MGE ENERGY INC

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Regulated electric utility operations, conducted through MGE, which generate and distribute electricity to approximately 167,000 customers in Dane County, Wisconsin,

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Regulated electric utility operations, conducted through MGE, which generate and distribute electricity to approximately 170,000 customers in Dane County, Wisconsin,

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Regulated gas utility operations, conducted through MGE, which distribute natural gas to approximately 178,000 customers in seven south-central and western Wisconsin counties,

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Regulated gas utility operations, conducted through MGE, which distribute natural gas to approximately 180,000 customers in seven south-central and western Wisconsin counties,

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Our primary focus is our core utility customers, which are served by 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 responsible manner. That responsibility is manifested in actions MGE has taken, and will continue to take, to achieve its goals of 80% carbon reduction by 2030 (from 2005 levels) and net-zero carbon by 2050, including:

Current wording

Our primary focus is our core utility customers, which are served by 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 responsible manner. That responsibility is manifested in actions MGE has taken, and will continue to take, to achieve its goal of net-zero carbon by 2050.

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growing ownership of renewable generation sources.

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As part of this long‑term transition, MGE continues to evaluate the role of coal‑fired generation in its portfolio, including previously announced plans regarding the Columbia Energy Center and the planned fuel transition at the Elm Road Units. MGE remains focused on reducing reliance on coal over time and expanding ownership of renewable generation to support a cleaner, reliable energy future.

Previous wording

During the year ended December 31, 2024, MGE Energy's earnings were $120.6 million or $3.33 per share compared to $117.7 million or $3.25 per share for the same period in the prior year. MGE's earnings for the year ended December 31, 2024, were $89.4 million compared to $90.5 million for the same period in the prior year.

Current wording

During the year ended December 31, 2025, MGE Energy's earnings were $135.9 million or $3.72 per share compared to $120.6 million or $3.33 per share for the same period in the prior year. MGE's earnings for the year ended December 31, 2025, were $104.1 million compared to $89.4 million for the same period in the prior year.

Previous wording

Lower gas retail sales resulting from warmer than normal weather in the first quarter of 2024 contributed to lower gas earnings in 2024. Gas retail sales decreased approximately 4% and heating degree days (a measure for determining the impact of weather during the heating season) decreased by approximately 6% in 2024 compared to the same period in the prior year.

Current wording

Higher gas retail sales in 2025 contributed to higher gas earnings for 2025, compared to the same period in the prior year. Gas retail sales increased approximately 14% for 2025, compared to the prior year period. Heating degree days (a measure for determining the impact of weather during the heating season) increased by approximately 18% in 2025 compared to the same period in the prior year.

Previous wording

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. The PSCW also approved a 4.17% increase to electric rates and 1.32% increase to gas rates in 2025. The PSCW approved a 2025 Fuel Cost Plan in December 2024. The plan lowered the 2025 increase in electric rates to 2.63%, reflecting lower expected fuel costs. See "Other Matters" below for additional information on the 2024/2025 rate proceeding.

Current wording

2024/2025 Rate Proceeding: In December 2023, the PSCW approved a 4.17% increase to electric rates and 1.32% increase to gas rates for 2025. The PSCW approved a 2025 Fuel Cost Plan in December 2024. The plan lowered the 2025 increase in electric rates to 2.63%. See "Other Matters" below for additional information on the 2024/2025 rate proceeding.

Previous 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) MGE 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 included an earnings sharing mechanism, under which, if MGE earns above the 9.7% ROE authorized in the rate order: (i) MGE 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

Large Scale Utility Projects: Large scale generation projects recently completed or under construction, are shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" for projects placed in service, or "Construction work in progress" for projects under construction on the consolidated balance sheets.

Current wording

Large Scale Utility Projects: Large scale generation projects recently completed or under construction, are summarized in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" for projects placed in service, or "Construction work in progress" for projects under construction on the consolidated balance sheets. See "Capital Expenditures" below for additional information on projects.

