# MGE Energy Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [MGE Energy Inc](/companies/mgee.md) (CIK 1161728)
- Form: 10-Q
- Filed: 2025-05-07
- Accepted by EDGAR: May 7, 2025, 16:15 ET
- Period: 2025-03-31
- Accession: 0000950170-25-065302
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1161728/000095017025065302/mgee-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1161728/000095017025065302/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $52.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $6.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $41.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $1.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 36,539,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $77.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $47.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $16.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2025-03-31 | $35.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $222.3m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $2.84bn | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $107.5m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2025-03-31 | $762.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-03-31 | $5.3m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-03-31 | $1.26bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 42,589 characters.

### General

MGE Energy is an investor-owned public utility holding company operating through subsidiaries in five business segments:

- Regulated electric utility operations, conducted through MGE, which generate and distribute electricity to approximately 167,000 customers in Dane County, Wisconsin,
- Regulated gas utility operations, conducted through MGE, which distribute natural gas to approximately 178,000 customers in seven south-central and western Wisconsin counties,
- Nonregulated energy operations, conducted through MGE Power and its subsidiaries, which owns interests in electric generating capacity that is leased to MGE,
- Transmission investments, representing our equity investment in ATC, which owns and operates electric transmission facilities primarily in Wisconsin, and ATC Holdco, a company created to facilitate out-of-state electric transmission development and investments, and
- All other, which includes investing in companies and property that relate to the regulated operations and financing the regulated operations, through its wholly owned subsidiaries CWDC, MAGAEL, and North Mendota, and corporate operations and services.

MGE plans to 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 University of Wisconsin-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:

- Weather, and its impact on customer sales,
- Economic conditions, including current business activity and employment and their impact on customer demand,
- Regulation and regulatory issues, and their impact on the timing and recovery of costs,
- Energy commodity prices, including natural gas prices,
- Equity price risk pertaining to pension related assets,
- Credit market conditions, including interest rates and our debt credit rating,
- Environmental laws and regulations, including adopted and pending environmental rule changes, and
- Other factors listed in Item 1A. Risk Factors in our 2024 Annual Report on Form 10-K.

During the three months ended March 31, 2025, MGE Energy's earnings were $41.6 million or $1.14 per share compared to $33.8 million or $0.93 per share during the same period in the prior year. MGE's earnings during the three months ended March 31, 2025, were $34.2 million compared to $26.6 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: | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Electric Utility | $20.2 | $15.8 |
| Gas Utility | 13.6 | 10.6 |
| Nonregulated Energy | 6.0 | 5.8 |
| Transmission Investments | 2.3 | 2.0 |
| All Other | (0.5) | (0.4) |
| Net Income | $41.6 | $33.8 |

Our net income during the three months ended March 31, 2025, compared to the same periods in the prior year primarily reflects the effects of the following factors:

#### Electric Utility

An increase in electric investments, as part of the 2025 rate case, contributed to an increase in earnings for the three months ended March 31, 2025, as compared to the same period in the prior year. Favorable weather contributed to higher electric residential sales for the three months ended March 31, 2025, compared to the same period in the prior year.

#### Gas Utility

Higher gas retail sales in the first quarter of 2025 contributed to higher gas earnings for the three months ended March 31, 2025, compared to the same period in the prior year. Gas retail sales increased approximately 19%. Heating degree days (a measure for determining the impact of weather during the heating season) increased by approximately 13% in the first three months of 2025 compared to the same period in the prior year.

### Significant Events

The following events affected the first three months of 2025:

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

The 2025 rate order includes an earnings sharing mechanism, under which, if MGE earns above the 9.7% ROE authorized in the rate order: (i) the utility will retain 100% of earnings for the first 15 basis points above the authorized ROE; (ii) 50% of the next 60 basis points will be required to be deferred and returned to customers; and (iii) 100% of any remaining excess earnings will be required to be refunded to customers. The earnings calculation excludes fuel rules adjustments.

