United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended:
June 30, 2026
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______________ to _______________
Commission
File No.
Name of Registrant, State of Incorporation, Address
of Principal Executive Offices, and Telephone No.
IRS Employer
Identification No.
000-49965
MGE Energy, Inc.
(a Wisconsin Corporation)
133 South Blair Street
Madison, Wisconsin 53788
(608) 252-7000 | mgeenergy.com
39-2040501
000-1125
Madison Gas and Electric Company
(608) 252-7000 | mge.com
39-0444025
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $1 Par Value Per Share
MGEE
The NASDAQ Stock Market
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:
MGE Energy, Inc. Yes ☒ No ☐
Madison Gas and Electric Company Yes ☒ No ☐
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files):
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated
Filer
Non-accelerated Filer
Smaller Reporting Company
Emerging Growth Company
☒
☐
If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
MGE Energy, Inc. ☐
Madison Gas and Electric Company ☐
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):
MGE Energy, Inc. Yes ☐ No ☒
Madison Gas and Electric Company Yes ☐ No ☒
Number of Shares Outstanding of Each Class of Common Stock as of July 31, 2026
Common stock, $1.00 par value, 37,784,012 shares outstanding.
Common stock, $1.00 par value, 17,347,894 shares outstanding (all of which are owned beneficially and of record by MGE Energy, Inc.).
1
Table of Contents
PART I. FINANCIAL INFORMATION
3
Filing Format
Forward-Looking Statements
Where to Find More Information
Definitions, Abbreviations, and Acronyms Used in the Text and Notes of this Report
4
Item 1. Financial Statements.
6
Consolidated Statements of Income (unaudited)
Consolidated Statements of Cash Flows (unaudited)
7
Consolidated Balance Sheets (unaudited)
8
Consolidated Statements of Common Equity (unaudited)
9
10
11
12
Consolidated Statements of Equity (unaudited)
13
MGE Energy, Inc., and Madison Gas and Electric Company - Notes to Consolidated Financial Statements (unaudited)
14
1. Summary of Significant Accounting Policies.
2. New Accounting Standards.
15
3. Investment in ATC and ATC Holdco.
4. Taxes.
16
5. Pension and Other Postretirement Plans.
6. Equity and Financing Arrangements.
17
7. Share-Based Compensation.
18
8. Commitments and Contingencies.
19
9. Rate Matters.
22
10. Derivative and Hedging Instruments.
23
11. Fair Value of Financial Instruments.
25
12. Joint Plant Construction Project Ownership.
28
13. Revenue.
29
14. Segment Information.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
33
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
47
Item 4. Controls and Procedures.
PART II. OTHER INFORMATION.
49
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
50
Signatures - MGE Energy, Inc.
51
Signatures - Madison Gas and Electric Company.
52
2
This combined Form 10-Q is being filed separately by MGE Energy, Inc. (MGE Energy) and Madison Gas and Electric Company (MGE). MGE is a wholly owned subsidiary of MGE Energy and represents a majority of its assets, liabilities, revenues, expenses, and operations. Thus, all information contained in this report relates to, and is filed by, MGE Energy. Information that is specifically identified in this report as relating solely to MGE Energy, such as its financial statements and information relating to its nonregulated business, does not relate to, and is not filed by, MGE. MGE makes no representation as to that information. The terms "we" and "our," as used in this report, refer to MGE Energy and its consolidated subsidiaries, unless otherwise indicated.
Certain matters discussed in this report include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements that are not statements of historical facts are, or may be deemed to be, forward-looking statements. Such forward-looking statements are based on historical performance and current expectations, estimates, forecasts and projections about our future financial results, goals, plans, commitments, strategies and objectives, particularly related to future load growth, revenues, expenses, capital expenditures and rate recovery, financial resources, regulatory matters, and the scope and expense associated with future environmental regulation. Such statements involve inherent risks, assumptions and uncertainties, known or unknown, including internal or external factors that could delay, divert or change any of them, that are difficult to predict, may be beyond our control and could cause our future financial results, goals, plans and objectives to differ materially from those expressed in, or implied by, the statements. Words such as "believe," "expect," "anticipate," "estimate," "could," "should," "intend," "will," "commit," "target," "plan," and other similar words, and words relating to goals, targets and projections, generally identify forward-looking statements. Both MGE Energy and MGE caution investors that these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from those projected, expressed, or implied.
The factors that could cause actual results to differ materially from the forward-looking statements made by a registrant include (a) those factors discussed in the following sections of the registrants' 2025 Annual Report on Form 10-K: Item 1A. Risk Factors; Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, as updated by Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations in this report; and Item 8. Financial Statements and Supplementary Data – Footnote 16, as updated by Part I, Item 1. Financial Statements – Footnote 8 in this report; and (b) other factors discussed herein and in other filings made by that registrant with the Securities and Exchange Commission (SEC).
Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this report. MGE Energy and MGE undertake no obligation to publicly update or revise any forward-looking statement to reflect events or circumstances after the date of this report, whether as a result of new information, future events, changed circumstances or otherwise, except as required by law.
We file annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and other information with the SEC. The SEC maintains an internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
MGE Energy maintains a website at mgeenergy.com, and MGE maintains a website at mge.com. Copies of the reports and other information that we file with the SEC may be obtained from our websites free of charge. Information contained on MGE Energy's and MGE's websites shall not be deemed incorporated into, or to be a part of, this report.
Abbreviations, acronyms, and definitions used in the text and notes of this report are defined below.
MGE Energy and Subsidiaries:
CWDC
Central Wisconsin Development Corporation
MAGAEL
MAGAEL, LLC
MGE
MGE Energy
MGE Power
MGE Power, LLC
MGE Power Elm Road
MGE Power Elm Road, LLC
MGE Power West Campus
MGE Power West Campus, LLC
MGE Services
MGE Services, LLC
MGE State Energy Services
MGE State Energy Services, LLC
MGE Transco
MGE Transco Investment, LLC
MGEE Transco
MGEE Transco, LLC
North Mendota
North Mendota Energy & Technology Park, LLC
Other Defined Terms:
2025 Annual Report on Form 10-K
MGE Energy's and MGE's Annual Report on Form 10-K for the year ended December 31, 2025
2024 ELG Rule
Supplemental Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category
2021 Incentive Plan
MGE Energy's 2021 Long-Term Incentive Plan
AD/CVD
Antidumping and Countervailing Duties
AFUDC
Allowance for Funds Used During Construction
ATC
American Transmission Company LLC
ATC Holdco
ATC Holdco, LLC
ATM
At-the-Market Offering Program
Badger Hollow
Badger Hollow Solar Park
Blount
Blount Station
BTA
Best Technology Available
CA
Certificate of Authority
CBP
U.S. Customs and Border Protection
CCR
Coal Combustion Residual
Codification
Financial Accounting Standards Board Accounting Standards Codification
Columbia
Columbia Energy Center
Cooling degree days (CDD)
Measure of the extent to which the average daily temperature is above 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide cooling
CWIP
Construction Work in Progress
Dth
Dekatherms, a quantity measure for natural gas
DOC
United States Department of Commerce
Elm Road Units
Elm Road Generating Station
EPA
United States Environmental Protection Agency
FERC
Federal Energy Regulatory Commission
FTR
Financial Transmission Rights
GHG
Greenhouse gas
Heating degree days (HDD)
Measure of the extent to which the average daily temperature is below 65 degrees Fahrenheit, which is considered an indicator of possible increased demand for energy to provide heating
High Noon
High Noon Solar Energy Center
IRS
Internal Revenue Service
ITC
Investment Tax Credit
Koshkonong
Koshkonong Solar Park
kWh
Kilowatt-hour, a measure of electric energy produced
MISO
Midcontinent Independent System Operator, Inc.
MW
Megawatt, a measure of electric energy generating capacity
MWh
Megawatt-hour, a measure of electric energy produced
NAAQS
National Ambient Air Quality Standards
Nasdaq
The Nasdaq Stock Market
NOx
Nitrogen Oxide
OBBBA
One Big Beautiful Bill Act
Paris
Paris Solar-Battery Park
PGA
Purchased Gas Adjustment clause, a regulatory mechanism used to reconcile natural gas costs recovered in rates to actual costs
PM
Particulate Matter
PSCW
Public Service Commission of Wisconsin
PTC
Production Tax Credit
ROE
Return on Equity
Saratoga
Saratoga Solar Electric Generation and BESS Facility
SEC
Securities and Exchange Commission
SO2
Sulfur Dioxide
Stock Plan
Direct Stock Purchase and Dividend Reinvestment Plan of MGE Energy
Sunnyside
Sunnyside Solar and Battery Project
Therm
Measure of quantity of heat used to measure gas supply
UFLPA
Uyghur Forced Labor Prevention Act
Ursa
Ursa Solar Electric Generation Facility
USITC
United States International Trade Commission
VIE
Variable Interest Entity
WCCF
West Campus Cogeneration Facility
WDNR
Wisconsin Department of Natural Resources
WEPCO
Wisconsin Electric Power Company, a subsidiary of WEC Energy Group, Inc.
West Riverside
West Riverside Energy Center
WPDES
Wisconsin Pollutant Discharge Elimination System
WRO
Withhold Release Order
XBRL
eXtensible Business Reporting Language
5
(In thousands, except per share amounts)
Three Months Ended
Six Months Ended
June 30,
2026
2025
Operating Revenues:
Electric revenues
$
131,594
129,527
263,034
255,016
Gas revenues
29,601
29,925
140,864
123,406
Total Operating Revenues
161,195
159,452
403,898
378,422
Operating Expenses:
Fuel for electric generation
12,907
16,292
33,216
33,861
Purchased power
5,813
5,562
8,280
9,940
Cost of gas sold
9,285
11,313
80,108
65,277
Other operations and maintenance
65,242
57,777
126,810
114,336
Depreciation and amortization
28,939
28,354
57,028
56,032
Other general taxes
6,375
5,931
12,670
11,888
Total Operating Expenses
128,561
125,229
318,112
291,334
Operating Income
32,634
34,223
85,786
87,088
Other income, net
14,286
3,707
25,276
6,311
Interest expense, net
(9,288
)
(8,457
(19,093
(16,038
Income before income taxes
37,632
29,473
91,969
77,361
Income tax provision
(4,279
(2,975
(10,135
(9,271
Net Income
33,353
26,498
81,834
68,090
Earnings Per Share of Common Stock
Basic
0.89
0.73
2.21
1.86
Diluted
0.72
Dividends per share of common stock
0.475
0.450
0.950
0.900
Weighted Average Shares Outstanding
37,351
36,540
36,972
36,526
37,456
36,569
37,029
36,557
The accompanying notes are an integral part of the above unaudited consolidated financial statements.
