MGE Energy Inc: Form 10-K for the period ended Dec 31, 2025

MGE Energy operates in the following business segments:

• Regulated electric utility operations – generating, purchasing, and distributing electricity through MGE.
• Regulated gas utility operations – purchasing and distributing natural gas through MGE.
• Nonregulated energy operations – owning and leasing electric generating capacity that assists MGE through MGE Energy's wholly owned subsidiaries MGE Power Elm Road and MGE Power West Campus.
• Transmission investments – representing our investment in American Transmission Company LLC, a company engaged in the business of providing electric transmission services primarily in Wisconsin, and our investment in ATC Holdco LLC, a company created to facilitate out-of-state electric transmission development and investments.
• All other – investing in companies and property that relate to the regulated operations and financing the regulated operations, through its wholly owned subsidiaries CWDC, MAGAEL, and North Mendota, and Corporate functions.

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

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

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

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

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

Electric Utility Operations

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

As of December 31, 2025, MGE supplied electric service to approximately 170,000 customers, with approximately 91% located in the cities of Fitchburg, Madison, Middleton, and Monona, Wisconsin and 9% in adjacent areas.

Electric sales, customers, and revenues for 2025 were comprised of the following:

Electric operations accounted for approximately 72%, 74%, and 71% of MGE's total 2025, 2024, and 2023 regulated revenues, respectively.

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

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

Transmission

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

Regional Transmission Organizations (RTO)

MISO

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

MISO operates a bid-based energy market. MGE offers substantially all of its generation to the MISO market and purchases its electric supply, or load requirement from the MISO market in accordance with the MISO tariff. MGE also participates in the ancillary services market operated by MISO, which is an extension of the existing energy market. Through the operation of the ancillary services market, MISO provides the reserves for MGE's load, and MGE may offer to sell reserves from its generating units.

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

Fuel supply and generation

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

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

(a) MGE's coal generation for electric supply may fluctuate from year to year. Generation sources change based on lowest cost generation available. MGE continues to drive its commitment to achieve our emission reduction goals through the continuing addition of renewable generation and its transition plan to eliminate coal as a fuel source.

(b) Includes both internal generation and purchased power.

(c) Includes third-party purchased power and MISO market activity. A significant percentage of MGE's electric supply comes from internal generation sources. MGE supplements this internal generation with long-term purchase power agreements and spot purchases in the MISO market.

(d) The MISO market consists of two energy markets, the Day-ahead market and the Real-time market. The table above nets purchases and sales within the same hour in the two MISO markets. For the years ended December 31, 2025, 2024, and 2023, the amount netted between Day-ahead and the Real-time MISO markets was 306,198 MWh, 329,672 MWh, and 256,571 MWh, respectively. These amounts are reflected in "Adjusted total fuel sources."

Environmental Initiatives – Electricity Generation

MGE continues to advance its long-term strategy to achieve a more sustainable future for the benefit of its investors, employees, customers and the communities it services. MGE has set a target of providing net-zero carbon electricity by 2050.

MGE's carbon reduction goals are generally aligned with leading scientific guidance, including recommendations from the Intergovernmental Panel on Climate Change (IPCC) to limit global temperature increases to 1.5 degrees Celsius above pre-industrial levels. In 2020, the University of Wisconsin-Madison's Nelson Institute for Environmental Studies released its analysis of MGE's net-zero by 2050 goal. The IPCC modeling available suggested that by 2050, emissions from electricity generation in industrialized countries should be 87% to 99% lower than the 2005 baseline. The analysis determined that our 2050 goal is in line with model benchmarks to limit global warming to 1.5 degrees Celsius above pre-industrial levels.

MGE's strategy focuses on adopting cost effective technologies as they become commercially available, while maintaining reliability and affordability. Significant investments in solar, wind, and battery storage support MGE's long term decarbonization goal.

• Renewable generation and storage - Solar, wind, and battery storage projects play a critical role in MGE's strategy for reducing carbon emissions in pursuit of net-zero carbon electricity by 2050. Additionally, MGE plans to reduce its use of fossil fuels and work to help customers with energy efficiency and electrification, including the electrification of transportation.

Since 2015, MGE has added 253 MW of solar, 93 MW of wind generation, and 11 MW of battery storage to its electric renewable generation portfolio. See Item 2. Properties below for further information on these facilities. In addition, MGE expects to add approximately 252 MW of solar, 18 MW of wind, and 125 MW of battery storage, which include projects approved or pending PSCW approval, by the end of 2030.

MGE is partnering with Columbia's co-owners to construct a compressed carbon dioxide long-duration energy storage system, known as the Columbia Energy Storage project. MGE's 19% share will be 3 MW. The project was selected for a grant from the U.S Department of Energy. The Columbia Energy Storage project was approved by the PSCW in 2025. This project will be the first of its kind in the United States.