2025 Deferred Fuel Savings: MGE had deferred fuel savings through the three months ended March 31, 2025. As of March 31, 2025, MGE had deferred $0.8 million of 2025 fuel savings. These costs will be subject to the PSCW's annual review of 2025 fuel costs, expected to be completed during 2026. See Footnote 9 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 shown in the following table. Incurred costs are reflected in "Property, plant, and equipment, net" for projects placed in service, or "Construction work in progress" for projects under construction on the consolidated balance sheets.

| Project | Ownership Interest | Source | Share of Generation | Share of Estimated Costs(a) | Costs incurred as of March 31, 2025(a) | Date of Commercial Operation |
| --- | ---: | --- | --- | --- | --- | --- |
| Paris | 10% | Battery | 11 MW | $25 million(d) | $22.9 million(b) | 2025(c) Battery |
| Darien | 10% | Solar/Battery | 25 MW/7.5 MW | $63 million(d) | $47.1 million(b) | March 2025 Solar 2026(c) Battery |
| Koshkonong | 10% | Solar/Battery | 30 MW/16.5 MW | $104 million(d) | $20.0 million(b) | 2026(c) Solar 2027(c) Battery |
| High Noon | 10% | Solar/Battery | 30 MW/16.5 MW | $99 million | $1.1 million | 2027(c) |
| Sunnyside | 100% | Solar/Battery | 20MW/40MW | $112 million | $0.9 million | 2026(c) Solar 2027(c) Battery |
| Ursa(e) | 10% | Solar | 20 MW | $46 million | $0.3 million | 2027(c) |
| Badger Hollow(e) | 10% | Wind | 11.2 MW | $36 million | $0.3 million | 2027(c) |
| Whitetail(e) | 10% | Wind | 6.7 MW | $23 million | $0.1 million | 2027(c) |
| Dawn Harvest(e) | 10% | Solar | 15 MW | $34 million | $0.6 million | 2028(c) |
| Good Oak(e) | 10% | Solar | 9.8 MW | $22 million | $1.4 million | 2028(c) |
| Gristmill(e) | 10% | Solar | 6.7 MW | $15 million | $1.3 million | 2028(c) |
| Saratoga(e) | 10% | Solar/Battery | 15 MW/5 MW | $46 million | $1.1 million | 2028(c) |

(a) Excluding AFUDC.

(b) MGE received specific approval to recover 100% AFUDC. After tax, MGE recognized $5.1 million, $3.1 million, and $0.5 million of AFUDC equity through March 31, 2025, on Paris, Darien, and Koshkonong, respectively, during construction. AFUDC has been excluded from the costs incurred in the table above.

(c) Estimated date of commercial operation.

(d) Estimated costs are expected to exceed PSCW previously approved CA levels. Notifications are provided to the PSCW when costs increase above CA levels. MGE has and will continue to request recovery of the updates in its rate case proceedings.

(e) Pending approval by the PSCW.

In the near term, several items may affect us, including:

2024 Annual Fuel Proceeding: MGE had fuel savings in 2024. As of December 31, 2024, MGE had deferred $3.0 million of 2024 fuel savings. These costs will be subject to the PSCW's annual review of 2024 fuel costs, expected to be completed during 2025. MGE has proposed to return these savings in October 2025.

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 – 80% carbon reduction target by 2030 (from 2005 levels): MGE has outlined initiatives to achieve our target.

- *Transitioning away from coal.* Columbia: MGE, along with the other plant co-owners, announced plans to retire Columbia Unit 1 and Unit 2 by the end of 2029. Final timing and retirement dates for Units 1 and 2 are subject to change depending on operational and regulatory considerations, capacity needs, and other factors impacting one or more of the Columbia co-owners. MGE has a plan, which it continues to evaluate, to replace the generation from Columbia while maintaining electric service reliability. In December 2024, MGE and Columbia's co-owners announced plans to explore converting at least one unit of Columbia to natural gas before the end of 2029.

Elm Road Units: MGE, along with the plant co-owners, announced plans to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. Transition plans and costs will be subject to PSCW approval. MGE's remaining use of coal is expected to be further reduced as the Elm Road Units transition to natural gas. By the end of 2030, coal is expected to be used only as a backup fuel at the Elm Road Units. This transition will help MGE meet its 2030 carbon reduction goals. By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal, which will eliminate coal as an internal generation source for MGE.

- *Growing renewable generation.* MGE is seeking to acquire, or has acquired, joint interests in several renewable generation projects. The forecasted capital expenditures include approximately 178 MW of solar, 18 MW of wind, which include projects approved or pending PSCW approval. See the 2025-2029 capital expenditures forecast disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K.