(In thousands)
Operating Activities:
Net income
Adjustments to reconcile net income to cash provided by operating activities
Deferred income taxes
5,518
2,578
Provision for doubtful receivables
3,513
4,400
Employee benefit plan credit
(4,232
(2,320
Cash contributions to pension and other postretirement plans
(3,752
(3,800
Equity earnings in investments
(7,336
(6,241
Dividends from investments
5,545
6,008
Changes in assets and liabilities
Current assets
23,420
13,105
Accounts payable
(21,055
(13,491
9,532
—
Other current liabilities
298
(2,309
Regulatory assets and liabilities, net
9,995
7,381
Other, net
(11,480
4,520
Cash Provided by Operating Activities
148,828
133,953
Investing Activities:
Capital expenditures
(210,906
(111,753
Capital contributions to investments
(7,714
(5,871
Other
2,287
(630
Cash Used for Investing Activities
(216,333
(118,254
Financing Activities:
Issuance of common stock, net
88,948
3,750
Cash dividends paid on common stock
(35,299
(32,872
Repayments of long-term debt
(3,897
(2,625
Issuance of long-term debt
90,000
(Repayments of) proceeds from short-term debt
(59,777
5,500
(1,523
(812
Cash Provided by (Used for) Financing Activities
78,452
(27,059
Change in cash, cash equivalents, and restricted cash
10,947
(11,360
Cash, cash equivalents, and restricted cash at beginning of period
8,736
24,496
Cash, cash equivalents, and restricted cash at end of period
19,683
13,136
December 31,
ASSETS
Current Assets:
Cash and cash equivalents
16,621
5,666
Accounts receivable, less reserves of $11,049 and $8,578, respectively
42,330
57,558
Other accounts receivable, less reserves of $2,318 and $2,084, respectively
14,421
12,983
Unbilled revenues
29,967
42,770
Materials and supplies, at average cost
38,553
37,850
Fuel for electric generation, at average cost
12,753
11,010
Stored natural gas, at average cost
13,671
15,317
Prepaid taxes
19,123
19,314
Regulatory assets - current
8,705
8,879
Other current assets
14,751
17,201
Total Current Assets
210,895
228,548
Regulatory assets
51,244
42,758
Pension and other postretirement benefit asset
172,412
164,985
Other deferred assets and other
19,872
18,348
Property, Plant, and Equipment:
Property, plant, and equipment, net
2,337,481
2,279,899
Construction work in progress
372,628
292,969
Total Property, Plant, and Equipment
2,710,109
2,572,868
Investments
135,673
127,913
Total Assets
3,300,205
3,155,420
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Long-term debt due within one year
20,509
21,633
Short-term debt
34,750
94,527
66,836
117,673
Accrued interest and taxes
12,127
10,269
Accrued payroll related items
15,742
17,244
Regulatory liabilities - current
23,801
23,490
11,799
11,873
Total Current Liabilities
185,564
296,709
Other Credits:
340,423
337,798
Investment tax credit - deferred
61,466
48,609
Regulatory liabilities
197,539
185,372
Accrued pension and other postretirement benefits
51,452
51,105
Asset retirement obligations
79,395
76,289
Other deferred liabilities and other
64,743
63,397
Total Other Credits
795,018
762,570
Capitalization:
Common shareholders' equity
1,440,519
1,303,936
Long-term debt
879,104
792,205
Total Capitalization
2,319,623
2,096,141
Commitments and contingencies (see Footnote 8)
Total Liabilities and Capitalization
Accumulated
Additional
Common
Paid-in
Retained
Comprehensive
Stock
Capital
Earnings
Income/(Loss)
Total
Three Months Ended June 30, 2025
Beginning Balance
36,537
433,079
789,297
1,258,913
Common stock dividends declared ($0.450 per share)
(16,444
466
471
Equity-based compensation plans and other
535
Ending Balance - June 30, 2025
36,542
434,080
799,351
1,269,973
Three Months Ended June 30, 2026
36,753
449,098
863,548
1,349,399
Common stock dividends declared ($0.475 per share)
(17,931
1,028
73,906
74,934
764
Ending Balance - June 30, 2026
37,781
523,768
878,970
Six Months Ended June 30, 2025
36,490
429,515
764,133
1,230,138
Common stock dividends declared ($0.900 per share)
41
3,709
856
867
Six Months Ended June 30, 2026
434,959
832,435
Common stock dividends declared ($0.950 per share)
1,217
87,731
1,078
1,100
64,863
57,489
126,099
113,751
128,182
124,941
317,401
290,749
33,013
34,511
86,497
87,673
7,644
747
14,327
363
(9,366
(8,554
(19,190
(16,189
31,291
26,704
81,634
71,847
(3,079
(2,229
(7,709
(7,569
28,212
24,475
73,925
64,278
Less: Net Income Attributable to Noncontrolling Interest, net of tax
(5,729
(5,714
(11,335
(11,313
Net Income Attributable to MGE
22,483
18,761
62,590
52,965
4,376
1,785
(2,319
22,278
13,107
(21,297
(13,533
3,428
(2,771
(8,344
146,450
127,988
(3,116
(765
(214,022
(112,518
Cash dividends paid to parent by MGE
(18,000
(23,500
Distributions to parent from noncontrolling interest
(8,250
(8,000
Capital contribution from parent
77,500
76,053
(29,437
8,481
(13,967
5,318
20,059
13,799
6,092
10,737
2,248
14,419
12,979
19,027
18,748
15,445
17,225
205,607
224,584
18,243
17,817
2,337,509
2,279,927
2,710,137
2,572,896
3,157,643
3,023,040
66,579
117,658
12,192
10,234
11,798
8,843
185,371
293,629
302,681
301,198
68,108
67,281
760,641
729,854
Common shareholder's equity
1,172,654
1,050,564
Noncontrolling interest
159,873
156,788
Total Equity
1,332,527
1,207,352
2,211,631
1,999,557
Non-
Common Stock
Controlling
Shares
Value
Interest
Beginning balance
17,348
283,667
709,108
151,985
1,162,108
5,714
(10,000
(4,000
717,869
153,699
1,172,583
308,917
763,156
158,144
1,247,565
5,729
Capital contributions from parent
60,750
369,667
785,639
688,404
150,386
1,139,805
292,167
741,049
11,335
MGE Energy, Inc., and Madison Gas and Electric Company
Notes to Consolidated Financial Statements (unaudited)
This report is a combined report of MGE Energy and MGE. References in this report to "MGE Energy" are to MGE Energy, Inc. and its subsidiaries. References in this report to "MGE" are to Madison Gas and Electric Company.
MGE Power Elm Road and MGE Power West Campus own electric generating assets and lease those assets to MGE. Both entities are variable interest entities (VIE) under applicable authoritative accounting guidance. MGE is considered the primary beneficiary of these entities as a result of contractual agreements. As a result, MGE has consolidated MGE Power Elm Road and MGE Power West Campus in its financial reports. See Footnote 3 of the Notes to the Consolidated Financial Statements under Item 8, Financial Statements and Supplementary Data, of MGE Energy's and MGE's 2025 Annual Report on Form 10-K (the 2025 Annual Report on Form 10-K).
The accompanying consolidated financial statements as of June 30, 2026, and for the three and six months ended, as applicable, are unaudited but include all adjustments that MGE Energy and MGE management consider necessary for a fair statement of their respective financial statements. All adjustments are of a normal, recurring nature except as otherwise disclosed. The year-end consolidated balance sheet information was derived from the audited balance sheet appearing in the 2025 Annual Report on Form 10-K but does not include all disclosures required by accounting principles generally accepted in the United States of America. These notes should be read in conjunction with the financial statements and the notes thereto located on pages 52 through 105 of the 2025 Annual Report on Form 10-K.
MGE(b)
(In Thousands)
Income tax paid (receipts), net(a):
US Federal
(7,232)
3,681
(7,872)
3,351
US State and Local:
Wisconsin
3,800
5,000
3,620
4,980
91
66
Significant noncash investing activities:
Accrued capital expenditures
26,099
9,120
The following table presents the components of total cash, cash equivalents, and restricted cash on the consolidated balance sheets.
Restricted cash
1,014
952
Receivable - margin account
2,048
2,118
Cash, cash equivalents, and restricted cash
Cash Equivalents
All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.
Restricted Cash
MGE has certain cash accounts that are restricted to uses other than current operations and designated for a specific purpose. MGE's restricted cash accounts include cash held by trustees for certain employee benefits and cash deposits held by third parties. These are included in "Other current assets" on the consolidated balance sheets.
Receivable – Margin Account
Cash amounts held by counterparties as margin collateral for certain financial transactions are recorded as Receivable – margin account in "Other current assets" on the consolidated balance sheets. The costs being hedged are fuel for electric generation, purchased power, and cost of gas sold.
In November 2024, the Financial Accounting Standards Board issued authoritative guidance within the codification's Income Statement - Reporting Comprehensive Income topic, which added disclosure requirements for the disaggregation of certain income statement expenses. The authoritative guidance will become effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. MGE will adopt the standard as of the effective date. The adoption of this standard will not have a material impact on MGE Energy's and MGE's financial statements.
In September 2025, the Financial Accounting Standards Board issued authoritative guidance within the codification’s Internal-Use Software topic, which amends certain aspects of the accounting for and disclosure of software costs. The authoritative guidance will become effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods; early adoption is permitted as of the beginning of an annual reporting period. MGE will adopt the standard as of the effective date. The adoption of this standard is not expected to have a material impact on MGE Energy's and MGE’s financial statements.
In May 2026, the Financial Accounting Standards Board issued authoritative guidance within the codification’s Environmental Credits topic, which establishes a comprehensive model for the recognition, measurement, presentation, and disclosure of environmental credits and related obligations. The authoritative guidance will become effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual reporting periods; early adoption is permitted. MGE will adopt the standard as of the effective date. The adoption of this standard is not expected to have a material impact on MGE Energy's and MGE’s financial statements.
ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, like other Wisconsin electric utilities, contributed its electric transmission facilities to ATC, as required by Wisconsin law. That interest is presently held by MGE Transco, a subsidiary of MGE Energy. ATC Holdco was formed by several members of ATC, including MGE Energy, to pursue electric transmission development and investments outside of Wisconsin. The ownership interest in ATC Holdco is held by MGEE Transco, a subsidiary of MGE Energy.
