed charges for the six months ended June 30, 2024, decreased approximately 14% compared to the same period in the prior year, reflecting a decrease in natural gas commodity costs (recovered through the PGA).
Current wording
The average retail rate per therm excluding customer fixed charges for the nine months ended September 30, 2024, decreased approximately 12% compared to the same period in the prior year, reflecting a decrease in natural gas commodity costs (recovered through the PGA).
Previous wording
Volume. For the six months ended June 30, 2024, retail gas deliveries decreased approximately 8% compared to the same period in the prior year primarily attributable to unfavorable weather conditions in the first half of 2024.
Current wording
Volume. For the nine months ended September 30, 2024, retail gas deliveries decreased approximately 7% compared to the same period in the prior year primarily attributable to unfavorable weather conditions in the first half of 2024.
Previous wording
Other. For the six months ended June 30, 2024, other gas revenues decreased primarily related to lower residential customer fixed charges. The PSCW approved a reduction in the customer fixed charge component of the residential gas rate in the 2024 rate proceeding.
Current wording
Other. For the nine months ended September 30, 2024, other gas revenues decreased primarily related to lower residential customer fixed charges. The PSCW approved a reduction in the customer fixed charge component of the residential gas rate in the 2024 rate proceeding.
Previous wording
Cost of gas sold decreased $27.0 million during the six months ended June 30, 2024, compared to the same period in the prior year. Therms delivered decreased approximately 7% and cost per therm decreased approximately 31%.
Current wording
Cost of gas sold decreased $27.5 million during the nine months ended September 30, 2024, compared to the same period in the prior year. Cost per therm decreased approximately 30% and therms delivered decreased approximately 7%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenues above.
Previous wording
During the six months ended June 30, 2024, operations and maintenance expenses increased $8.8 million, compared to the same period in the prior year. The following contributed to the net change:
Current wording
During the nine months ended September 30, 2024, operations and maintenance expenses increased $11.8 million, compared to the same period in the prior year. The following contributed to the net change:
Previous wording
Increased distribution expenses were higher in 2024 primarily related to the May 2024 storm response costs.
Current wording
Increased distribution expenses in 2024 are primarily related to the May 2024 storm response costs.
Previous wording
Electric depreciation expense increased $3.2 million and gas depreciation expense increased $0.6 million during the six months ended June 30, 2024, compared to the same period in the prior year. MGE purchased West Riverside in March 2023 and Badger Hollow II was placed in service in December 2023. The timing of the in-service dates contributed to the increase in electric depreciation expense.
Current wording
Electric depreciation expense increased $4.7 million and gas depreciation expense increased $0.9 million during the nine months ended September 30, 2024, compared to the same period in the prior year. MGE purchased West Riverside in March 2023 and Badger Hollow II was placed in service in December 2023. The timing of the in-service dates contributed to the increase in electric depreciation expense.
Previous wording
Electric other income decreased $1.3 million and gas other income decreased $2.6 million during the six months ended June 30, 2024, compared to the same period in the prior year, primarily related to pension and other postretirement excluding service costs.
Current wording
Electric other income decreased $5.6 million and gas other income decreased $4.1 million during the nine months ended September 30, 2024, compared to the same period in the prior year, primarily related to pension and other postretirement excluding service costs.
Previous wording
The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During the six months ended June 30, 2024 and 2023, net income at the nonregulated energy operations segment was $11.9 million and $11.0 million, respectively.
Current wording
The nonregulated energy operations are conducted through MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. During the nine months ended September 30, 2024 and 2023, net income at the nonregulated energy operations segment was $18.0 million and $16.7 million, respectively.
Previous wording
The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. During the six months ended June 30, 2024 and 2023, other income at the transmission investment segment primarily reflects ATC's operations and was $5.5 million and $5.2 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and "Other Matters" below for additional information concerning ATC.
Current wording
The transmission investment segment holds our interest in ATC and ATC Holdco, and its income reflects our equity in the earnings of those investments. ATC Holdco was formed in December 2016 to pursue transmission development opportunities that typically have long development and investment lead times before becoming operational. During the nine months ended September 30, 2024 and 2023, other income at the transmission investment segment primarily reflects ATC's operations and was $8.4 million and $7.9 million, respectively. In October 2024, FERC issued a ruling eliminating the risk premium in the ROE calculation resulting in a 4-basis point reduction in the base ROE from 10.02% to 9.98%. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC and "Other Matters" below for additional information concerning ATC and FERC ruling on ROE.
Previous wording
The increase of $0.9 million in other income from all other operations during the three months ended June 30, 2024, primarily results from decreased investment distribution losses from our venture capital funds compared to the same period in the prior year. These venture capital investments support early-stage companies working to advance smart technologies, the customer experience, distributed energy resources, electrification, cybersecurity, and other priorities for utility companies such as greater sustainability.
Current wording
The increase of $1.0 million in other income from all other operations during the nine months ended September 30, 2024, primarily results from decreased investment distribution losses from our venture capital funds compared to the same period in the prior year. These venture capital investments support early-stage companies working to advance smart technologies, the customer experience, distributed energy resources, electrification, cybersecurity, and other priorities for utility companies such as greater sustainability.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Revenue subject to refund. 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. 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.
Current report — wording carried from elsewhere
MGE received PSCW approval to recover 100% AFUDC.
Current report — wording carried from elsewhere
Estimated costs are expected to exceed PSCW previously approved CA levels. Notifications are provided to the PSCW when costs increase above CA levels. MGE has and will continue to request recovery of the updates in its rate case proceedings.
Current report — wording carried from elsewhere
West Riverside: In June 2024, MGE purchased an additional 25 MW of capacity of West Riverside for approximately $25 million. After purchase, MGE owns 50 MW of capacity of West Riverside. West Riverside is a natural gas-fired generating plant.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Volume. During the six months ended June 30, 2024, residential sales decreased by approximately 4% compared to the same period in the prior year. This decrease was driven by weather conditions during the heating months. This change was a result of a warmer April 2023 compared to 2024 which impacted residential sales.
Previous report — wording carried elsewhere
MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenues above.
Previous report — wording carried elsewhere
The increase of $1.1 million in other income from all other operations during the six months ended June 30, 2024, primarily results from decreased investment distribution losses from our venture capital funds compared to the same period in the prior year. These venture capital investments support early-stage companies working to advance smart technologies, the customer experience, distributed energy resources, electrification, cybersecurity, and other priorities for utility companies such as greater sustainability.