Environmental Initiatives – Natural gas distribution: Building upon our long-standing commitment to providing affordable, sustainable energy, MGE has set a goal to achieve net-zero methane emissions from its natural gas distribution system by 2035. If MGE can accelerate plans to achieve net-zero methane emissions from its natural gas system—through the evolution of new technologies, such as renewable natural gas—it will. MGE is working to reduce overall emissions from its natural gas distribution system in a quick and cost-effective manner. For customers who want to reduce their environmental footprint further, MGE introduced a renewable natural gas program in May 2024, after approval by the PSCW. MGE purchases renewable thermal credits on behalf of customers who voluntarily elect in the program to offset the emissions associated with the customer's monthly natural gas usage.

Solar Procurement Disruptions: MGE is monitoring import regulations under the Uyghur Forced Labor Protection Act and the U.S. Department of Commerce new solar tariffs. These disruptions have a potential to impact current and future solar projects which may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we have filed, and expect to continue to file, notifications with the PSCW and expect to request recovery of any increases in MGE's future rate proceedings. See "Other Matters" below for additional information on the solar procurement disruptions.

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

Financing and Equity Issuance Plans: MGE Energy annually evaluates its financing plan, dividend practices, and credit line sizing, focusing on maintaining its investment grade rating while meeting cash needs to fund capital requirements, including construction expenditures, retire debt, pay dividends, and operating expenses. As of March 31, 2025, MGE had $280 million of remaining regulatory authority from the PSCW to issue long-term debt to finance authorized utility capital expenditures. During the first quarter of 2025, MGE Energy issued new shares of common stock to participants in its Direct Stock Purchase and Dividend Reinvestment Plan. Beginning May 2025, MGE Energy expects to purchase shares in the open market for participants in the Direct Stock Purchase and Dividend Reinvestment Plan.

### Results of Operations

### Three Months Ended March 31, 2025 and 2024

### 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:

*(In thousands)*

|  | Revenues Three Months Ended March 31, 2025 | 2024 | % Change | Sales (kWh) Three Months Ended March 31, 2025 | 2024 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Residential | $45,139 | $41,141 | 9.7% | 214,992 | 199,692 | 7.7% |
| Commercial | 60,635 | 59,863 | 1.3% | 430,278 | 420,792 | 2.3% |
| Industrial | 2,964 | 3,410 | (13.1)% | 34,533 | 37,448 | (7.8)% |
| Other-retail/municipal | 9,348 | 9,690 | (3.5)% | 79,752 | 82,847 | (3.7)% |
| Total retail | 118,086 | 114,104 | 3.5% | 759,555 | 740,779 | 2.5% |
| Sales to the market | 6,480 | 1,076 | n.m. | 127,099 | 24,981 | n.m. |
| Other revenues | 888 | 945 | (6.0)% | — | — | —% |
| Total | $125,454 | $116,125 | 8.0% | 886,654 | 765,760 | 15.8% |

n.m. not meaningful

Electric revenue increased $9.3 million during the three months ended March 31, 2025, compared to the same period in the prior year, due to the following:

*(In millions)*

|  |  |
| --- | ---: |
| Sales to the market | $5.4 |
| Increase in residential volume | 2.6 |
| Rate changes | 2.4 |
| Customer fixed and demand charges | 1.0 |
| Net increase in commercial, industrial and other-retail/municipal volume | 0.5 |
| Revenue subject to refund, net | (2.6) |
| Total | $9.3 |