MGE is working to achieve a more sustainable energy future by investing in cost-effective renewable generation and innovative new technologies and services for customers. MGE has emphasized this innovation by developing customer programs to address climate change and encourage our customers to use clean energy. A portion of MGE's renewable generation is dedicated to customer programs such as the Renewable Energy Rider (RER) and Shared Solar Program. The RER and Shared Solar programs reduce MGE's carbon emissions while providing customers the ability to purchase renewable energy to meet their energy needs.

Renewable Energy Rider (RER) – Under this program, MGE partners with large energy users, primarily governmental entities, to provide customized renewable energy solutions. MGE owns the generation assets and RER customers are billed a PSCW-approved contractual renewable resource rate that covers all costs associated with the construction and ongoing operations of the renewable generation facility. MGE has developed approximately 42 MW of solar generation under the RER program.

Shared Solar Program – This program offers residential and small business customers to meet up to half of their annual energy needs with locally generated solar energy. The first solar array associated with this program, owned by MGE, became operational in 2017 for 500 KW capacity. The completion of a second solar facility (Morey Field) added 3.5 MW of capacity to the program, as well as 2 MW from Strix Solar, which was completed in 2025. In December 2025, the PSCW approved the implementation of a new community solar program, Shared Solar for Business, for large commercial customers.

Electrifying Transportation - The electrification of transportation is a key strategy for reducing carbon emissions. MGE has established a network of nearly 60 charging stations, powered by renewable energy, serving the growing number of electric vehicles (EV) in MGE's service area. The EV fast charging hubs feature some of the most powerful EV chargers in the Midwest. MGE has continued to add EVs to its fleet and is targeting 100% all-electric or plug-in hybrid light-duty vehicles by 2030. Additionally, we are working with the City of Madison to further the electrification of its vehicles and buses. MGE continues to provide technical assistance to the city in the development of an all-electric Bus Rapid Transit system.

• Transitioning away from coal
• Elm Road Units – In October 2025, MGE, along with the plant co-owners, filed a joint application with the PSCW to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. Transition plans and costs will be subject to PSCW approval. By the end of 2030, coal is expected to be used only as a backup fuel at the Elm Road Units. By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal.
• 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.
• Natural gas as a fuel source - As part of MGE's continued energy transition plan, MGE plans to invest in additional natural gas-fired generation and storage facilities. Natural gas plants add needed reliability and balance to the electric system while MGE continues to transition away from coal-fired generation and add more renewable capacity to MGE's generation mix. MGE purchased 50 MW (25 MW in 2023 and 25 MW in 2024) in the West Riverside Energy Center (West Riverside), a highly efficient, state-of-the-art natural gas-fired plant in Beloit, Wisconsin. In February 2026, MGE executed an asset purchase agreement for 168 MW of existing gas-fired generation through an ownership share in the RockGen Energy Center near Cambridge, Wisconsin, subject to PSCW approval. If approved, the transaction is expected to close in late 2027.

Generation sources

MGE receives electric generation supply from coal-fired, gas-fired, and renewable energy sources. These sources include owned facilities as well as facilities leased from affiliates and accounted for under our nonregulated energy operations. See Item 2. Properties for more information regarding these generation sources, including location, capacity, ownership or lease arrangement, and fuel source. See "Nonregulated Energy Operations" below for more information regarding generating capacity leased to MGE by MGE Energy's nonregulated subsidiaries.

Purchased power

MGE enters into short- and long-term purchase power commitments with third parties to meet a portion of its anticipated electric energy supply needs. As of December 31, 2025, MGE has 30 MW of a renewable purchase power commitment for each of the next two years.

Gas Utility Operations

MGE transports and distributes natural gas in a service area covering 1,722 square miles in seven south-central Wisconsin counties. The service area includes the city of Madison, Wisconsin and surrounding areas.

As of December 31, 2025, MGE supplied natural gas service to approximately 180,000 customers in the cities of Elroy, Fitchburg, Lodi, Madison, Middleton, Monona, Prairie du Chien, Verona, and Viroqua; 25 villages; and all or parts of 49 townships. Gas sales, customers, and revenues for 2025 were comprised of the following:

Gas operations accounted for approximately 28%, 26%, and 29% of MGE's total 2025, 2024, and 2023 regulated revenues, respectively.

MGE can curtail gas deliveries to interruptible customers. These are customers who agree to reduce their load in the case of an emergency interruption. In 2025, 2024, and 2023, approximately 2%, 2%, and 3%, respectively, of retail gas deliveries were to interruptible customers.