MGE Transco and MGEE Transco have accounted for their investments in ATC and ATC Holdco, respectively, under the equity method of accounting. Equity earnings from investments are recorded as "Other income" on the consolidated statements of income of MGE Energy. MGE Transco recorded the following amounts related to its investment in ATC:
Equity earnings from investment in ATC
3,776
3,066
7,298
6,056
Dividends received from ATC
2,788
2,345
5,450
5,632
Capital contributions to ATC
2,156
2,679
6,616
5,171
In July 2026, MGE Transco made a $3.6 million capital contribution to ATC.
ATC's summarized financial data is as follows:
Operating revenues
274,048
241,227
539,307
476,156
Operating expenses
(129,636
(117,564
(257,041
(234,309
1,228
550
1,928
633
(45,925
(43,254
(90,401
(82,447
Earnings before members' income taxes
99,715
80,959
193,793
160,033
MGE receives transmission and other related services from ATC. During the three and six months ended June 30, 2026, MGE recorded $11.2 million and $22.4 million, respectively, for transmission service compared to $10.2 million and $20.4 million for the comparable periods in 2025. MGE also provides a variety of operational, maintenance, and project management work for ATC, which is reimbursed by ATC. As of June 30, 2026, and December 31, 2025, MGE had a receivable due from ATC of $3.7 million and $2.5 million, respectively. The receivable is primarily related to transmission interconnection activities at the renewable generation sites. MGE will be reimbursed for these costs after the new generation assets are placed into service.
Effective Tax Rate.
The effective income tax rates for the period, computed by dividing income tax expense by income before taxes, were as follows:
Effective income tax rate
Three Months Ended June 30,
11.4
%
10.1
9.8
8.4
Six Months Ended June 30,
11.0
12.0
9.4
10.5
The effective tax rates were different than the federal statutory rate primarily due to state income taxes, net of the related federal tax benefit, federal production tax credits (PTC) and investment tax credits (ITC), the amortization of excess deferred taxes, and the impact of non-taxable income related to the equity portion of Allowance for Funds Used During Construction (AFUDC), net of depreciation. For both MGE Energy and MGE, the decrease in the effective tax rate for the six months ended June 30, 2026, compared to the prior year period was driven primarily by additional federal tax credits associated with renewable generation and energy storage projects, as well as increased non-taxable income related to the equity portion of AFUDC on projects under construction.
MGE maintains qualified and nonqualified pension plans, health care, and life insurance benefits and defined contribution 401(k) benefit plans for its employees and retirees.
The components of net periodic benefit cost, other than the service cost component, are recorded in "Other income, net" on the consolidated statements of income. The service cost component is recorded in "Other operations and maintenance" on the consolidated statements of income. MGE has regulatory treatment and recognizes regulatory assets or liabilities for timing differences between when net periodic benefit costs are recovered and when costs are recognized.
The following table presents the components of net periodic benefit costs recognized.
Pension Benefits
Components of net periodic benefit cost:
Service cost
583
655
1,202
1,306
Interest cost
4,062
4,313
8,073
8,569
Expected return on assets
(7,790
(7,246
(15,526
(14,507
Amortization of:
Actuarial loss
59
102
103
150
Net periodic benefit (credit) cost
(3,086
(2,176
(6,148
(4,482
Postretirement Benefits
177
188
352
371
677
754
1,359
1,514
(712
(634
(1,419
(1,358
Transition obligation
Actuarial gain
(208
(173
(389
(321
(66
135
(97
207
As approved by the PSCW, MGE is allowed to defer differences between actual employee benefit plan costs and costs reflected in current rates. The deferred costs may be recovered or refunded in MGE's next rate filing. In 2026, MGE is refunding over-collected costs from previous years. During the three and six months ended June 30, 2025, MGE recovered $0.1 million and $0.7 million, respectively. These costs have not been reflected in the table above.
MGE Energy sells shares of its common stock through its Direct Stock Purchase and Dividend Reinvestment Plan (the Stock Plan). Those shares may be newly issued shares or shares that are purchased in the open market by an independent agent for participants in the Stock Plan. Sales of newly issued shares under the Stock Plan are covered by a shelf registration statement that MGE Energy filed with the SEC. During the six months ended June 30, 2026, and 2025, net proceeds from the Stock Plan were approximately $5.5 million and $3.8 million, respectively, which were used for general corporate purposes.
In February 2026, MGE Energy filed a prospectus supplement under which it may sell shares of its common stock having an aggregate offering price of up to $100 million, through Guggenheim Securities, LLC, and Morgan Stanley & Co. LLC (each, a Manager) in negotiated transactions that are deemed to be an "at-the-market offering" (ATM). The ATM may be terminated by MGE Energy or, with respect only to itself, any Manager. Unless earlier terminated, the ATM shall automatically terminate on February 23, 2029, if MGE Energy does not file a new shelf registration statement relating to the shares to be sold under the ATM on or prior to such date. Each Manager will be entitled to compensation at a commission equal to up to 2.0% of the gross offering proceeds of the shares of common stock sold under the ATM. MGE Energy expects to use the net proceeds from any issuance of common stock for general corporate purposes, including repayment of short-term debt, funding capital expenditures, and investments in subsidiaries. As of June 30, 2026, MGE Energy sold an aggregate of 154,321 shares of its common stock under the ATM for aggregate net proceeds of $11.5 million and $0.2 million in transaction fees paid.
On May 6, 2026, MGE Energy completed a registered public offering of 3,300,331 shares of its common stock at a public offering price of $75.75 per share, for aggregate gross proceeds of approximately $250 million. Of the shares offered,
990,099 shares were issued and sold by MGE Energy, resulting in net proceeds of approximately $72.2 million after underwriting discounts and commissions. The remaining 2,310,232 shares were sold to Morgan Stanley & Co. LLC, Bank of America, N.A., and JPMorgan Chase Bank, National Association or their respective affiliates pursuant to separate forward sale agreements entered into by MGE Energy with each of these counterparties. Under the forward sale agreements, MGE Energy has the right to elect physical settlement, cash settlement, or net share settlement, in whole or in part, through January 2028, and the agreements are classified as equity instruments. Based on the initial forward sale price of $72.9094 per share, MGE Energy expects to receive net proceeds of approximately $168.4 million upon full physical settlement of the forward sale agreements, subject to adjustments specified in such agreements. MGE Energy intends to use the net proceeds from the offering and any future settlement of the forward sale agreements for general corporate purposes, which may include repayment of short-term debt, repurchase, retirement or refinancing of other securities, funding capital expenditures, and investments in subsidiaries.
The share issuances discussed above, together with shares issued pursuant to stock-based compensation arrangements, resulted in the following changes in outstanding common stock:
Common stock shares outstanding at beginning of period
36,753,208
36,536,628
36,541,849
36,489,641
Shares issued:
At-the-market offering program
154,321
Stock-based compensation
22,050
11,213
Stock plan
37,444
5,221
72,432
40,995
Public offering
990,099
Common stock shares outstanding at end of period
37,780,751
Basic earnings per share is calculated by dividing net income attributable to MGE Energy by the weighted-average number of MGE Energy's common shares outstanding during the period. In the calculation of diluted earnings per share, weighted-average shares outstanding are increased for additional shares that would be outstanding if potentially dilutive securities were converted to common stock. Potentially dilutive securities for MGE Energy consist of restricted stock units and shares under the forward equity sale agreements, as discussed above.
Net income attributed to common shareholders
Weighted average common shares outstanding - basic
Effect of dilutive securities:
Dilutive effect of stock-based compensation awards
43
26
31
Dilutive effect of forward equity sale agreement
62
Weighted average common shares outstanding - diluted
Basic earnings per share
$0.89
$0.73
$2.21
$1.86
Diluted earnings per share
$0.72
During the three and six months ended June 30, 2026, MGE recorded $1.6 million and $2.7 million, respectively, in compensation expense related to share-based compensation awards compared to $0.5 million and $1.7 million, respectively, for the comparable periods in 2025.
In the first quarter of 2026, participants received cash payments totaling $1.7 million and 22,050 shares of common stock upon settlement of awards granted in 2023 to employees and non-employee directors, and in 2025 to non-employee directors, under the 2021 Incentive Plan.
In March 2026, MGE granted 24,879 performance units and 34,230 restricted stock units under the 2021 Incentive Plan to eligible employees and non-employee directors. In April 2026, MGE granted 25,000 restricted stock units under the 2021 Incentive Plan to eligible employees.
Share-based compensation expense is recognized on a straight-line basis over the requisite service period. Awards classified as equity awards are measured based on their grant-date fair value. Awards classified as liability awards are recorded at fair value each reporting period. The performance units can be paid out in cash, shares of common stock, or a combination of cash and stock and are classified as a liability award. The restricted stock units will be paid out in shares of common stock and therefore are classified as equity awards.
MGE Energy and MGE are subject to frequently changing local, state, and federal regulations concerning air quality, water quality, land use, threatened and endangered species, hazardous materials handling, and solid waste disposal. These regulations affect how we conduct operations and may affect both operating costs and capital expenditures. Several of these environmental rules are subject to legal challenges, reconsideration and/or other uncertainties. Regulatory initiatives, proposed rules, and court challenges to adopted rules could have the potential to have a material effect on capital expenditures and operating costs. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.
These initiatives, proposed rules, and court challenges include:
With the closure of the wet pond system in 2023, Columbia complies with ELG requirements. With the installation of additional wastewater treatment equipment completed in 2023, the Elm Road Units comply with ELG requirements.
In May 2024, the EPA finalized the Supplemental Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category (2024 ELG Rule) that further regulates the wastewater discharges associated with coal-fired power plants. The rule impacts Columbia and the Elm Road Units. The 2024 ELG Rule focuses on wastewater discharges from flue gas desulfurization, combustion residual leachate, and bottom ash transport water. The 2024 ELG Rule includes reduced requirements for plants that have already installed pollution controls based on previous versions of the rule, and for plants that will be retiring or switching to natural gas by certain dates. Although the 2024 ELG Rule is currently being challenged in federal court, the litigation is on hold while the EPA undertakes a reconsideration process. The 2024 ELG Rule builds upon the 2020 ELG Rule, which also remains under legal challenge and is similarly on hold pending the outcome of the EPA's review. In December 2025, the EPA published a rule (2025 Rule) that extended several rule deadlines. This rule is also under legal challenge. The operator of the Elm Road Units is in compliance with the 2024 ELG Rule. The operator of Columbia has indicated they are in compliance with the 2024 ELG Rule. MGE will continue to monitor the outcomes of the rule challenges and work with our co-owners on their compliance plans.