- *Sales to the market.* Sales to the market typically occur when MGE has more generation in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During the three months ended March 31, 2025, market volumes increased compared to the same period in the prior year, reflecting an increase in sales. Additionally, the cost of capacity sold increased, contributing to the revenue generated from increased sales to the market from excess generation and purchases. The revenue generated from these sales is largely offset in fuel rules costs, and do not have a significant impact on net income. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements in this Report.
- *Volume.* During the three months ended March 31, 2025, residential sales increased by approximately 8% compared to the same period in the prior year. This increase was driven by differences in the weather experienced during the three months ended March 31, 2025, compared to the same period in the prior year. Temperatures, on average, were warmer than normal in the first quarter of 2024.
- *Rate changes.* In December 2023, the PSCW authorized MGE to increase 2025 rates for retail electric customers by approximately 2.63%. Rates charged to retail customers during the three months ended March 31, 2025, were $2.4 million higher than those charged during the same period in the prior year. See Footnote 9 of the Notes to Consolidated Financial Statements in this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs are generally offset in fuel and purchased power costs and do not have a significant impact on net income.
- *Customer fixed and demand charges.* During the three months ended March 31, 2025, fixed and demand charges increased $1.0 million, primarily attributable to the increase in demand charges for commercial customers.
- *Revenue subject to refund.* For cost recovery mechanisms, any over-collection of revenues resulting from costs authorized to be collected from customers in rates exceeding actual costs is recorded as a reduction of revenue in the period incurred, as the over-collection is expected to be refunded to customers in a subsequent period. In the year the over-collection is refunded, rates are reduced and offset as revenue subject to refund. There is no net income impact in the year the costs are refunded.

### Electric fuel and purchased power

*(In millions)*

|  | Three Months Ended March 31, 2025 | 2024 | $ Change |
| --- | ---: | ---: | ---: |
| Fuel for electric generation | $17.6 | $12.7 | $4.9 |
| Purchased power | 4.4 | 9.4 | (5.0) |

The $4.9 million increase in fuel for electric generation in the first quarter of 2025 was due to an approximately 32% increase in internal generation driven by an increase in sales and 5% increase in the average cost, each compared to the same period in the prior year.

Excluding deferred fuel costs, purchased power decreased $3.0 million in the first quarter of 2025, compared to the same period in the prior year. The decrease in purchased power was due to an approximately 57% decrease in market purchases as a result of lower customer sales and increased internal generation. This decrease was partially offset by an approximately 39% increase in average cost. Deferred fuel cost recovered during the three months ended March 31, 2024, was $2.1 million. There were no deferred fuel costs recovered during the three months ended March 31, 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:

*(In thousands, except HDD and average*

| rate per therm of retail customer) | Revenues Three Months Ended March 31, 2025 | 2024 | % Change | Therms Delivered Three Months Ended March 31, 2025 | 2024 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Residential | $53,868 | $43,398 | 24.1% | 52,229 | 43,807 | 19.2% |
| Commercial/Industrial | 37,113 | 29,524 | 25.7% | 46,136 | 39,224 | 17.6% |
| Total retail | 90,981 | 72,922 | 24.8% | 98,365 | 83,031 | 18.5% |
| Gas transportation | 2,313 | 2,080 | 11.2% | 21,824 | 20,888 | 4.5% |
| Other revenues | 187 | 167 | 12.0% | — | — | —% |
| Total | $93,481 | $75,169 | 24.4% | 120,189 | 103,919 | 15.7% |
| Heating degree days (normal 3,501) |  |  |  | 3,369 | 2,981 | 13.0% |
| Average rate per therm of retail customer | $0.925 | $0.878 | 5.4% |  |  |  |

Gas revenue increased $18.3 million during the three months ended March 31, 2025, compared to the same period in the prior year, due to the following:

*(In millions)*

|  |  |
| --- | ---: |
| Increase in volume | $11.4 |
| Rate changes | 7.7 |
| Other | (0.8) |
| Total | $18.3 |

- *Volume.* For the three months ended March 31, 2025, retail gas deliveries increased approximately 19% compared to the same period in the prior year, primarily attributable to unfavorable weather conditions in the first quarter of 2024.
- *Rate changes.* In December 2023, the PSCW authorized MGE to increase 2025 rates for retail gas customers by approximately 1.32%.

MGE recovers the cost of natural gas in its gas segment through the purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass through to its gas customers the cost of gas. Changes in PGA recoveries affect revenues but do not change net income in view of the pass-through treatment of the costs. Payments for natural gas increased, driving higher rates during the three months ended March 31, 2025.

The average retail rate per therm excluding customer fixed charges for the three months ended March 31, 2025, increased approximately 5% compared to the same period in the prior year, reflecting an increase in natural gas commodity costs (recovered through the PGA).

- *Other.* For the three months ended March 31, 2025, other gas revenues decreased primarily related to lower residential customer fixed charges. The PSCW approved a reduction in the customer fixed charge component of the residential gas rate in the 2025 rate proceeding.

