MGE ENERGY INC

MGE Energy operates in the following business segments:

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Regulated electric utility operations – generating, purchasing, and distributing electricity through MGE.

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Regulated gas utility operations – purchasing and distributing natural gas through MGE.

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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.

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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.

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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, and North Mendota, and Corporate functions.

See Footnote 22 to the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for more information regarding MGE Energy's business segments.

MGE's utility operations represent a majority of the assets, liabilities, revenues, expenses, and operations of MGE Energy. MGE Energy's nonregulated energy operations currently include an undivided interest in two coal-fired generating units located in Oak Creek, Wisconsin, which we refer to as the Elm Road Units, and an undivided interest in a cogeneration facility located on the Madison campus of the University of Wisconsin, which we refer to as the West Campus Cogeneration Facility or WCCF.

As a public utility, MGE is subject to regulation by the PSCW and the FERC. The PSCW has authority to regulate most aspects of MGE's business including rates, accounts, the issuance of securities, and plant siting. The PSCW also has authority over certain aspects of MGE Energy as a holding company of a public utility. FERC has jurisdiction, under the Federal Power Act, over certain accounting practices and certain other aspects of MGE's business.

MGE Energy's subsidiaries are also subject to regulation under local, state, and federal laws regarding air and water quality and solid waste disposal. See "Environmental Regulation" below for additional information regarding the environmental regulations to which MGE Energy and its subsidiaries are subject.

MGE Energy was organized as a Wisconsin corporation in 2001. MGE was organized as a Wisconsin corporation in 1896. Our principal offices are located at 133 South Blair Street, Madison, Wisconsin 53788, and our telephone number is (608) 252-7000.

Electric Utility Operations

MGE distributes electricity in a service area covering a 264 square-mile area of Dane County, Wisconsin. The service area includes the city of Madison, Wisconsin. It owns or leases ownership interests in electric generation facilities located in Wisconsin and Iowa.

As of December 31, 2024, MGE supplied electric service to approximately 167,000 customers, with approximately 91% located in the cities of Fitchburg, Madison, Middleton, and Monona, Wisconsin and 9% in adjacent areas.

Electric sales, customers, and revenues for 2024 were comprised of the following:

Electric operations accounted for approximately 74%, 71%, and 65% of MGE's total 2024, 2023, and 2022 regulated revenues, respectively.

See Part I, Item 2. Properties, of this Report for a description of MGE's electric utility plant.

MGE is registered with North American Electric Reliability Corporation (NERC) and one regional entity, the Midwest Reliability Organization. The essential purposes of these entities are to develop and implement regional and NERC reliability standards and determine compliance with those standards, including enforcement mechanisms.

Transmission

In 2001, American Transmission Company LLC (ATC) was collectively formed by Wisconsin-based utilities which were required by Wisconsin law to contribute their transmission facilities to an independent system operator. ATC continues to be owned by those utilities and their affiliates. ATC's purpose is to provide reliable, economic transmission service to all customers in a fair and equitable manner. ATC plans, constructs, operates, maintains, and expands transmission facilities that it owns to provide adequate and reliable transmission of power. ATC is regulated by FERC for all rate terms and conditions of service. ATC is also regulated by the PSCW for some aspects of its governance and is a transmission-owning member of the MISO.

Regional Transmission Organizations (RTO)

MISO

MGE is a nontransmission owning member of MISO. MISO, a FERC-approved RTO, is responsible for monitoring the electric transmission system that delivers power from generating plants to wholesale power customers. MISO's role is to ensure equal access to the transmission system and to maintain or improve electric system reliability across 15 U.S. states and the Canadian province of Manitoba.

MISO operates a bid-based 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. Through the operation of the ancillary services market, MISO provides the reserves for MGE's load, and MGE may offer to sell reserves from its generating units.

MGE participates in the MISO capacity auction, which provides a forum for buyers and sellers of planning resource credits to interact. Load serving entities such as MGE may participate in the capacity auction to obtain the necessary aggregate planning resource credits needed to meet their planning reserve margin requirement established by the PSCW. Generator owners may participate to sell any excess aggregate planning resource credits.

Fuel supply and generation

MGE satisfies its customers' electric demand with internal generation and purchased power. MGE's current fuel mix for generation fluctuates from year-to-year due to fuel pricing in the market, generating unit availability, weather, and customer demand. MGE has a responsibility to its customers to dispatch the lowest cost generation available pursuant to regulatory requirements.

MGE's electric energy delivery requirements were satisfied from the following fuel sources:

(a)

MGE's coal generation for electric supply may fluctuate from year to year. 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. 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. The table above nets purchases and sales within the same hour in the two MISO markets. For the years ended December 31, 2024, 2023, and 2022, the amount netted between Day-ahead and the Real-time MISO markets was 329,672 MWh, 256,571 MWh, and 303,428 MWh, respectively. These amounts are reflected in "Adjusted total fuel sources."

Environmental Initiatives – Electricity Generation

MGE is working toward a more sustainable future for the benefit of its investors, employees, customers and the broader community in its service area. 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).