Blount received its most recent Wisconsin Pollutant Discharge Elimination System (WPDES) permit from the Wisconsin Department of Natural Resources (WDNR) in October 2023. Blount's latest WPDES permit assumes that the plant meets BTA standards for entrainment for the duration of this permit which expires in 2028. The WDNR included a requirement to conduct an optimization study to demonstrate compliance with impingement BTA
standards in the latest permit which needs to be completed by January 2028. Once the WDNR determines the impingement requirements at Blount, MGE will be able to determine any compliance costs of meeting Blount's permit requirements.
Intakes at Columbia are subject to this rule. In March 2026, Columbia received an updated WPDES permit from the WDNR. The WPDES permit indicates that Columbia's existing intake structure meets BTA standards. MGE does not, based on current information, anticipate any further requirements at Columbia and thus does not expect this rule to have a material effect on Columbia.
In May 2024, the EPA published its final performance standards and emission guidelines under Section 111(b) of the Clean Air Act for carbon dioxide emissions from new combustion turbines and existing fossil fuel-fired boilers used to produce electricity. The final rule granted some emissions flexibility for existing coal-fired units that retire and/or fuel switch by certain dates. For existing natural gas boiler units, the final rule established a process where states must submit plans to the EPA for establishing standards. States had two years from the publication date of these rules to submit plans to the EPA for review and approval. Preliminary evaluation of the final ruling showed that MGE met the requirements for the gas-fired boilers at Blount. Evaluations done by the owners of Columbia and the Elm Road Units in 2024 indicated that they have a plan for complying with the May 2024 rule. In June 2025, the EPA published a proposed rule with two potential options: (1) repeal the performance standards and emission guidelines under Section 111 of the Clean Air Act associated with GHG emissions from fossil fuel-fired power plants, or (2) retain only the efficiency-based requirements for new natural gas-fired power plants and repeal all other aspects of the rule. In July 2025, the EPA released a new proposed rule titled "Reconsideration of 2009 Endangerment Finding and Greenhouse Gas Vehicle Standards." In February 2026, the EPA finalized the repeal, which will effectively undo the basis for federal regulation of GHG under the Clean Air Act. Several states and stakeholders have initiated legal challenges to the repeal. The scope and timing of any impacts on federal GHG regulation remain uncertain pending litigation and potential further agency action. MGE will continue to monitor developments.
The Elm Road Units are located in Milwaukee County, Wisconsin, a nonattainment area for the 2015 Ozone NAAQS. The area was redesignated to serious nonattainment by the EPA in December 2024, effective January 2025, but is currently categorized as moderate nonattainment following a stay granted by the U.S. Court of Appeals for the Seventh Circuit in September 2025. At this time, the operator of the Elm Road Units does not expect that the 2015 Ozone NAAQS or the Milwaukee County nonattainment designation will have a direct material effect on the Elm Road Units.
In March 2024, the EPA published a final rule to lower the average annual PM2.5 NAAQS from 12 ug/m3 to 9 ug/m3 effective May 2024.
Multiple states and industry groups challenged the March 2024 PM2.5 NAAQS rule in the United States Court of Appeals for the District of Columbia Circuit. In February 2025, Wisconsin's Governor Evers submitted a state-wide attainment recommendation to the EPA. In June 2026, the United States Court of Appeals for the District of Columbia Circuit denied the petitions for review. As a result, absent further judicial relief, EPA action, or other legal developments, the annual PM2.5 standard of 9 µg/m3 remains in effect.
The new annual PM2.5 NAAQS could impact Milwaukee County, where the Elm Road Units are located, if the county is determined to be in nonattainment. A nonattainment designation would require the State of Wisconsin to develop a plan to get into attainment, which would likely include additional limitations for new and modified plants in the county. The final impact of this rule will not be known until the EPA determines the attainment status of Wisconsin
20
counties and the State of Wisconsin develops an attainment implementation plan. MGE will continue to follow the rule's developments.
The EPA's Good Neighbor Plan and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and PM2.5 ambient air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states. This is accomplished through a reduction in NOx and SO2 from qualifying fossil fuel-fired power plants and industrial boilers in upwind "contributing" states. NOx and SO2 contribute to fine particulate pollution, and NOx contributes to ozone formation in downwind areas. Reductions are generally achieved through a cap-and-trade system. Individual plants can meet their caps through reducing emissions and/or buying allowances on the market.
In March 2023 (published June 2023), the EPA finalized its Federal Implementation Plan to address state obligations under the Clean Air Act "good neighbor" provisions for the 2015 Ozone NAAQS (Good Neighbor Plan). The Good Neighbor Plan impacts 23 states, including Wisconsin. For Wisconsin, the Good Neighbor Plan includes revisions to the current obligations for fossil-fuel power generation, which includes Blount, Columbia, the Elm Road Units, WCCF, West Riverside, and West Marinette. Initial obligations under the Federal Implementation Plan were scheduled to begin during the 2023 ozone season. In 2026, additional obligations would go into effect, including a further reduction in emissions budgets. Wisconsin would need to submit a State Implementation Plan to meet its obligations or accept the EPA's Good Neighbor Plan.
Multiple legal challenges to the Good Neighbor Plan and related state implementation plan disapprovals are pending, including in the United States Court of Appeals for the District of Columbia. In June 2024, the Supreme Court of the United States granted a request to stay the Good Neighbor Plan and block its enforcement pending judicial review by the U.S. Court of Appeals for the District of Columbia on the merits of petitioner's challenges to implementation of the rule. The EPA has temporarily halted the enforcement of the Good Neighbor Plan's requirements for all pollution sources in states affected by the plan, including Wisconsin. While the EPA addresses these concerns, interim rules have been implemented in Wisconsin to address interstate pollution. Based on MGE's current evaluation, if the Good Neighbor Plan goes into effect as-is, the 2026 additional emission reductions may impact the Elm Road Units. However, the final impact of the rules will not be known until judicial reviews are completed and/or the EPA takes further action regarding the rule.
The CCR Rule regulates the disposal of solid waste coal ash and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash. The CCR Rule also regulates landfills, ash ponds, and other surface impoundments used for coal combustion residuals by regulating their design, location, monitoring, and operation. The CCR Rule requires owners and operators of coal-fired power plants to stop transporting CCR and non-CCR wastewater to unlined surface impoundments. At Columbia, the coal combustion residuals system completed in 2023 replaced the unlined surface impoundment, and Columbia complies with this rule.
Review of the Elm Road Units has indicated that the costs to comply with the CCR Rule are not expected to be significant.
In May 2024, the EPA published its final CCR Legacy Rule. The CCR Legacy Rule applies to previously closed disposal sites. In 2024, MGE recorded an asset retirement obligation for its estimated share of the legal liability associated with the effect of the CCR Legacy Rule for remediation and groundwater compliance monitoring at Columbia. Actual costs of compliance may be different than the amount recorded due to potential changes in compliance strategies that will be used, as well as other potential changes in cost estimate.
In February 2026, the EPA finalized the CCR Management Unit Deadline Extension Rule, which provides a one-year extension for the submission of Facility Evaluation Reports and extends the deadline for the implementation of groundwater monitoring systems at legacy CCR management units to February 2031. Columbia continues to evaluate the impact of this extension on its compliance timeline. This update is not expected to materially affect anticipated
21
compliance costs. In April 2026, the EPA published a proposed rule that would amend the CCR regulations by eliminating certain closure requirements that previously applied to legacy surface impoundments and CCR management units. MGE will continue to monitor legal developments and any future updates to this rule.
MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE accrues for costs that are probable of being incurred and subject to reasonable estimation. The accrued amount for these matters is not material to the financial statements. MGE does not expect the resolution of these matters to have a material adverse effect on its consolidated results of operations, financial condition, or cash flows.
MGE Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet their obligations to deliver electricity and natural gas to customers. Management expects to recover these costs in future customer rates. The following table shows future minimum commitments related to purchase contracts as of June 30, 2026:
2027
2028
2029
2030
Thereafter
Coal(a)
19,327
12,157
7,927
Rate increase
Return on Common Equity
Common Equity Component of Regulatory Capital Structure
Effective Date
Approved 2024/2025 rate proceeding(a)(b)
Electric(c)
2.63%
9.7%
56.1%
1/1/2025
Gas
1.32%
Approved 2026/2027 settlement(b)(d)
Electric
0.15%
9.8%
1/1/2026
2.77%
3.63%
1/1/2027
2.04%
Fuel rules require Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band around the amount approved for a utility in its annual fuel proceedings. Any over- or under-recovery of the actual costs is determined in the following year and is then reflected in future billings to electric retail customers. The fuel rules bandwidth is set at plus or minus 2% in 2026 and 2025. The electric fuel-related costs are subject to an excess revenues test. Excess revenues are defined as revenues in the year in question that provide MGE with a greater return on common equity than authorized by the PSCW in MGE's latest rate order. The recovery of under-collected electric fuel-related costs would be reduced by the amount that exceeds the excess revenue test. These costs are subject to the PSCW's annual review of fuel costs completed in the year following the deferral. The following table summarizes deferred electric fuel-related costs:
Fuel Costs (Savings) (in millions)
Refund or Recovery Period
2024
($3.0)(a)
October 2025
($7.1)(a)
October 2026
($6.7)
(b)
As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, the derivatives are recognized in the consolidated balance sheets at fair value. MGE's financial commodity derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability depending on whether the derivative is in a net loss or net gain position, respectively. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are refundable or recoverable in gas rates through the Purchased Gas Adjustment (PGA) or in electric rates as a component of the fuel rules mechanism.
The gross notional volume of open derivatives is as follows:
December 31, 2025
Commodity derivative contracts
195,080
224,360
7,330,000
8,230,000
FTRs
5,424
2,413
MGE purchases and sells exchange-traded and over-the-counter options, swaps, and futures contracts. These arrangements are primarily entered into to help stabilize the price risk associated with gas or power purchases. These transactions are employed by both MGE's gas and electric segments. Additionally, as a result of the firm transmission agreements that MGE holds on electricity transmission paths in the MISO market, MGE holds financial transmission rights (FTRs). An FTR is a financial instrument that entitles the holder to a stream of revenues or charges based on the differences in hourly day-ahead energy prices between two points on the transmission grid. The fair values of these instruments are offset with a corresponding regulatory asset/liability depending on whether the instruments are in a net loss/gain position. Depending on the nature of the instrument, the gain or loss associated with these transactions will be reflected as cost of gas sold, fuel for electric generation, or purchased power expense in the delivery month applicable to
the instrument. As of June 30, 2026, and December 31, 2025, the cost basis of exchange traded derivatives and FTRs exceeded their fair value by $0.8 million and $1.4 million, respectively.