Environmental Initiatives - Natural gas distribution

Building upon our long-standing commitment to providing affordable, sustainable energy, MGE has set a goal to achieve net-zero methane emissions from its natural gas distribution system by 2035. If MGE can accelerate plans to achieve net-zero methane emissions from its natural gas system—through the evolution of new technologies, such as renewable natural gas—it will. MGE is working to reduce overall emissions from its natural gas distribution system in a quick and cost effective manner. 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.

Gas supply

MGE has physical interconnections with ANR Pipeline Company (ANR) and Northern Natural Gas Company (NNG). MGE's primary service territory, which includes Madison and the surrounding area, receives deliveries at one NNG and four ANR gate stations. MGE's outlying territory receives deliveries at NNG gate stations located in Elroy, Prairie du Chien, Viroqua, and Crawford County. Interconnections with two major pipelines provide competition in interstate pipeline service and a more reliable and economical gas supply mix, which includes gas from Canada and the mid-continent and Gulf Coast regions of the United States.

During the winter months, when customer demand is typically higher, MGE is primarily concerned with meeting its obligation to customers. MGE meets customer demand by using firm supplies under contracts finalized before the heating season, supplies in storage (injected during the summer), and other firm supplies purchased during the winter period.

Annually, through our contracts with ANR, a total of approximately 6.5 million Dth of gas can be injected into ANR's storage fields in Michigan from April 1 through October 31. These gas supplies are then available for withdrawal during the subsequent heating season, November 1 through March 31. Using storage allows MGE to buy gas supplies during the summer season, when prices are normally lower, and withdraw these supplies during the winter season, when prices are typically higher. Storage also gives MGE more flexibility in meeting daily load fluctuations.

MGE's contracts for firm transportation service of gas include winter maximum daily quantities of:

• 185,650 Dth (including 116,078 Dth of storage withdrawals) on ANR.
• 81,453 Dth on NNG.

Nonregulated Energy Operations

MGE Energy, through our subsidiaries, has developed generation sources that assist MGE in meeting the electricity needs of our customers. These sources consist of the Elm Road Units and the WCCF, which are owned by subsidiaries of MGE Energy and leased to MGE. See Item 2. Properties for a description of these facilities, their joint owners, and the related lease arrangements.

Transmission Investments

ATC owns and operates electric transmission facilities primarily in Wisconsin. MGE received an interest in ATC when it, in coordination with 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 wholly-owned subsidiary of MGE Energy. As of December 31, 2025, MGE Transco held a 3.6% ownership interest in ATC.

In 2016, ATC Holdco was formed by several of the members of ATC, including MGE Energy, to explore electric transmission development and investments outside of Wisconsin, which typically have long development and investment lead times before becoming operational. MGE Energy's ownership interest in ATC Holdco is held by MGEE Transco, a wholly-owned subsidiary of MGE Energy. As of December 31, 2025, MGEE Transco held a 4.4% ownership interest in ATC Holdco.

Environmental Regulation

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 the manner in which we conduct our operations, the costs of those operations, as well as capital and operating 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 our capital expenditures and operating costs. Management believes compliance costs will be recovered in future rates based on the previous treatment of environmental compliance projects. In addition to the regulations discussed below, MGE continues to track state and federal initiatives such as potential state and federal regulations governing surface water and/or groundwater containing per- and polyfluoroalkyl substances (PFAS), potential changes to regulations governing polychlorinated biphenyl (PCB), potential changes to air and water standards, and potential climate change legislation.

Water Quality

Effluent Limitations Guidelines and Standards for Steam Electric Power Generating Point Source Category

The EPA's promulgated water Effluent Limitations Guidelines (ELG) and standards for steam electric power plants focus on the reduction of metals and other pollutants in wastewater from new and existing power plants. MGE's Columbia plant and Elm Road Units are subject to this rule. In May 2024, the EPA finalized the ELG rule that further regulates wastewater discharges associated with coal-fired power plants. The rule focuses on wastewater discharges from flue gas desulfurization, combustion residual leachate, and bottom ash transport water. The rule also regulates legacy wastewater that is discharged from certain surface impoundments.

See Footnote 16.a. of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Report for further discussion of environmental compliance obligations. Based on previous treatment of environmental compliance projects, management believes that any compliance costs will be recovered in future rates.

Cooling Water Intake Rules (Section 316(b))

Section 316(b) of the Clean Water Act requires that cooling water intake structures at electric power plants meet best available technology (BTA) standards to reduce mortality from entrainment (drawing aquatic life into a plant's cooling system) and impingement (trapping aquatic life on screens of cooling water intake structures). The EPA finalized its Section 316(b) rule for existing facilities in 2014. Section 316(b) requirements are implemented in Wisconsin through modifications to WPDES permits, which govern plant wastewater discharges.