MGE's carbon reduction goals are generally aligned with those of the scientific community, and specifically with the Intergovernmental Panel on Climate Change (IPCC) and its recommendation of limiting global temperature increases to 1.5 degrees Celsius above pre-industrial levels. In 2020, the University of Wisconsin-Madison's Nelson Institute for Environmental Studies released its analysis of MGE's goal of reaching net-zero carbon electricity by 2050. 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.

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 target of 80% carbon reduction by 2030 (from 2005 levels) is based on the planned transition away from coal and the planned addition of new renewable generation to reach our ultimate target of net-zero carbon by 2050. MGE already has taken action toward its goals:

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Transitioning away from coal - MGE has announced plans to transition away from coal-fired generation and has no sole ownership of coal-fired assets. This transition will help MGE meet its 2030 carbon reduction goal. By the end of 2032, MGE expects to eliminate coal as an owned generation source.

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Columbia - MGE and the other co-owners of Columbia, a two-unit coal-fired generation facility, announced plans to retire Columbia Unit 1 and Unit 2 by the end of 2029. MGE and Columbia’s co-owners plan to explore converting at least one unit to natural gas before its retirement. MGE currently owns 19% of the facility. Final timing and retirement dates are subject to change depending on operational, regulatory, capacity needs, and other factors impacting one or more of the Columbia co-owners. 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 by 2030.

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Elm Road Units – MGE along with the plant co-owners, announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. Transition plans and costs will be subject to PSCW approval. By the end of 2030, MGE expects coal at the Elm Road Units to be used only as a backup fuel and a full transition away from coal by the end of 2032.

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Renewable generation and storage - Solar, wind, and battery storage projects play a critical role in MGE's strategy for reducing carbon in pursuit of MGE's goal of achieving net-zero carbon electricity by 2050. Additionally, MGE plans 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 222 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. In addition, MGE expects to add approximately 178 MW of solar, 18 MW of wind, and 118 MW of battery storage, which include projects approved or pending PSCW approval, by the end of 2028.

MGE is partnering with the other co-owners of Columbia to construct a compressed carbon dioxide long-duration energy storage system, known as the Columbia Energy Storage project. MGE's 19% share will be 3 MW. The project was selected for a grant from the U.S Department of 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 has emphasized this innovation by developing customer programs to address climate change and encourage our customers to use clean energy. A portion of MGE's renewable generation is dedicated to customer programs such as the Renewable Energy Rider (RER) and Shared Solar Program. The RER and Shared Solar programs reduce MGE's carbon emissions while providing customers the ability to purchase renewable energy to meet their energy needs.

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. 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. 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. Pending approval by the PSCW, an additional 2 MW will be added to the program from Strix Solar, which was completed in 2025.

Electrifying Transportation - The electrification of transportation is a key strategy for reducing carbon emissions. MGE has established a network of more than 50 charging stations, powered by renewable energy, serving the growing number of electric vehicles (EV) in MGE's service area. The EV fast charging hubs feature some of the most powerful EV chargers in the Midwest. 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. The City of Madison currently has a goal of using 100% electric buses for its' new Bus Rapid Transit system located in the downtown region.

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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. 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. In early 2023, MGE purchased 25 MW in the West Riverside Energy Center (West Riverside), a highly efficient, state-of-the-art natural gas-fired plant in Beloit, Wisconsin. In June 2024, MGE purchased an additional 25 MW of capacity in West Riverside. Natural gas has lower carbon emission rates compared to coal-fired generation. MGE has additional investments in natural gas generators planned for the future to ensure adequate dispatchable capacity requirements are met.

Generation sources

MGE receives electric generation supply from coal-fired, gas-fired, and renewable energy sources. These sources include owned facilities as well as facilities leased from affiliates and accounted for under our nonregulated energy operations. See Item 2. Properties for more information regarding these generation sources, including location, capacity, ownership or lease arrangement, and fuel source. 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. As of December 31, 2024, MGE has 30 MW of a renewable purchase power commitment for each of the next three 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, 2024, MGE supplied natural gas service to approximately 178,000 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. Gas sales, customers, and revenues for 2024 were comprised of the following:

Gas operations accounted for approximately 26%, 29%, and 35% of MGE's total 2024, 2023, and 2022 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. In 2024, 2023, and 2022, approximately 2%, 3%, and 3%, respectively, of retail gas deliveries 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. 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 in a quick and cost effective manner. For customers who want to reduce their environmental footprint further, MGE introduced a renewable natural gas program in May 2024, after approval by the PSCW. MGE purchases renewable thermal credits on behalf of customers who voluntarily elect in the program to offset the emissions associated with the customer's monthly natural gas usage.

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. 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 typically higher, 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.

Annually, through our contracts with ANR, 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. 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's contracts for firm transportation service of gas include winter maximum daily quantities of:

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185,650 Dth (including 116,078 Dth of storage withdrawals) on ANR.

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81,453 Dth on NNG.