Previous wording

MGE received specific approval to recover 100% AFUDC on Paris, Darien, and Koshkonong. After tax, MGE recognized $4.8 million, $2.7 million, and $0.2 million of AFUDC equity earnings through December 31, 2024, on Paris, Darien, and Koshkonong, 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 $5.4 million, $3.2 million, $2.3 million, $1.4 million, $0.6 million of AFUDC equity earnings through December 31, 2025, on Paris, Darien, Koshkonong, High Noon, and other projects, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.

Previous wording

Deferred Fuel Costs - Subject to Refund: As of December 31, 2024, MGE had deferred $3.0 million of 2024 fuel savings. These costs will be subject to the PSCW's annual review of 2024 fuel costs, expected to be completed during 2025. See Footnote 9.b. of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for further information regarding fuel proceedings.

Current wording

Deferred Fuel Savings: As of December 31, 2025, MGE deferred $7.1 million of 2025 fuel savings. These costs will be subject to the PSCW's annual review of 2025 fuel costs, expected to be completed during 2026. See Footnote 9.b. of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for further information regarding fuel proceedings.

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 costs. 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 rules proceedings from the amount MGE deferred in 2023.

Current wording

2024 Annual Fuel Proceeding: MGE had fuel savings in 2024. As of December 31, 2024, MGE deferred $3.0 million of 2024 fuel savings. The PSCW has completed their review of 2024 fuel costs and approved MGE's return of these savings in October 2025. There was no change to the costs to be refunded as a result of the fuel rules proceedings from the amount MGE deferred in 2024.

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ATC Return on Equity: As discussed in "Other Matters" below, ATC's authorized ROE, which is used in calculating its rates and revenues, was 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. MGE Energy derived approximately 7.4% and 6.4% of net income for 2024 and 2023, respectively, from the investment in ATC.

Current wording

ATC Return on Equity: As discussed in "Other Matters" below, ATC's authorized ROE, which is used in calculating its rates and revenues, was 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. MGE Energy derived approximately 6.6% and 7.4% of net income for 2025 and 2024, respectively, from the investment in ATC.

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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.

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Future Generation - MGE continues to work toward its goal of 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.

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Growing renewable generation. MGE is seeking to acquire a joint interest in several renewable generation projects. See our 2025-2029 capital expenditures forecast included under "Liquidity and Capital Resources" below for information on these projects.

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Growing renewable generation and storage. MGE is seeking to acquire, or has acquired, joint interests in several renewable generation and storage projects. The forecasted capital expenditures include approximately 252 MW of solar, 18 MW of wind, and 125 MW of storage, which include projects approved or pending PSCW approval. See the 2026-2030 capital expenditures forecast included under "Liquidity and Capital Resources" below for information on those projects.

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Elm Road Units: MGE, along with the plant co-owner, 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. MGE's remaining use of coal is expected to be further reduced as the Elm Road Units transition to natural gas. By the end of 2030, coal is expected to be used only as a backup fuel at the Elm Road Units. This transition will help MGE meet its 2030 carbon reduction goals. 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.

Current wording

Transitioning away from coal. Elm Road Units: In October 2025, MGE, along with the plant co-owners, filed a joint application with the PSCW to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. See the

Previous wording

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.

Current wording

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. MGE offers two voluntary renewable natural gas programs. The initial program, launched in May 2024, enables customers to offset emissions associated with their natural gas consumption through a mechanism in which MGE purchases renewable thermal credits and retires them on behalf of participating customers. The second program, launched in January 2026, enables customers to inject renewable natural gas produced on the customer's premise into MGE's distribution system; customers may sell the natural gas to MGE or another third party and may retain or sell to MGE or another third party the associated environmental attributes.

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Solar Procurement Disruptions: 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 a potential to impact current and future solar projects which 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 "Other Matters" below for additional information on the solar procurement disruptions.

Current wording

Solar Procurement Disruptions: MGE is monitoring import regulations under the Uyghur Forced Labor Prevention Act and the U.S. Department of Commerce's 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. 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 "Other Matters" below for additional information on the solar procurement disruptions.