Blount received its most recent 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. Based on previous treatment of environmental compliance projects, management believes that any compliance costs will be recovered in future rates.

Intakes at Columbia are subject to this rule. The Columbia operator timely submitted its renewal application to the WDNR. Columbia's operator anticipates that BTA improvements required by the future renewal permit will be coordinated with the WDNR by the end of 2029. MGE will continue to work with Columbia's operator to evaluate regulatory requirements. MGE does not expect this rule to have a material effect on Columbia.

Air Quality

Air quality regulations promulgated by the EPA and WDNR in accordance with the Federal Clean Air Act and the Clean Air Act Amendments of 1990 impose restrictions on the emission of particulates, sulfur dioxide (SO2), nitrogen oxides (NOx), hazardous air pollutants and other pollutants, and require permits for the operation of emission sources. These permits must be renewed periodically. Various newly enacted and/or proposed federal and state initiatives may result in additional operating and capital expenditure costs for fossil-fueled electric generating units. Based on previous treatment of environmental compliance projects, management believes that any compliance costs will be recovered in future rates.

Ozone NAAQS

The Elm Road Units are located in Milwaukee County, Wisconsin, a nonattainment area for the 2015 Ozone NAAQS. 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.

Fine Particulate Matter (PM2.5) NAAQS

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. 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. With the planned transition of the Elm Road Units to natural gas, there is a low probability for the need of additional emission limitations. However, the final impact of this rule will not be known until the EPA determines the attainment status of Wisconsin counties, and the State of Wisconsin develops an attainment implementation plan. MGE will continue to follow the rule's developments.

Rules regulating nitrogen oxide (NOx) and sulfur dioxide (SO2) emissions, including the Cross State Air Pollution Rule's (CSAPR) Good Neighbor Plan and Clean Air Visibility Rule

The EPA's CSAPR and its progeny (e.g. the Good Neighbor Plan) 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 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 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. This action follows legal challenges to the plan. While the EPA addresses these concerns, interim rules have been implemented. See Footnote 16.a. of the Notes to the Consolidated Financial Statements in this Report for further discussion of the proposed rule.

Clean Air Visibility Rule

Columbia is subject to the best available retrofit technology (BART) regulations, a subsection of the Clean Air Visibility Rule, which may require pollution control retrofits. Columbia's existing pollution control upgrades, and the EPA's stance that compliance with the CSAPR and its progeny such as the Good Neighbor Plan satisfy the requirements of BART, should mean that Columbia will not need to do additional work to meet BART requirements. Wisconsin's 2021 State Implementation Plan (SIP) finds that Wisconsin will meet its current regional haze goals based on expected emissions reductions. MGE will continue to monitor legal developments and any future updates to this rule.

Global Climate Change

MGE produces greenhouse gas (GHG) emissions, primarily from the fossil fuel generating facilities it uses to meet customers' energy needs, as well as from its natural gas pipeline system and fleet vehicles. Climate change and the regulatory response to it could significantly affect our operations in a number of ways, including increased operating costs and capital expenditures, restrictions on energy supply options, operational limits on fossil fuel fired plants, permitting difficulties, and emission limits. MGE would expect to seek and receive rate recovery of associated compliance costs, if and when required. MGE continues to monitor proposed climate change legislation and regulation.

MGE has taken steps to address GHG emissions and is targeting net-zero carbon electricity by 2050. As part of this strategy, MGE continues to evaluate the role of coal fired generation in its portfolio, including previously announced plans regarding the Columbia Energy Center and the planned fuel transition at the Elm Road Units. MGE remains focused on reducing reliance on coal over time and expanding ownership of renewable generation to support a cleaner, reliable energy future. Renewable energy continues to play a critical role in MGE's strategy for reducing carbon emissions. See "Electric Utility Operations - Fuel supply and generation" above for further information.

Building upon MGE's 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.

Greenhouse Gas Reduction Guidelines under the Clean Air Act 111(d) Rule

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 establishes a process where states must submit plans to the EPA for establishing standards. States will have 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 proposed rule which repeals the 2009 Endangerment Finding and Greenhouse Gas Vehicle Standards. The repeal will effectively undo the basis for federal regulation of GHG emissions under the Clean Air Act. Several states have already initiated legal challenges to the repeal, and other stakeholders are expected to do so. 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.

Federal Action on Climate Change

In January 2025, the Trump Administration issued several executive orders relating to energy and climate policy, including directing the United States' withdrawal from the Paris Agreement. As of January 2026, the U.S. has formally withdrawn. MGE continues to monitor the development of agency recommendations, implementation plans, and other administrative actions resulting from these orders to assess their relevance to MGE's decarbonization strategy, capital investment plans, and environmental compliance obligations, as well as any potential impacts on our operations.