The following table summarizes the fair value of the derivative instruments on the consolidated balance sheets. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, instruments are netted with the same counterparty under a master netting agreement as well as the netting of collateral.
Derivative
Assets
Liabilities
Balance Sheet Location
Commodity derivative contracts(a)
1,177
1,399
199
139
FTRs(a)
630
448
2,380
366
185
337
The following table shows the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the consolidated balance sheets.
Offsetting of Derivative Assets and Liabilities
Gross Amounts
Gross Amounts Offset in Balance Sheets
Collateral Posted Against Derivative Positions
Net Amount Presented in Balance Sheets
1,376
(1,376
1,538
(162
814
(814
2,565
(1,751
24
The following tables summarize the unrealized and realized gains (losses) related to the derivative instruments on the consolidated balance sheets and the consolidated statements of income.
Current and Long-Term Regulatory Asset (Liability)
Other Current Assets
Three Months Ended June 30:
Unrealized loss
1,680
Realized (loss) gain reclassified to a deferred account
(245
245
(288
288
Realized (loss) gain reclassified to income statement
(567
(54
(667
30
Six Months Ended June 30:
Unrealized (gain) loss
(3,753
362
Realized gain (loss) reclassified to a deferred account
2,363
(2,363
263
(263
Realized gain (loss) reclassified to income statement
768
2,261
(1,262
271
Realized Losses (Gains)
Fuel for Electric Generation/ Purchased Power
Cost of Gas Sold
306
198
315
439
(566
(2,231
596
(203
(232
598
MGE's commodity derivative contracts and FTRs are subject to regulatory deferral. These derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Realized gains and losses are deferred on the consolidated balance sheets and are recognized in earnings in the delivery month applicable to the instrument. As a result of the treatment described above, there are no unrealized gains or losses that flow through earnings.
Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of both June 30, 2026, and December 31, 2025, no counterparties were in a net liability position.
Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss. However, MGE enters into transactions only with companies that meet or exceed strict credit guidelines, and it monitors these counterparties on an ongoing basis to mitigate nonperformance risk in its portfolio. As of June 30, 2026, no counterparties had defaulted.
Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The accounting standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability including assumptions about risk. The standard also establishes a three-level fair value hierarchy based upon the observability of the assumptions used and requires the use of observable market data when available. The levels are:
Level 1 - Pricing inputs are quoted prices within active markets for identical assets or liabilities.
Level 2 - Pricing inputs are quoted prices within active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations that are correlated with or otherwise verifiable by observable market data.
Level 3 - Pricing inputs are unobservable and reflect management's best estimate of what market participants would use in pricing the asset or liability.
The carrying amount of cash, cash equivalents, and outstanding commercial paper approximates fair market value due to the short maturity of those investments and obligations. The estimated fair market value of long-term debt is based on quoted market prices for similar financial instruments. Since long-term debt is not traded in an active market, it is classified as Level 2. The estimated fair market value of the financial instruments are as follows:
Carrying Amount
Fair Value
Long-term debt(a)
904,217
850,628
818,115
768,889
The following table presents the balances of assets and liabilities measured at fair value on a recurring basis for both MGE and MGE Energy.
Fair Value as of June 30, 2026
Level 1
Level 2
Level 3
Assets:
Derivatives, net(a)
849
527
Liabilities:
2,168
1,432
736
Deferred compensation
7,457
Total Liabilities
9,625
Fair Value as of December 31, 2025
1,151
568
1,331
1,234
7,172
9,737
Exchange-traded Investments. Investments include exchange-traded investment securities valued using quoted prices on active exchanges and are therefore classified as Level 1.
Deferred Compensation. The deferred compensation plans allow participants to defer certain cash compensation into notional investment accounts. These amounts are included within "Other deferred liabilities and other" in the consolidated balance sheets. The value of certain deferred compensation obligations is based on the market value of the participants' notional investment accounts. The underlying notional investments are comprised primarily of equities, mutual funds, and fixed income securities that are based on directly and indirectly observable market prices. Since the deferred compensation obligations themselves are not exchanged in an active market, they are classified as Level 2.
The value of legacy deferred compensation obligations is based on notional investments that earn interest based upon the semiannual rate of U.S. Treasury Bills having a 26-week maturity increased by 1% compounded monthly with a
minimum annual rate of 7%, compounded monthly. The notional investments are based upon observable market data, however, since the deferred compensation obligations themselves are not exchanged in an active market, they are classified as Level 2.
Derivatives. Derivatives include exchange-traded derivative contracts, over-the-counter transactions, and FTRs. Most exchange-traded derivative contracts are valued based on unadjusted quoted prices in active markets and are therefore classified as Level 1. A small number of exchange-traded derivative contracts are valued using quoted market pricing in markets with insufficient volumes and are therefore considered unobservable and classified as Level 3. Transactions done with an over-the-counter party are on inactive markets and are therefore classified as Level 3. These transactions are valued based on quoted prices from markets with similar exchange-traded transactions. FTRs are priced based upon monthly auction results for identical or similar instruments in a closed market with limited data available and are therefore classified as Level 3.
The following table summarizes the changes in Level 3 commodity derivative assets and liabilities measured at fair value on a recurring basis.
Realized and unrealized gains (losses):
Included in regulatory assets
(284)
442
Included in regulatory liability
(318)
642
Included in earnings
(564)
(665)
817
(1,262)
Settlements
564
665
(817)
1,264
The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis(b).
Purchased power expense
27
MGE has ownership interests in generation projects with other co-owners, some of which are under construction, as shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" or "Construction work in progress" on the consolidated balance sheets.
Project
Ownership Interest
Source
Share of Generation
Share of Estimated Costs(a)
Costs incurred as of June 30, 2026(a)
Estimated Date of Commercial Operation
Darien(b)(c)
10%
Battery
7.5 MW
$18 million(k)
$7.4 million
Koshkonong(b)(d)
Solar/Battery
30 MW/16.5 MW
$93 million(k)
$68.7 million
2026 Solar2027 Battery
High Noon(b)(e)
$99 million
$63.3 million
Columbia Energy Dome(b)(e)
19%
Storage
3 MW
$22 million(k)(l)
$6.9 million
Badger Hollow(b)(f)
Wind
11.2 MW
$36 million
Whitetail(g)
6.7 MW
$23 million
$1.2 million
Dawn Harvest(b)(h)
Solar
15 MW
$34 million
$16.4 million
Forward Repower(b)(i)
12.8%
18 MW
$14 million
$5.3 million
Ursa(b)(e)
20 MW
$46 million
$6.6 million
Saratoga(b)(j)
15 MW/5 MW
$12.1 million
Good Oak(b)(e)
9.8 MW
$22 million
$8.4 million
Gristmill(b)(e)
$15 million
$5.9 million
Revenues disaggregated by revenue source were as follows:
Residential
43,930
43,182
89,244
88,321
Commercial
65,618
64,027
127,037
124,662
Industrial
3,274
3,117
6,122
6,081
Other-retail/municipal
10,852
10,342
20,186
19,690
Total retail
123,674
120,668
242,589
238,754
Sales to the market
7,026
7,840
18,635
14,320
680
805
1,536
1,693
Total electric revenues
131,380
129,313
262,760
254,767
18,007
17,956
80,771
71,824
Commercial/Industrial
9,859
10,434
55,364
47,547
27,866
28,390
136,135
119,371
Gas transportation
1,555
1,384
4,322
3,697
180
151
407
338
Total gas revenues
Non-regulated energy revenues
214
274
249
Total Operating Revenue
MGE Energy operates in the following business segments: electric utility, gas utility, nonregulated energy, transmission investment, and all other. See Footnote 22 to the consolidated financial statements included in Part II, Item 8 of the 2025 Annual Report on Form 10-K for additional discussion of each of these segments.
Fuel and purchased power and Purchased gas costs are significant segment expenses as defined in Segment Reporting. The Chief Operating Decision Maker does not review disaggregated assets on a segment basis; therefore, such information is not presented.
The following tables show segment information for MGE Energy's and MGE's operations:
(In thousands)MGE Energy
Non-Regulated Energy
Transmission Investment
Total Reportable Segments
All Others
Consolidation/Elimination
Consolidated Total
Interdepartmental revenues
(10
2,195
11,576
13,761
(13,761
Total operating revenues
131,370
31,796
11,790
174,956
Fuel and purchased power
(19,509
789
(18,720
Purchased gas costs
(10,702
1,417
(9,285
(21,959
(4,999
(1,981
(28,939
Interest expense
(8,168
(2,250
(818
(11,236
Other segment items(a)
(57,877
(15,372
(30
(73,279
2,546
11,555
(59,178
Income tax (provision) benefit
(1,237
599
(2,441
(1,034
(4,113
(166
Equity in earnings of investments
3,795
Net income (loss)
22,620
(928
6,520
2,761
30,973
(28
2,558
11,121
13,651
(13,651
129,285
32,483
173,103
(22,524
670
(21,854
(13,211
1,898
(22,094
(4,347
(1,913
(28,354
(6,485
(1,768
(889
(9,142
(58,130
(15,015
(23
(73,168
(291
11,083
(62,376
(472
561
(2,318
(835
(3,064
89
3,060
19,580
(1,297
6,192
2,225
26,700
(202
(18
11,209
22,994
34,185
(34,185
262,742
152,073
23,268
438,083
(43,582
2,086
(41,496
(89,256
9,148
(80,108
(43,213
(9,864
(3,951
(57,028
(16,247
(4,473
(1,654
(22,374
(113,151
(30,977
(81
(144,209
2,999
22,951
(118,259
Income tax benefit (provision)
1,744
(4,664
(4,789
(1,999
(9,708
(427
7,336
48,293
12,839
12,793
5,337
79,262
2,572
(76
9,030
22,225
31,179
(31,179
254,691
132,436
22,474
409,601
(45,630
1,829
(43,801
(72,501
7,224
(65,277
(43,629
(8,579
(3,824
(56,032
(12,978
(3,531
(1,795
(18,304
(114,109
(31,111
(67
(145,287
(727
22,126
(123,888
1,430
(4,426
(4,573
(1,702
6,241
39,775
12,288
12,215
4,539
68,817
(In thousands)MGE
Other segment items(b)
(61,724
Net income attributable to noncontrolling interest, net of tax
Net income (loss) attributable to MGE
(62,085
(121,258
(123,161
The following tables show segment information for MGE Energy's and MGE's capital expenditures:
Utility
Consolidated
(In thousands) MGE Energy
Non-regulated Energy
Consolidation/ Elimination Entries
174,157
28,308
8,441
210,906
83,034
22,975
5,744
111,753
32
General
MGE Energy is an investor-owned public utility holding company operating through subsidiaries in five business segments:
MGE will continue to focus on growing earnings while controlling operating and fuel costs. MGE's goal is to provide safe and efficient operations in addition to providing customer value. We believe it is critical to maintain a strong credit rating consistent with financial strength in MGE in order to accomplish these goals.