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Executive Order – Tariffs: MGE is monitoring the actions of the Trump Administration with respect to certain proposed import tariffs on foreign goods, including those from Canada, Mexico, and/or China. These tariffs have a potential impact on cost of operations and on current and future capital projects. See "Other Matters" below for additional information on the executive orders on Tariffs.

Current wording

Tariffs: MGE is monitoring the actions of the Trump Administration with respect to certain proposed or recently implemented import tariffs on foreign goods. These tariffs have a potential impact on cost of operations and on current and future capital projects. See "Other Matters" below for additional information on the executive orders on Tariffs.

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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.

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Financing and Equity Issuance Plans: As of December 31, 2025, MGE has $230 million of remaining regulatory authority from the PSCW to issue long-term debt to finance authorized utility capital expenditures. In January 2026, MGE issued $90 million of long-term debt. See "Liquidity and Capital Resources" below for additional information. MGE expects to use a portion of the remaining authority during 2026 to finance authorized utility capital expenditures. In 2026, MGE Energy expects to begin issuing new shares of common stock to participants in our Direct Stock Purchase and Dividend Reinvestment Plan. The amount and timing of any financings will be primarily driven by capital investments and cash requirements and will depend upon market conditions, regulatory approvals, and other factors.

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Electric revenue increased $7.9 million during 2024 compared to 2023, due to the following:

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Electric revenue increased $33.9 million during 2025 compared to 2024, due to the following:

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 2024, market volumes increased compared to 2023, reflecting 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 Part II, Item 8 of this Report.

Current wording

Sales to the market. Sales to the market typically occur when MGE has more generation 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 2025, market volumes increased compared to 2024, reflecting increase in sales. Additionally, the cost of capacity sold increased, contributing to the revenue generated from increased sales to the market from excess generation and purchases. The revenue generated from these sales is largely offset by fuel rules costs, and do not have a significant impact on net income. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report.

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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 2024 were $6.5 million higher than those charged during 2023. See Footnote 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of 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 2024, the PSCW authorized MGE to increase 2025 rates for retail electric customers by approximately 2.63%. Rates charged to retail customers during 2025 were $10.0 million higher than those charged during 2024. See Footnote 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of 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.

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Customer fixed and demand charges. During 2024, fixed and demand charges increased $2.6 million primarily attributable to the increase in demand charges for commercial customers.

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Customer fixed and demand charges. During 2025, fixed and demand charges increased $4.9 million primarily attributable to the increase in demand charges for commercial customers.

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The $3.6 million decrease in fuel for electric generation was due to an approximately 17% decrease in the average cost, partially offset by an approximately 13% increase in internal generation. Renewable generation increased approximately 26% driven by new generation sources including Badger Hollow II.

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The $16.8 million increase in fuel for electric generation was due to an approximately 16% increase in internal generation as well as an approximately 13% increase in the average cost.

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Excluding deferred fuel costs, purchased power decreased $9.7 million. The decrease in purchased power was due to an approximately 30% decrease in market purchases as a result of increased internal generation. Furthermore, there was an approximately 4% increase in average cost partially offsetting the decrease in market purchases. Deferred fuel cost recovered in 2024 is $6.7 million compared to $5.4 million in 2023.

Current wording

Excluding deferred fuel costs, purchased power decreased $6.2 million. The decrease in purchased power was due to an approximately 39% decrease in market purchases as a result of increased internal generation. Furthermore, there was an approximately 1% increase in average cost partially offsetting the decrease in market purchases. Deferred fuel cost recovered in 2024 was $6.7 million. There were no deferred fuel costs recovered during 2025.

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Gas revenue decreased $21.4 million during 2024 compared to 2023, due to the following:

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Gas revenue increased $32.8 million during 2025 compared to 2024, due to the following:

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Rate changes. In December 2023, the PSCW authorized MGE to increase 2024 rates for retail gas customers by 2.44%.

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Rate changes. In December 2023, the PSCW authorized MGE to increase 2025 rates for retail gas customers by approximately 1.32%.

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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 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 increased, driving higher rates during 2025.