State and Regional Action on Climate Change

In August 2019, Wisconsin Governor Tony Evers signed an executive order to establish the Office of Sustainability and Clean Energy (OSCE). The order tasks the OSCE with, among other things, ensuring that the actions of the State of Wisconsin are aligned with the goals and recommendations of the Paris Agreement, verifying that electricity consumed by the State of Wisconsin is 100% carbon-free by 2050, and developing a comprehensive multi-sector clean energy plan for the state. In April 2022, the OSCE released Wisconsin's Clean Energy Plan. The plan includes a goal to achieve net zero carbon by 2050. MGE is engaged in this process by participating on a Stakeholder Advisory Team in a voluntary capacity. MGE will continue to evaluate this plan for its applicability to MGE's decarbonization plans and to evaluate potential impact on our operations.

Solid Waste

Coal Combustion Residuals (CCR) 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. Columbia's obligations under this portion of the CCR Rule are now complete. Review of the Elm Road Units has indicated that the costs to comply with this 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. Columbia's operator has evaluated the rule and determined that parts of the rule apply to Columbia's previously closed site.

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 is evaluating the impact of this extension on its compliance timeline.

See Footnote 16.a. of the Notes to the Consolidated Financial Statements in this Report for further discussion of compliance costs for Columbia. Based on previous treatment of environmental compliance projects, management believes that any compliance costs will be recovered in future rates.

Renewable Energy Standards

Wisconsin law establishes a minimum amount of energy MGE must supply from renewable sources. MGE currently exceeds the applicable minimum requirement of approximately 8%. The costs to comply with this requirement are being recovered in rates.

Human Capital

MGE Energy and MGE are committed to attracting, developing, and retaining a sustainable workforce and aim to foster a diverse, equitable, and inclusive culture.

As of December 31, 2025, MGE Energy and its subsidiaries had 726 employees, 318 of whom were covered by collective bargaining agreements as described below:

As of December 31, 2025, women and ethnic minorities represented 27% and 10% of our total workforce, respectively.

Governance

The Human Resources and Compensation Committee of the Board of Directors of MGE Energy oversees MGE Energy's human resource strategies. It reviews the salaries, fees and other benefits of officers and directors and recommends compensation adjustments to the board. The committee determines the amounts and elements of compensation for the company's executive officers and provides overall guidance for the company's executive compensation policies and programs. Such policies relate to Stock Ownership Guidelines, the recovery, or the "clawback" of, excess compensation based on erroneous data, and succession planning.

Development and Training

The energy industry is ever-changing. MGE believes it is important to continue to engage human capital resources as the industry evolves. MGE is committed to sustainable workforce practices such as career development and training. MGE offers all employees the opportunity to learn and grow—whether it is to become more proficient in their job, improve decision-making skills, or prepare for a move to another role. MGE works to provide employees with the right tools—learning and content—needed to develop the knowledge and skills necessary to grow and to ensure MGE has a workforce that is knowledgeable, prepared, and high performing to deliver on our goals and objectives. All employees have access to a variety of learning resources to help ensure they are equipped with the knowledge and skills to effectively navigate the evolving utility industry.

Workplace Culture

MGE supports an inclusive, respectful work environment where individuals and groups can achieve their full potential. MGE seeks to attract and retain the best people to do the job. A wide range of backgrounds and ideas strengthens MGE's work environment. MGE's goal is to create a healthy and productive work environment that provides a sense of belonging for all MGE employees. MGE's employee-led steering team on workplace culture works to engage employees and identify opportunities for connecting and for living our values. As a community energy company, this commitment creates value-added partnerships with the broader community.

Safe and Healthy Working Conditions

"We power safety. Work safe. Home safe." That is the commitment at MGE, and it is embraced by employees. MGE's journey to safety excellence is guided by the Safety Steering Team. The team meets regularly to examine safety topics and to identify and to prioritize continuous improvement opportunities. MGE goes beyond applicable occupational health and safety standards by involving employees from all levels of the organization in the continuous improvement of the company-wide safety culture. MGE's continuous improvement process incorporates safety perception surveys, improvement projects, and monitoring of leading indicators. Stop Work Authority is an employee-developed program to communicate that all employees have equal authority and responsibility to stop work when a perceived unsafe condition or behavior is reported.

MGE encourages employees across the company to make health and wellness a priority. Good health brings vitality and energy to employees' work lives and home lives. MGE's programs to promote health and wellness include hybrid work schedules, the Healthy Rewards program, and access to occupational therapists for sprain and strain prevention and ergonomic assessments.