### Cost of gas sold

Cost of gas sold increased $12.1 million during the three months ended March 31, 2025, compared to the same period in the prior year. Therms delivered increased approximately 18% and cost per therm increased approximately 9%. 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 March 31, 2025, operations and maintenance expenses increased $2.6 million, compared to the same period in the prior year. The following contributed to the net change:

*(In millions)*

|  |  |
| --- | ---: |
| Increased transmission costs | $1.1 |
| Increased customer services | 0.6 |
| Increased electric production expenses | 0.4 |
| Increased other expenses | 0.5 |
| Total | $2.6 |

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

### Consolidated depreciation expense

Electric depreciation expense increased $0.9 million and gas depreciation expense increased $0.1 million during the three months ended March 31, 2025, compared to the same period in the prior year. Paris solar was placed in service in December 2024. The timing of the in-service dates contributed to the increase in electric depreciation expense.

### Electric and gas other income

Electric other income decreased $1.5 million during the three months ended March 31, 2025, compared to the same period in the prior year, primarily related to pension and other postretirement excluding service costs. Gas other income remained flat during the three months ended March 31, 2025. The PSCW has approved 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.

### 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 March 31, 2025 and 2024, net income at the nonregulated energy operations segment was $6.0 million and $5.8 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 March 31, 2025 and 2024, other income at the transmission investment segment primarily reflects ATC's operations and was $3.2 million and $2.7 million, respectively. See Footnote 3 of the Notes to Consolidated Financial Statements in this Report for summarized financial information regarding ATC.

### 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's noncontrolling interest, net of tax, reflected on MGE's consolidated statement of income:

*(In millions)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| MGE Power Elm Road | $3.8 | $3.8 |
| MGE Power West Campus | 1.8 | 1.8 |

### 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 three months ended March 31, 2025. 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 2024 Annual Report on Form 10-K.

### 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. During the first quarter of 2025, MGE Energy issued new shares of common stock to participants in our Direct Stock Purchase and Dividend Reinvestment Plan. Beginning in May 2025, MGE Energy expects to purchase shares in the open market for participants in the Direct Stock Purchase and Dividend Reinvestment Plan. MGE Energy also expects to generate funds from operations and both long-term and short-term debt financing. 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 2024 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 three months ended March 31, 2025 and 2024:

*(In thousands)*

| Cash provided by (used for): | MGE Energy 2025 | 2024 | MGE 2025 | 2024 |
| --- | ---: | ---: | ---: | ---: |
| Operating activities | $77,862 | $65,815 | $73,954 | $65,034 |
| Investing activities | (50,592) | (46,426) | (48,049) | (45,192) |
| Financing activities | (15,107) | (14,288) | (19,458) | (16,828) |

### Cash Provided by Operating Activities

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 three months ended March 31, 2025, compared to the same period in 2024, were as follows:

*(In millions)*

|  | MGE Energy | MGE |
| --- | ---: | ---: |
| Higher payments for fuel and purchased power at our generation plants, as well as higher natural gas costs to our customers | $(6.2) | $(6.2) |
| Higher overall collections from customers, driven by higher electric and gas residential sales | 30.1 | 30.1 |
| Higher payments for other operation and maintenance expenses | (13.6) | (15.5) |
| Lower payments for interest, driven by the decrease of short-term debt in 2025 | 0.6 | 0.6 |
| Higher dividend received from ATC | 1.2 | — |
| Other operating activities | (0.1) | (0.1) |
| Increase in cash provided by operating activities | $12.0 | $8.9 |

36

### Capital Requirements and Investing Activities

### MGE Energy

MGE Energy's cash used for investing activities increased $4.2 million during the three months ended March 31, 2025, as compared to the same period in the prior year.

Capital expenditures during the three months ended March 31, 2025, were $47.7 million. This amount represents an increase of $2.9 million from the expenditures made in the same period in the prior year. This increase primarily reflects an increase in renewable generation facilities expenditures.

Capital contributions in ATC increased $1.2 million during the three months ended March 31, 2025, when compared to the same period in the prior year.

### MGE

MGE's cash used for investing activities increased $2.9 million during the three months ended March 31, 2025, when compared to the same period in the prior year.