The ownership/leasing structure for our nonregulated energy operations was adopted under applicable state regulatory guidelines for MGE's participation in these generation facilities, consisting principally of a stable return on the equity investment in the new generation facilities over the term of the related leases. The nonregulated energy operations include an ownership interest in two coal-fired generating units in Oak Creek, Wisconsin, and a partial ownership of a cogeneration project on the UW-Madison campus. A third party operates the units in Oak Creek, and MGE operates the cogeneration project. Due to the nature of MGE's participation in these facilities, the results of MGE Energy's nonregulated operations are also consolidated into MGE's consolidated financial position and results of operations under applicable accounting standards.
Executive Overview
We principally earn revenue and generate cash from operations by providing electric and natural gas utility services, including electric power generation and electric power and gas distribution. The earnings and cash flows from the utility business are sensitive to various external factors, including, but not limited to:
During the three months ended June 30, 2026, MGE Energy's earnings were $33.4 million, or $0.89 per diluted share, compared to $26.5 million, or $0.72 per diluted share, during the same period in the prior year. MGE's earnings during the three months ended June 30, 2026, were $22.5 million compared to $18.8 million during the same period in the prior year.
During the six months ended June 30, 2026, MGE Energy's earnings were $81.8 million, or $2.21 per diluted share, compared to $68.1 million, or $1.86 per diluted share, during the same period in the prior year. MGE's earnings during the six months ended June 30, 2026, were $62.6 million compared to $53.0 million during the same period in the prior year.
MGE Energy's net income was derived from our business segments as follows:
(In millions)
Business Segment:
Electric Utility
22.6
19.6
48.3
39.8
Gas Utility
(1.0)
(1.3)
12.8
12.3
Nonregulated Energy
6.5
6.2
12.2
Transmission Investments
2.8
2.2
5.3
4.5
All Other
2.5
(0.2)
2.6
(0.7)
33.4
26.5
81.8
68.1
Our net income during the three and six months ended June 30, 2026, compared to the same periods in the prior year, primarily reflects the effects of the following factors:
Earnings for the three and six months ended June 30, 2026, increased year-over-year, primarily driven by a rise in the rate base due to increased electric investments approved in the 2026/2027 rate case.
Investment gains from venture capital funds resulted in higher earnings for the three and six months ended June 30, 2026, 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.
Significant Events
The following events affected the first six months of 2026:
2026/2027 Rate Settlement Agreement: In December 2025, the PSCW approved a unanimous settlement agreement that MGE reached with intervening parties in its 2026/2027 rate case. As part of the settlement agreement, the PSCW approved a 0.15% increase for electric rates and a 2.77% increase to gas rates for 2026 and a 3.63% increase for electric rates and a 2.04% increase to gas rates for 2027. MGE filed a 2027 Fuel Cost Plan with the PSCW in June 2026. MGE expects a final decision from the PSCW on the Fuel Cost Plan by the end of 2026. See "Other Matters" below for additional information on the 2026/2027 rate case settlement.
2026 Deferred Fuel Savings: MGE had deferred fuel savings through the six months ended June 30, 2026. As of June 30, 2026, MGE deferred $6.7 million of 2026 fuel savings. These costs will be subject to the PSCW's annual review of 2026 fuel costs, expected to be completed during 2027. See Footnote 9 of the Notes to the Consolidated Financial Statements in this Report for further information regarding fuel cost proceedings.
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.
Source(In millions)
Share ofEstimatedCosts(a)
Costs Incurred as of June 30, 2026(a)(b)
539
175.0
73
13.4
200
84.0
6.9
1.0
34
In February 2026, MGE executed an asset purchase agreement to acquire a 33.4% ownership interest in the RockGen Energy Center, an existing natural gas-fired generating plant near Cambridge, Wisconsin. MGE's estimated cost is approximately $203 million. If approved, the transaction is expected to close in late 2027.
In the near term, several items may affect us, including:
2025 Annual Fuel Proceeding: MGE had fuel savings in 2025. As of December 31, 2025, MGE deferred $7.1 million of 2025 fuel savings. The PSCW has completed the annual review of 2025 fuel costs and gave approval for MGE to return these savings in October 2026. There was no change to the costs to be refunded in the fuel rule proceedings from the amount MGE deferred in the previous year.
Environmental Initiatives: There are proposed legislative rules and initiatives involving matters related to air emissions, water effluent, hazardous materials, and greenhouse gases, all of which affect generation plant capital expenditures and operating costs as well as future operational planning. Legislation and rulemaking addressing climate change and related matters could significantly affect the costs of owning and operating fossil-fueled generating plants. MGE would expect to seek and receive recovery of any such costs in rates. However, it is difficult to estimate the amount of such costs due to the uncertainty as to the timing and form of any legislation or rules, the timing and effects of any judicial review, and the scope and time of the recovery of costs in rates, which may occur after those costs have been incurred and paid.
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.
Columbia: Operational, regulatory, and environmental regulation considerations have impacted and continue to impact Columbia's generation planning. MGE, as a minority owner, and Columbia's other co-owners continue to evaluate transitioning away from coal and continue to evaluate replacing the generation from Columbia while maintaining electric service reliability. MGE and Columbia's co-owners are exploring converting Columbia to natural gas.
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.
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
35
recovery of any increases in MGE's future rate proceedings. See "Other Matters" below for additional information on the solar procurement disruptions.
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 tariffs.
Financing and Equity Issuance Plans: As of June 30, 2026, MGE has $140 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 2026 to finance authorized utility capital expenditures. MGE Energy has equity programs available to issue new shares of common stock, including its at-the-market offering program, forward equity sale agreements, and its Direct Stock Purchase and Dividend Reinvestment Plan. See Footnote 6 of the Notes to Consolidated Financial Statements in this Report for additional information on these programs.
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.
Large-Load Growth: Management is seeing growing interest from large‑load customers, including data‑intensive and technology‑focused operations, seeking reliable and scalable electric service in our service territory. Our favorable location, strong regional transmission access, and proximity to major economic and research institutions support this interest. MGE engages early with prospective customers to evaluate load needs, interconnection requirements, and potential system impacts. Although the timing and size of individual projects remain uncertain, these inquiries represent a potential source of incremental and durable load growth.
The following discussion is based on the business segments as discussed in Footnote 14 of the Notes to Consolidated Financial Statements in this Report.
Results of Operations
Three Months Ended June 30, 2026 and 2025
Electric sales and revenues
The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the periods indicated:
Revenues
Sales (kWh)
(In thousands, except CDD)
% Change
1.7%
203,576
203,344
0.1%
2.5%
439,310
439,972
(0.2)%
5.0%
36,746
35,737
2.8%
4.9%
102,697
99,198
3.5%
782,329
778,251
0.5%
(10.4)%
62,600
92,400
(32.3)%
(15.5)%
—%
1.6%
844,929
870,651
(3.0)%
Cooling degree days (normal 203)
164
223
(26.5)%
Electric revenue increased $2.1 million during the three months ended June 30, 2026, compared to the same period in the prior year, due to the following:
36
Rate changes
2.0
Customer fixed and demand charges
0.6
Revenue subject to refund, net
0.3
Net increase in commercial, industrial and other-retail/municipal volume
0.1
(0.8)
(0.1)
2.1
Electric fuel and purchased power
$ Change
12.9
16.3
(3.4)
5.8
5.6
0.2
The $3.4 million decrease in fuel for electric generation was due to an approximately 23% decrease in internal generation driven by a decrease in sales, partially offset by a 2% increase in the average cost, each compared to the same period in the prior year.
Excluding deferred fuel costs, purchased power increased $0.3 million. The increase in purchased power was due to an approximately 59% increase in market purchases as a result of decreased internal generation. This increase was partially offset by an approximately 34% decrease in average cost. There were no deferred fuel costs recovered during the three months ended June 30, 2026 and 2025.
Fuel and purchased power costs are generally offset by electric revenue and do not have a significant impact on net income. MGE expects to seek and receive recovery of fuel and purchased power costs that exceed the fuel rules bandwidth in customer rates. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the fuel rules bandwidth.
Gas deliveries and revenues
The following table compares MGE's gas revenues and gas therms delivered by customer class for each of the periods indicated:
Therms Delivered
(In thousands, except HDD and average
rate per therm of retail customer)
0.3%
12,450
13,034
(4.5)%
(5.5)%
13,956
14,484
(3.6)%
(1.8)%
26,406
27,518
(4.0)%
12.4%
15,223
15,429
(1.3)%
19.2%
(1.1)%
41,629
42,947
(3.1)%
Heating degree days (normal 794)
701
843
(16.8)%
Average rate per therm of retail customer
1.055
1.032
2.2%
37
Gas revenue decreased $0.3 million during the three months ended June 30, 2026, compared to the same period in the prior year, due to the following:
Decrease in volume
(0.6)
1.3
(0.3)
Cost of gas sold decreased $2.0 million during the three months ended June 30, 2026, compared to the same period in the prior year. Cost per therm decreased approximately 14% and there was a decrease in therms delivered of approximately 5%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenues above.
Consolidated operations and maintenance expenses
During the three months ended June 30, 2026, operations and maintenance expenses increased $7.5 million, compared to the same period in the prior year. The following contributed to the net change:
Increased administrative and general costs
3.4
Increased electric production expenses
1.6
Increased transmission costs
Increased electric distribution expenses
0.8
Increased other expenses
7.5
Consolidated depreciation expense
Electric depreciation expense decreased $0.1 million and gas depreciation expense increased $0.7 million during the three months ended June 30, 2026, compared to the same period in the prior year. In December 2025, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2026. These new rates were the primary driver for the change in depreciation expense.