Financial Information About Segments

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

Information About our Executive Officers

The names, ages, and positions of MGE Energy and MGE's executive officers are listed below along with their business experience during the past five years.

(a) Executive officer of MGE Energy and MGE.

(b) Executive officer of MGE.

(c) Retired effective December 31, 2025.

MGE Energy and our subsidiaries, including MGE, operate in a regulated market environment that involves significant risks, many of which are beyond our control. The following risk factors may adversely affect our results of operations, cash flows and financial position and market price for our publicly traded securities. While we believe we have identified and discussed below the key risk factors affecting our business, additional unknown risks and uncertainties may adversely affect our performance or financial condition in the future.

Regulatory Risk

We are subject to extensive government regulation in our business, which affects our costs and ability to respond to changing events and circumstances.

Our business is subject to regulation at the local, state, and federal levels. The regulations adopted by local, state, and federal agencies affect how we do business, our ability to undertake specified actions since pre-approval or authorization may be required for projects, the costs of operations, and the rates we are authorized to charge to recover those costs. Our ability to attract capital also depends, in part, upon our ability to recover our costs and obtain a fair return for shareholders.

MGE Energy is subject to regulation as a holding company by the PSCW. The PSCW regulates MGE's rates; terms and conditions of service; various business practices and transactions; financing; the closure of generating facilities and related cost recovery; and transactions between it and its affiliates, including MGE Energy. MGE is also subject to regulation by the FERC, which regulates certain aspects of its business, including certain accounting policies.

MGE is subject to oversight and monitoring by MISO. Changes in MISO's resource adequacy process, including seasonal reserve margin requirements and capacity accreditation rules, impact how generating facilities, such as MGE's solar projects, are recognized for capacity. New methodologies, like the direct loss-of-load approach, could require MGE to revise its resource plans, add capacity, or purchase additional resources, potentially leading to costs that may not be recoverable through rates. In addition, existing or new facilities may have a reduction accredited capacity under MISO's seasonal process.

ATC, in which we have an investment, is subject to regulation by FERC as to, among other things, rates.

Failure to comply with applicable regulations may result in customer refunds, penalties, and other payments which could materially and adversely affect our financial condition, results of operations, and liquidity.

Our utility revenues are subject to regulatory proceedings and/or negotiated settlements, which can affect our ability to recover, and the timing of recovery of, costs that we incur in our operations.

Our utility customer rates have a material impact on our financial condition, results of operations, and liquidity. Our ability to obtain adjustments to those rates depends upon timely regulatory action under applicable statutes and regulations. These proceedings typically involve multiple parties, including governmental bodies and officials, consumer advocacy groups, and various consumers of energy, who may focus on differing elements of the rate setting process, including environmental matters, addressing affordability concerns. Decisions are subject to judicial review, potentially leading to additional uncertainty associated with the approval proceedings, including with respect to outcome and timing. Rate regulation provides us an opportunity to recover costs that have been reasonably incurred and the ability to earn a reasonable rate of return on invested capital. However, we have no assurance that our regulators will consider all of our costs to have been reasonably incurred. In addition, our rate proceedings may not always result in rates that fully recover our costs or provide a reasonable return on equity. We estimate the impacts of changes in customer growth and weather as part of our customer rates. Any reduction of sales from these factors may not result in rates that fully recover our costs and may require adjustments to our rates, which we cannot guarantee will be approved.

Under applicable accounting for regulated operations, certain costs and revenues are deferred as regulatory assets and liabilities for future recovery or refund to customers, as authorized by our regulators. If recovery of regulatory assets is not approved or is no longer deemed probable, these costs would be recognized as a current period expense and could materially and adversely impact our operations and financial performance in that period.

We could be subject to higher costs and potential penalties resulting from mandatory reliability standards.

MGE must adhere in its electric distribution system to mandatory reliability standards established by NERC. These standards cover areas such as critical infrastructure protection, emergency preparedness, facility design, and transmission operations, among others. The critical infrastructure protection standards focus on physical and access security of cyber assets, as well as incident response and recovery planning. Compliance with these standards affects our operating costs and any noncompliance could result in sanctions, including monetary penalties.

We are subject to changing environmental laws and regulations that may affect our costs and business plans.

We are subject to environmental laws and regulations that affect the manner in which we conduct business, including capital expenditures, operating costs, and potential liabilities. There is uncertainty regarding whether and how the current and future Presidential administrations will address climate change-related matters, including restrictions on greenhouse gas emissions, such as carbon. While it is difficult to know the extent of possible legislation or regulatory activity, there may be an increase in the number and scope of environmental laws and regulations aimed at carbon sources, including fossil-fueled generation and the transportation of natural gas. These possible changes, as well as evolving consumer sentiment, have affected and may continue to affect our business plans, make them more costly, or expose us to liabilities for past, present, or future operations.