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The average retail rate per therm excluding customer fixed charges for 2024, decreased approximately 7% compared to 2023, 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 2025, increased approximately 4% compared to 2024, reflecting an increase in natural gas commodity costs (recovered through the PGA).

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Volume. For 2024, retail gas deliveries decreased approximately 4% compared to 2023 primarily attributable to unfavorable weather conditions in the first half of 2024.

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Volume. For 2025, retail gas deliveries increased approximately 14% compared to 2024 primarily attributable to unfavorable weather conditions in 2024.

Previous wording

Cost of gas sold decreased $24.0 million in 2024 compared to 2023. Cost per therm decreased approximately 19% and therms delivered decreased approximately 4%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under "Gas deliveries and revenues" above.

Current wording

Cost of gas sold increased $24.3 million in 2025 compared to 2024. Therms delivered increased approximately 14% primarily driven by weather and cost per therm increased approximately 14%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenues above.

Previous wording

For 2024, operations and maintenance expenses increased $12.7 million, compared to 2023. The following contributed to the net change:

Current wording

For 2025, operations and maintenance expenses increased $8.0 million, compared to 2024. The following contributed to the net change:

Previous wording

Increased transmission costs are primarily a result of an increase in transmission rate and collection of deferred costs from prior years. Transmission costs represent ATC and MISO network transmission expenses authorized to collect in rates. The PSCW has approved MGE to defer as a regulatory asset or liability, the difference between actual costs included in rates and to be recovered or refunded in a future rate proceeding. Transmission cost is generally offset by electric revenue and does not have a significant impact on net income.

Current wording

Increased transmission costs are primarily a result of an increase in transmission rate. Transmission costs represent ATC and MISO network transmission expenses authorized to collect in rates. The PSCW has approved MGE to defer as a regulatory asset or liability, the difference between actual costs included in rates and to be recovered or refunded in a future rate proceeding. Transmission cost is generally offset by electric revenue and does not have a significant impact on net income.

Previous wording

Increased electric production expenses are primarily related to operating and maintenance costs for Columbia and renewable generating facilities. MGE continues to add new renewable generation sites including the second phase of Badger Hollow which went online in December 2023.

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Increased electric production expenses are primarily related to operating and maintenance costs for the Elm Road Units and renewable generating facilities.

Previous wording

Electric depreciation expense increased $6.8 million and gas depreciation expense increased $1.2 million for 2024, compared to 2023. 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 $4.9 million and gas depreciation expense increased $0.6 million for 2025, compared to 2024. Paris solar was placed in service in December 2024, Darien solar was placed in service in March 2025, and Paris battery was placed in service in June 2025. The timing of the in-service dates contributed to the increase in electric depreciation expense.

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Electric and gas other income and interest expense

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Electric and gas other income

Previous wording

The nonregulated energy operations are conducted through certain of 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. For 2024 and 2023, net income at the nonregulated energy operations segment was $24.1 million and $22.4 million, respectively.

Current wording

The nonregulated energy operations are conducted through certain of 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. For 2025 and 2024, net income at the nonregulated energy operations segment was $24.8 million and $24.1 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 2024 and 2023, other income from the transmission investment segment primarily reflected ATC's operations and was $12.3 million and $10.6 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 7 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report and "Other Matters" below for additional information concerning ATC and summarized financial information regarding 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 2025 and 2024, other income from the transmission investment segment primarily reflected ATC's operations and was $13.0 million and $12.3 million, respectively. See Footnote 7 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report and "Other Matters" below for summarized financial information regarding ATC.

Previous wording

The decrease in net loss for all other operations during 2024 compared to 2023, is primarily related to a $1.5 million (pre-tax) voluntary contribution to the Madison Gas and Electric Foundation in 2023.

Current wording

The increase of $0.6 million in other income from all other operations during 2025 compared to 2024, primarily reflects results from investment gains recognized in the current year, from venture capital funds. 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. This increase was partially offset by a $2.5 million (pre-tax) voluntary contribution to the Madison Gas and Electric Foundation, MGE's philanthropic arm, in 2025.