Capital expenditures during the three months ended March 31, 2025, were $47.7 million. This amount represents an increase of $2.9 million from the expenditures made in the same period in the prior year. This increase primarily reflects an increase in renewable generation facilities expenditures.

### Capital Expenditures

MGE Energy's and MGE's liquidity are primarily affected by their capital expenditure requirements. During the three months ended March 31, 2025, capital expenditures for MGE Energy and MGE totaled $47.7 million, which included $45.3 million of utility capital expenditures.

MGE does not currently expect any material changes to its total forecasted expenditures as presented in the 2025 through 2029 capital expenditure forecast included under Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources in the 2024 Annual Report on Form 10-K. MGE's plan to achieve its target of 80% carbon reduction by 2030 (from 2005 levels) is based on the transition away from coal, addition of new renewable generation, and additional generation sources that provide the reliable energy to serve demand dependably. The mix of generation sources presented in the 2025 through 2029 capital expenditure forecast may shift based on reliability needs as MGE continues on the path to achieve its carbon reduction goals. Additionally, MGE is monitoring import regulations under the Uyghur Forced Labor Protection Act, U.S. Department of Commerce solar tariffs, and other tariffs issued under executive orders. These disruptions have impacted and may continue to impact current and future solar projects by increasing costs or causing delays in construction timelines. As projects are delayed, timing of capital expenditures will be correspondingly shifted. See "Other Matters" below for additional information on the solar procurement disruptions.

### 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 three months ended March 31, 2025, compared to the same period in 2024, were as follows:

*(In millions)*

|  | MGE Energy | MGE |
| --- | ---: | ---: |
| Issuance of common stock | $3.3 | $— |
| Higher cash dividends paid, dividend rate per share ($0.450 vs. $0.428) | (1.0) | — |
| Lower cash dividends to parent (MGE Energy) | — | 0.5 |
| Change in short-term debt borrowings, net | (3.0) | (3.0) |
| Other financing activities | (0.1) | (0.1) |
| Decrease in cash flows from financing activities | $(0.8) | $(2.6) |

(a) 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:

|  | MGE Energy March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Common shareholders' equity | 62.1% | 61.5% |
| Long-term debt(a) | 37.9% | 38.5% |
| Short-term debt | 0.0% | 0.0% |

(a) Includes the current portion of long-term debt.

### 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.

### Environmental Matters

In March 2025, the EPA announced its intention to initiate regulatory actions concerning several key environmental regulations, including the 2024 power plant greenhouse gas regulations, Effluent Limitation Guidelines, the 2024 amendments to the CCR Rule, and the 2023 Good Neighbor Plan. To date, no formal steps have been taken to alter these regulations. MGE is closely monitoring the EPA's administrative efforts in these areas and will evaluate appropriate responses as developments occur.

See the discussion of environmental matters included in the 2024 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 2023, the PSCW approved the 2024/2025 rate application for a 4.17% increase for electric rates and a 1.32% increase to gas rates for 2025. The PSCW approved a 2025 Fuel Cost Plan in December 2024. The plan lowered the 2025 increase in electric rates to 2.63%.

In April 2025, MGE filed a 2026/2027 rate application with a proposed increase of 4.89% for electric rates and a 2.33% increase for gas rates in 2026. The application addresses rates for 2027 proposing a 4.33% increase for electric rates and a 2.16% increase to gas rates for 2027. PSCW approval is pending. A final order is expected before the end of the year.

Details related to MGE's 2024/2025 approved rate proceeding and 2026/2027 proposed rate proceeding are as follows:

*(Dollars in thousands)*

|  | Average Rate Base(a) | Average CWIP(b) | Return on Common Equity(c) | Common Equity Component of Regulatory Capital Structure | Effective Date |
| --- | ---: | ---: | ---: | ---: | --- |
| Electric (2025 Test Period) | $1,241,502 | $7,106 | 9.7% | 56.06% | 1/1/2025 |
| Gas (2025 Test Period) | $341,369 | $7,146 | 9.7% | 56.06% | 1/1/2025 |
| Electric (2026 Test Period)(d) | $1,362,320 | $34,666 | 10.0% | 56.08% | 1/1/2026 |
| Gas (2026 Test Period)(d) | $378,582 | $6,053 | 10.0% | 56.08% | 1/1/2026 |
| Electric (2027 Test Period)(d) | $1,549,683 | $29,151 | 10.0% | 56.04% | 1/1/2027 |
| Gas (2027 Test Period)(d) | $399,304 | $6,291 | 10.0% | 56.04% | 1/1/2027 |

(a) Average rate base amounts reflect MGE's allocated share of rate base and do not include construction work in progress (CWIP) or a cash working capital allowance and were calculated using a forecasted 13-month average for the test periods. The PSCW provides a return on selected CWIP and a cash working capital allowance by adjusting the percentage return on rate base.