Numerous environmental laws and regulations govern many aspects of our present and future operations. These include: air emissions limits and reporting; ambient air quality standards; water quality; water intake and discharges; wetlands; solid and hazardous waste; handling and disposal of hazardous substances; protection of endangered resources, such as threatened and endangered species, protection of cultural resources and archaeological sites; remediation and management of contaminated sites; and control of potential pollution from electric and gas construction sites. These evolving regulations have affected us, and may continue to affect us by, among other items:

• Introducing uncertainty into our planning and capital expenditures processes, as changes in requirements may affect the timing and choice of compliance methods and require costly revisions to prior plans and commitments.
• Imposing or modifying limits on the operations of our facilities in order to meet restrictions on air emissions, water use or water discharges.
• Requiring capital expenditures and changes in operating procedures and costs as a result of the need to install additional pollution controls or more advanced technology or equipment at new or existing facilities.
• Mandating increasing purchases of renewable energy, which affects the use of existing generation, and energy efficiency initiatives, which affect revenues.

We may be subject to future laws, regulations, or actions associated with public concern with fossil-fuel generation, greenhouse gases, and the effects of global climate change.

Our subsidiaries operate or co-own electric power plants that burn fossil fuels, deliver natural gas, and deliver electricity to customers. These business activities are subject to evolving public concern regarding greenhouse gases (GHG), legislative and regulatory action, and possible litigation in response to that public concern. The primary greenhouse gas associated with our subsidiaries' combustion of fossil fuels, and the largest emission in our system overall, is carbon dioxide (CO2).

Our subsidiaries have incurred and may continue to incur costs from more stringent regulation of GHG from power plants, natural gas delivery, GHG used in power distribution, and efficiencies lost during power distribution. Compliance with such regulation may result in increased capital and operating costs, including expenditures for equipment, technology, and monitoring activities. While it is difficult to know the extent of possible legislation or regulatory activity, the federal government may consider, and could pass, some form of greenhouse gas legislation or regulations. In addition, litigation targeting GHG emissions from the electric power industry may also occur if the federal government fails to act on greenhouse gas initiatives.

We face risk regarding the recovery of fuel and purchased power costs.

MGE has price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE burns natural gas in several of its electric generation facilities. In many cases, the cost of purchased power is tied to the cost of natural gas. In the event of an interruption in energy supply, whether due to equipment problems, transmission constraints, or otherwise, we may incur additional costs to obtain alternative sources of energy supply, in order to meet our contractual or regulatory obligations to our customers. Electric 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 electric fuel-related costs are subject to an excess revenue 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. MGE assumes the risks and benefits of variances that are within the cost tolerance band.

Changes in federal income tax policy, including provisions under the Inflation Reduction Act (IRA) and One Big Beautiful Bill Act (OBBBA), or our inability to use or generate tax credits, may adversely affect our financial condition, results of operations, and cash flows, and credit ratings.

If corporate tax rates or policies change, we may be required to record material charges against earnings. Increased tax rates could create timing delays before regulated rates allow recovery of those tax increases in revenues. In addition, IRS tax policies such as tax normalization, Treasury Regulations, and evolving guidance under the IRA and OBBBA may impact our ability to economically deliver certain types of resources relative to market prices. OBBBA includes provisions for the phase-out of certain tax credits over time, creating uncertainty around long-term project economics and potentially accelerating investment timelines. These changes could require us to modify resource plans, accelerate construction schedules, or seek alternative financing structures, all of which may increase costs and risk. There is uncertainty regarding whether and how the current and future Presidential administrations or U.S. Congress will continue to address tax policy and regulation.

We have historically reduced our consolidated federal and state income tax liability through various tax credits. We may not be able to fully use these tax credits if future taxable income is insufficient or if transferability options are limited. Any future disallowance of credits due to legislative changes or adverse determinations could materially affect our tax obligations and financial results. The IRA introduced new labor requirements that are conditions to qualification for renewable tax credits. Failure to meet these requirements on renewable projects that began construction after January 28, 2023, could result in a significant reduction in the amount of renewable tax credits, which could adversely impact our financial condition and results of operations. OBBBA introduces additional eligibility requirements, including compliance with Foreign Entity of Concern (FEOC) rules, which may restrict the use of certain equipment or components in renewable projects. Failure to meet FEOC requirements could disqualify projects from tax credits, significantly increasing costs and reducing expected returns.