38
Electric and gas other income
Electric other income increased $4.9 million and gas other income increased $2.0 million during the three months ended June 30, 2026, compared to the same period in the prior year, driven by a $2.3 million positive impact from non-service costs components of pension and other postretirement costs. The PSCW has authorized MGE to defer as a regulatory asset or liability, the difference between actual pension and other postretirement costs included in rates and to be recovered or refunded in a future rate proceeding. Pension and other postretirement cost is generally offset by electric and gas revenue and does not have a significant impact on net income. Higher AFUDC-Equity due to continued capital investment further contributed to an increase in electric other income.
Nonregulated Energy Operations - MGE Energy and MGE
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, 2026 and 2025, net income at the nonregulated energy operations segment was $6.5 million and $6.2 million, respectively.
Transmission Investment Operations - MGE Energy
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, 2026 and 2025, other income at the transmission investment segment primarily reflects ATC's operations and was $3.8 million and $3.1 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC.
All Other Operations - MGE Energy
Other income
The increase of $2.9 million in other income from all other operations during the three months ended June 30, 2026, 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.
Consolidated Income Taxes - MGE Energy and MGE
See Footnote 4 of the Notes to Consolidated Financial Statements in this Report for the effective tax rate reconciliation.
Noncontrolling Interest, Net of Tax - MGE
Noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus. They are not owned by MGE. Due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with those of MGE, the primary beneficiary of the VIEs. The following table shows MGE Energy's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:
3.8
3.9
1.9
1.8
39
Six Months Ended June 30, 2026 and 2025
1.0%
418,909
418,336
1.9%
873,469
870,250
0.4%
0.7%
71,570
70,270
182,920
178,950
1,546,868
1,537,806
0.6%
30.1%
180,352
219,499
(17.8)%
Other revenues
(9.3)%
3.1%
1,727,220
1,757,305
(1.7)%
Electric revenue increased $8.0 million during the six months ended June 30, 2026, compared to the same period in the prior year, due to the following:
4.3
4.0
1.1
Increase in residential volume
(1.6)
8.0
40
33.2
33.9
8.3
9.9
The $0.7 million decrease in fuel for electric generation in the first six months of 2026 was due to an approximately 5.4% decrease in internal generation, partially offset by a 3.8% increase in the average cost, each compared to the same period in the prior year.
Excluding deferred fuel costs, purchased power decreased $1.7 million in the first six months of 2026, compared to the same period in the prior year. The decrease in purchased power was due to an approximately 42% decrease in average cost. This decrease was partially offset by an approximately 43% increase in market purchases as a result of decreased internal generation. There were no deferred fuel costs recovered during the six months ended June 30, 2026 and 2025.
12.5%
62,708
65,263
(3.9)%
16.4%
58,972
60,620
(2.7)%
14.0%
121,680
125,883
(3.3)%
16.9%
36,964
37,253
(0.8)%
20.4%
14.1%
158,644
163,136
(2.8)%
Heating degree days (normal 4,284)
4,028
4,212
(4.4)%
1.119
0.948
18.0%
Gas revenue increased $17.5 million during the six months ended June 30, 2026, compared to the same period in the prior year, due to the following:
16.2
2.4
(3.3)
17.5
MGE recovers the cost of natural gas in its gas segment through the 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 the six months ended June 30, 2026.
The average retail rate per therm excluding customer fixed charges for the six months ended June 30, 2026, increased approximately 18% compared to the same period in the prior year, reflecting an increase in natural gas commodity costs (recovered through the PGA).
Cost of gas sold increased $14.8 million during the six months ended June 30, 2026, compared to the same period in the prior year. Cost per therm increased approximately 27%, partially offset by a decrease in therms delivered of approximately 4%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenues above.
During the six months ended June 30, 2026, operations and maintenance expenses increased $12.5 million, compared to the same period in the prior year. The following contributed to the net change:
7.0
3.2
0.5
Decreased other expenses
(0.4)
12.5
Electric depreciation expense decreased $0.4 million and gas depreciation expense increased $1.3 million during the six months ended June 30, 2026, compared to the same period in the prior year. In December 2025, the PSCW approved new depreciation rates, which were implemented and became effective as of January 1, 2026. These new rates were the primary driver for the change in depreciation expense.
Electric other income increased $10.9 million and gas other income increased $3.0 million during the six months ended June 30, 2026, compared to the same period in the prior year, driven by a $6.5 million positive impact from non-service costs components of pension and other postretirement costs. The PSCW has authorized MGE to defer as a regulatory asset or liability, the difference between actual pension and other postretirement costs included in rates and to be recovered or refunded in a future rate proceeding. Pension and other postretirement cost is generally offset by electric and gas revenue and does not have a significant
42
impact on net income. Higher AFUDC-Equity due to continued capital investment further contributed to an increase in electric other income.
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, 2026 and 2025, net income at the nonregulated energy operations segment was $12.8 million and $12.2 million, respectively.
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, 2026 and 2025, other income at the transmission investment segment primarily reflects ATC's operations and was $7.3 million and $6.2 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC.
The increase of $3.9 million in other income from all other operations during the six months ended June 30, 2026, 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.
See Footnote 4 of the Notes to Consolidated Financial Statements in this Report for the effective tax rate.
Noncontrolling interest, net of tax, reflects the accounting required for MGE Energy's interest in MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF). MGE Energy owns 100% of MGE Power Elm Road and MGE Power West Campus. They are not owned by MGE. Due to the contractual agreements for these projects with MGE, the entities are considered VIEs with respect to MGE and their results are consolidated with those of MGE, the primary beneficiary of the VIEs. The following table shows MGE's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:
7.7
3.6
Contractual Obligations and Commercial Commitments - MGE Energy and MGE
There were no material changes, other than from the normal course of business, to MGE Energy's and MGE's contractual obligations (representing cash obligations that are considered to be firm commitments) and commercial commitments (representing commitments triggered by future events) during the six months ended June 30, 2026, except as noted below. Further discussion of the contractual obligations and commercial commitments is included in Footnote 16 of the Notes to Consolidated Financial Statements and "Contractual Obligations and Commercial Commitments for MGE Energy and MGE" under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in the 2025 Annual Report on Form 10-K.
Purchase Contracts – MGE Energy and MGE
See Footnote 8.c. of Notes to Consolidated Financial Statements in this Report for a description of commitments as of June 30, 2026, that MGE Energy and MGE have entered into with respect to various commodity supply and transportation contracts to meet their obligations to deliver electricity and natural gas to customers.
Liquidity and Capital Resources
MGE Energy and MGE expect to have adequate liquidity to support future operations and capital expenditures over the next twelve months. Available resources include cash and cash equivalents, operating cash flows, liquid assets, borrowing working capacity under revolving credit facilities, and access to equity and debt capital markets, including our at-the-market program. In May 2026, MGE Energy also completed a public offering of common stock, including forward sale agreements that will provide an additional source of liquidity and financial flexibility to support future capital investment needs upon settlement of the shares of common stock sold under the agreements, as described in Footnote 6.c. of the Notes to Consolidated Financial Statements in this Report. 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. MGE plans to maintain a capital structure consistent with authorized levels approved by its regulator. See "Credit Facilities" under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the 2025 Annual Report on Form 10-K for information regarding MGE Energy's and MGE's credit facilities.
Cash Flows
The following summarizes cash flows for MGE Energy and MGE during the six months ended June 30, 2026 and 2025:
Cash provided by (used for):
Operating activities
Investing activities
(216,333)
(118,254)
(214,022)
(112,518)
Financing activities
(27,059)
(29,437)
Cash flows from operating activities for MGE Energy and MGE principally reflect the receipt of customer payments for electric and gas service and outflows related to fuel for electric generation, purchased power, gas, and operation and maintenance expenditures.
The principal increases (decreases) in cash flows from operating activities during the six months ended June 30, 2026, compared to the same period in 2025, were as follows:
Higher overall collections from customers, driven by higher electric and gas rates
38.1
Changes in income taxes paid/received - includes proceeds from renewable tax credits transferred to other corporate taxpayers during 2026 of $9.5 million
12.1
12.6
Higher payments for fuel and purchased power at our generation plants, as well as higher natural gas costs to our customers
(20.9)
Higher payments for other operation and maintenance expenses
(11.7)
(9.1)
Higher payments for interest
(1.9)
Lower dividend received from ATC
(0.5)
Other operating activities
Increase in cash provided by operating activities
14.9
18.5
44
Capital Requirements and Investing Activities
The principal increases (decreases) in cash flows from investing activities during the six months ended June 30, 2026, compared to the same period in 2025, were as follows:
Capital expenditures, primarily reflects an increase in electric and gas utility expenditures, specifically related to spending for Sunnyside, Dawn Harvest, Saratoga, and local battery storage construction
(99.2)
Capital contributions to ATC and other investments
(1.8)
Proceeds from the sale of investments
Other investing activities
(2.4)
(2.3)
Decrease in cash flows from investing activities
(98.1)
(101.5)
Cash Used for Financing Activities
The principal sources and uses of cash are related to short-term and long-term borrowings and repayments and the payment of cash dividends.
The principal increases (decreases) in cash flows from financing activities during the six months ended June 30, 2026, compared to the same period in 2025, were as follows:
Change in long-term debt(a)
88.7
Higher issuance of common stock
85.1
Higher cash distribution from parent (MGE Energy)
77.5
Lower cash dividends to parent (MGE Energy)
5.5
Change in short-term debt borrowings, net
(65.3)
Higher cash dividends paid, dividend rate per share ($0.950 vs. $0.900)
Higher distributions to parent (MGE Energy) from noncontrolling interest, representing distributions from MGE Power Elm Road and MGE Power West Campus(b)
Other financing activities
Increase in cash flows from financing activities
105.5
(b) The noncontrolling interest arises from the accounting required for the entities, which are not owned by MGE but are consolidated as VIEs.
Capitalization Ratios
MGE Energy's capitalization ratios were as follows:
60.7%
58.9%
37.9%
36.8%
1.4%
4.3%
Credit Ratings
MGE Energy's and MGE's access to the capital markets, including, in the case of MGE, the commercial paper market, and their respective financing costs in those markets, may depend on the credit ratings of the entity that is accessing the capital markets.