(b) 50% of the forecasted 13-month average CWIP for the test periods earns an AFUDC return. Projects eligible to earn 100% AFUDC are excluded from this balance and discussed further in the Management Discussion and Analysis of Financial Condition and Results of Operations - Significant Events section.

(c) Returns on common equity may not be indicative of actual returns earned or projections of future returns, as actual returns will be affected by the volume of electricity or gas sold.

(d) Pending approval by the PSCW.

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.

### Uyghur Forced Labor Protection Act

In June 2021, the U.S. Customs and Border Protection (CBP) issued a Withhold Release Order (WRO) against silica-based products made by Hoshine Silicon Industry Co. Ltd., a company located in China's Xinjiang Uyghur Autonomous Region. The WRO was superseded by the Uyghur Forced Labor Protection Act (UFLPA), a federal law that became effective on June 21, 2022, which further established that all goods mined, produced, or manufactured wholly or in part in Xinjiang or by certain defined entities are prohibited from U.S. importation. 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 cause costs to exceed the levels approved for specific projects, we have filed and expect to continue to file a notification with the PSCW and expect to request recovery of any cost increases in MGE's future rate proceedings.

In January 2025, several more Chinese companies, including five solar supply chain providers, were banned under the UFLPA. MGE continues to ensure its compliance with the UFLPA.

### U.S. Department of Commerce - Solar Cells and Modules

In August 2023, the U.S. Department of Commerce issued its final determination on a solar tariff investigation that began in 2022, finding that Chinese manufacturers were circumventing tariffs on solar panels by shipping them through four Southeast Asian countries. A 24-month exemption from tariffs for solar panel and module imports from these four countries was in effect from June 2022 until June 6, 2024. In May 2024, the Biden Administration announced that bifacial solar panels would be subject to safeguard tariffs under Section 201 of the Trade Act of 1974, of which they were previously excluded. President Biden also directed U.S. Trade Representatives to increase tariffs under Section 301 from 25% to 50% on solar cells and modules. This change went into effect in September 2024. In April 2025, the U.S. Department of Commerce issued final determinations indicating that panel cells imported from Cambodia, Malaysia, Thailand, and Vietnam are being unfairly traded. Potential duties are awaiting a final injury ruling from the International Trade Commission. MGE continues to assess the potential impact of these tariffs on 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 a notification with the PSCW and expect to request recovery of any cost increases in MGE's future rate proceedings.

### Executive Orders on Tariffs

To date in 2025, President Trump has issued multiple executive orders implementing tariffs on imported goods. On April 2, 2025, 10% tariffs on nearly all countries, as well as additional reciprocal tariffs on certain countries, were announced. The 10% tariffs went into effect on April 9, and the reciprocal tariffs, except with respect to those on China, were paused for 90 days. MGE continues to assess the potential impact of these tariffs to MGE's cost of operations and on current and future capital expenditures including solar or battery storage projects. These tariffs may cause an increase in costs or delays in construction timelines.

### 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.

## Market risk

As filed, 171 characters.

There were no material changes to the market risks disclosed in Item 7A. Quantitative and Qualitative Disclosures About Market Risk in our 2024 Annual Report on Form 10-K.

## Controls and procedures

As filed, 2,219 characters.

During the first quarter of 2025, 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 March 31, 2025, 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 March 31, 2025, there were no changes in either registrant's internal controls over financial reporting that materially affected, or are reasonably likely to affect materially, that registrant's internal control over financial reporting.

## Risk factors

As filed, 127 characters.

There were no material changes from the risk factors disclosed in Item 1A. Risk Factors in our 2024 Annual Report on Form 10-K.

Filed May 7, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-065302. Last ingested by Listed: Oct 24, 2026, 15:05 ET. No prices; not investment advice.