None of MGE Energy's or MGE's borrowing is subject to default or prepayment as a result of a downgrading of credit ratings, although a downgrading of MGE's credit ratings would increase fees and interest charges under both MGE Energy's and MGE's credit agreements and may affect the collateral required to be posted under derivative transactions.
45
Environmental Matters
See the discussion of environmental matters included in the 2025 Annual Report on Form 10-K, as updated by Footnote 8.a. of Notes to Consolidated Financial Statements in this Report.
Other Matters
Rate Matters
In December 2025, the PSCW approved a settlement agreement for MGE's 2026/2027 rate case. As part of that settlement agreement, the PSCW approved a 0.15% increase for electric rates and a 2.77% increase to gas rates for 2026 and a 3.63% increase for electric rates and a 2.04% increase to gas rates for 2027. MGE filed a 2027 Fuel Cost Plan with the PSCW in June 2026. MGE expects a final decision from the PSCW on the Fuel Cost Plan by the end of 2026.
Details related to MGE's 2026/2027 settlement are as follows:
(Dollars in thousands)
Average Rate Base(a)
Average CWIP(b)
Return on Common Equity(c)
Electric (2026 Test Period)
1,346,269
37,232
56.09%
Gas (2026 Test Period)
375,594
7,764
Electric (2027 Test Period)
1,537,938
33,082
56.05%
Gas (2027 Test Period)
393,558
8,912
See Footnote 9 of Notes to Consolidated Financial Statements in this Report for further discussion of rate proceedings and an earnings sharing mechanism if MGE earns above the authorized return on common equity in the rate order.
The UFLPA, a federal law that became effective in June 2022, prohibits importation of goods, including silica-based products used in the production of solar panels, that are mined, produced, or manufactured wholly or in part in China’s Xinjiang Uyghur Autonomous Region. Suppliers for MGE's current solar projects were able to provide the CBP sufficient documentation to meet WRO and UFLPA compliance requirements, however we cannot currently predict what, if any, impact the UFLPA will have on the overall supply of solar panels into the United States and the related impact to timing and cost of solar projects included in our capital plan. In the event that such disruptions increase costs beyond approved levels, we have filed and expect to continue filing notifications with the PSCW and will seek recovery of those costs in future rate proceedings.
The UFLPA Entity List continues to expand, including entities participating in solar and solar supply chain activities. MGE continues to monitor developments related to the UFLPA, evaluate supplier compliance, and assess potential impacts to current and future projects.
U.S. Department of Commerce - Solar Cells and Modules
In June 2024, following AD/CVD investigations by the DOC and the USITC determining that Chinese manufacturers were circumventing tariffs on solar panels by shipping them through Cambodia, Malaysia, Thailand, and Vietnam, the DOC began applying tariffs to the importation of solar cells from those countries. In the second quarter of 2025, the DOC and USITC issued final determinations affirming and increasing the tariffs. Later that year, the U.S. Court of International Trade ruled that the prior two-year moratorium was unlawful, permitting retroactive collection, though the ruling has been stayed pending appeal to the Federal Circuit.
46
In late 2025, the DOC initiated new AD/CVD investigations into solar imports from India, Indonesia, and Laos. In February and April 2026, the DOC issued preliminary affirmative determinations in the CVD and AD investigations, respectively, resulting in increased preliminary tariff rates. The investigations remain ongoing, and final determinations are expected later in 2026. Additionally, a new 'Section 232' national security investigation into the global polysilicon supply chain was launched in late 2025, which could result in broad, global tariffs on solar components regardless of their country of origin.
MGE continues to assess the potential impact of these tariffs on current and future solar projects, which may result in increased costs, delays in construction timelines, or a new and potentially material financial liability due to retroactive tariffs. In the event that such disruptions increase costs beyond approved levels, we have filed and expect to continue filing notifications with the PSCW and will seek recovery of those costs in future rate proceedings.
Tariffs
U.S. and international trade policies, including tariffs, port fees, trade sanctions, and other import/export regulations, continue to evolve, influenced by geopolitical developments and economic priorities. MGE is proactively evaluating the potential effects of these changes on operating costs and capital investments, particularly for renewable energy and battery storage initiatives. Such policy shifts could lead to higher costs or delays in project timelines.
Tax Update - One Big Beautiful Bill Act
In July 2025, the OBBBA was signed into law, introducing significant changes to tax credits and compliance requirements. The OBBBA accelerates the termination of the Clean Electricity PTC and ITC for wind and solar projects placed in service after 2027. Pursuant to the OBBBA, the July 4, 2026 commencement-of-construction deadline for wind and solar projects has passed, and projects that did not begin construction by that date generally must be placed in service by December 31, 2027 to remain eligible for these credits. The phase out of PTCs and ITCs does not apply to energy storage, hydroelectric facilities, nuclear, or any other zero emission technology. The OBBBA imposes restrictions on credit eligibility, disallowing credits, and foreign entity material assistance. The Treasury Department issued new beginning-of-construction guidance in August 2025. However, a federal court vacated the guidance in June 2026, reinstating the prior physical work and 5% safe harbor framework, subject to further developments. Interim guidance has also been released on domestic content requirements. MGE has evaluated the impact of the OBBBA and will continue monitoring Treasury Department updates and engaging with industry groups to ensure compliance.
Adoption of Accounting Principles and Recently Issued Accounting Pronouncements
See Footnote 2 of Notes to Consolidated Financial Statements in this Report for discussion of new accounting pronouncements.
There were no material changes to the market risks disclosed in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2025 Annual Report on Form 10-K.
During the second quarter of 2026, each registrant's management, including the principal executive officer and principal financial officer, evaluated its disclosure controls and procedures related to the recording, processing, summarization, and reporting of information in its periodic reports that it files with the SEC. These disclosure controls and procedures have been designed to ensure that material information relating to that registrant, including its subsidiaries, is accumulated and made known to that registrant's management, including these officers, by other employees of that registrant and its subsidiaries as appropriate to allow timely decisions regarding required disclosure, and that this information is recorded, processed, summarized, evaluated, and reported, as applicable, within the time periods specified in the SEC's rules and forms. The evaluations take into account changes in the internal and external operating environments that may impact those controls and procedures. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision making can be faulty and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Also, MGE Energy does not control or manage certain of its unconsolidated entities and thus, its access and ability to apply its procedures to those entities is more limited than is the case for its consolidated subsidiaries.
As of June 30, 2026, each registrant's principal executive officer and principal financial officer concluded that its disclosure controls and procedures were effective. Each registrant intends to strive continually to improve its disclosure controls and procedures to enhance the quality of its financial reporting.
During the quarter ended June 30, 2026, there were no changes in either registrant's internal controls over financial reporting that materially affected, or are reasonably likely to materially affect, that registrant's internal control over financial reporting.
48
MGE Energy and its subsidiaries, including MGE, from time to time are involved in various legal proceedings that are handled and defended in the ordinary course of business. See Footnotes 8.a. and 8.b. of Notes to Consolidated Financial Statements in this Report for more information.
There were no material changes from the risk factors disclosed in Item 1A. Risk Factors in our 2025 Annual Report on Form 10-K, other than as set forth below:
We have in the past entered, and may in the future enter, into forward sale transactions that subject us to certain risks.
We have previously entered into forward sale agreements and may in the future enter into additional forward sale agreements that subject us to certain risks. The future issuance of any shares of common stock upon settlement of any forward sale agreement will result in dilution to our earnings per share, return on equity, and dividends per share. The purchase of common stock in connection with the unwinding of the forward purchaser's hedge position could cause our stock price to increase (or prevent a decrease) over such time, thereby increasing the amount of cash we would owe (or decreasing the amount of cash owed to us) upon a cash settlement. In addition, pursuant to each forward sale agreement, the relevant forward purchaser will have the right to accelerate the settlement of the forward sale agreement in connection with certain specified events. In such cases, we could be required to settle that particular forward sale agreement and issue common stock irrespective of our capital needs.
Not applicable to MGE Energy and MGE.
During the three months ended June 30, 2026, no director or officer of MGE Energy or MGE adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.
Ex. No.
Exhibit Description
***
Form of Restricted Stock Award Agreement for Employees pursuant to the MGE Energy Inc., 2021 Long-Term Incentive Plan, April 2026
10.2
Forward Sale Agreement, dated May 6, 2026, by and between MGE Energy, Inc. and Morgan Stanley & Co. LLC (incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K filed by MGE Energy, Inc. on May 8, 2026)
10.3
Forward Sale Agreement, dated May 6, 2026, by and between MGE Energy, Inc. and Bank of America, N.A. (incorporated by reference to Exhibit 10.2 of Current Report on Form 8-K filed by MGE Energy, Inc. on May 8, 2026)
10.4
Forward Sale Agreement, dated May 6, 2026, by and between MGE Energy, Inc. and JPMorgan Chase Bank, National Association (incorporated by reference to Exhibit 10.3 of Current Report on Form 8-K filed by MGE Energy, Inc. on May 8, 2026)
31.1
*
Certifications Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jeffrey M. Keebler for MGE Energy, Inc.
31.2
Certifications Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jared J. Bushek for MGE Energy, Inc.
31.3
Certifications Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jeffrey M. Keebler for Madison Gas and Electric Company
31.4
Certifications Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 filed by Jared J. Bushek for Madison Gas and Electric Company
32.1
**
Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jeffrey M. Keebler for MGE Energy, Inc.
32.2
Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jared J. Bushek for MGE Energy, Inc.
32.3
Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jeffrey M. Keebler for Madison Gas and Electric Company
32.4
Certifications Pursuant to Section 1350 of Chapter 63 of Title 18 United States Code (Sarbanes-Oxley Act of 2002) filed by Jared J. Bushek for Madison Gas and Electric Company
101.INS
XBRL Instance
101.SCH
XBRL Taxonomy Extension Schema With Embedded Linkbases Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definitions Linkbase Document
104.1
Included in the cover page, formatted in Inline XBRL
Filed herewith.
Furnished herewith.
Indicates a management contract or compensatory plan or arrangement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
MGE ENERGY, INC.
Date: August 5, 2026
/s/ Jeffrey M. Keebler
Jeffrey M. Keebler
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)
/s/ Jared J. Bushek
Jared J. Bushek
Executive Vice President - Chief Financial Officer and Treasurer
(Chief Financial Officer)
/s/ Jenny L. Lagerwall
Jenny L. Lagerwall
Assistant Vice President - Accounting and Controller
(Chief Accounting Officer)
MADISON GAS AND ELECTRIC COMPANY