Our utility business owns and operates renewable energy generating facilities that produce PTC and ITC credits. The amount of credits earned depends on facility in-service dates and operating factors, including generation output, transmission constraints, pricing trends, adverse weather conditions, equipment reliability, and the applicable credit rates. These factors, combined with labor requirements under IRA and FEOC compliance risks and credit phase-outs under OBBBA, could reduce credits and increase federal income tax expense. We could also be forced to replace lost generation capacity with additional power purchases from third parties, potentially leading to increased costs. Any of the considerations mentioned above could have an adverse impact on our financial condition and results of operations, which could be material depending upon the cause of the disruption and its duration.

There is also uncertainty as to when or how credit rating agencies, capital markets, the FERC, or state public utility commissions will treat impacts of any future federal or state tax regulation. These impacts could result in credit rating downgrades or negatively affect financial metrics such as funds from operations-to-debt ratios.

Operating Risk

We are affected by weather, which affects customer demand and can affect the operation of our facilities.

The demand for electricity and gas is affected by weather. Very warm and very cold temperatures, especially for prolonged periods, can dramatically increase the demand for electricity and gas for cooling and heating, respectively, as opposed to the softening effect of more moderate temperatures. Our electric revenues are sensitive to the summer cooling season and, to a lesser extent, the winter heating season. Similarly, very cold temperatures can dramatically increase the demand for gas for heating. A significant portion of our gas system demand is driven by heating. Extreme summer conditions or storms may stress electric systems, resulting in increased maintenance costs and limiting our ability to meet peak customer demand. As a result, our overall operating results may fluctuate substantially on a seasonal basis.

Demand for electricity and gas associated with existing data centers, and data centers developed in the future, could have a material impact on our operations.

We serve a variety of industries, including customers with large load requirements, such as data centers and other facilities. At this time, our service area does not include any large-scale data centers. The recent and ongoing expansion of data centers associated with increasing demand for artificial intelligence (AI) and other cloud‑based services is a national trend. This trend could lead to a significant increase in demand for electricity and gas if data centers expand or are developed within our service area over the next several years, which could require a rapid and significant increase in generation capacity and the development of related infrastructure. Alternatively, demand for electricity and gas could be lower than currently expected if the expansion of data centers and the associated increase in demand does not develop as anticipated.

We continue to evaluate the potential impacts of the development, construction, and operation of new data centers in our service area and will continue to evaluate potential mitigants to these risks, which could materially impact our operations, financial condition and results of operations. However, we cannot predict whether the data centers under consideration will ever commence operations in our service area or the size of the load obligations of data centers that do become operational. Furthermore, the City of Madison has enacted a temporary moratorium on the development of new large-scale data centers to evaluate their impact on local infrastructure and resources, which may delay or prevent the commencement of operations for planned projects within the City of Madison. Other pending or future legislative or regulatory actions may also impact the development, construction and operation of new data centers in our service area.

We could be adversely affected by changes in the development, and utilization by our customers, of power generation, storage, and use technologies, as well as emerging technologies such as AI.

Our revenues and the timing of cost recovery could be adversely impacted by improvements in power generation, storage, and use of technology to minimize energy use. Advancements in distributed generation, including commercial and residential solar installations and commercial micro turbines, continue to improve the cost-effectiveness of customer self-supply of electricity. Similarly, improvements in energy storage technology, such as batteries and fuel cells, enable customers to meet their around-the-clock electricity needs without relying on the electricity we provide.

Legislation or regulations could support these technologies, permit third-party sales, and allow interconnection to our distribution system. Improvements in energy efficiency and voluntary conservation efforts will also affect consumption. AI-driven energy management tools could also enable customers to optimize usage and further reduce purchases from us. Such developments could reduce customer purchases of electricity but may not reduce our investment and operating requirements due to our obligation to serve customers, including those whose self-supply resources fail. Because a portion of our costs are recovered through volumetric charges, reductions in electricity deliveries could affect the timing of our recovery of those costs and may require changes to rate structures.

We are affected by local, national, and worldwide economic activity.

MGE Energy's and MGE's operations are affected by local, national, and worldwide economic conditions. The consequences of a prolonged period of reduced economic activity may include lower demand for energy, uncertainty regarding energy prices and the capital and commodity markets, and increased credit risk. A decline in energy consumption may adversely affect our revenues and future growth. Increased credit risk reflects the risk that our retail customers will not pay their bills in a timely manner or at all, which may lead to a reduction in liquidity and an eventual increase in bad debt expense.

Higher levels of development and business activity within our service area generally increases the number of customers and their use of electricity and gas. Likewise, recessionary economic conditions generally have an adverse impact on our results of operations. Our business activities, including those of our subsidiaries, are concentrated in the State of Wisconsin. Changes in our local economy could negatively impact the financial condition of our customers, the growth opportunities available to us and our subsidiaries, and our results from operations.

Our operations have been, and may continue to be, impacted by domestic and global supply chain disruptions which are delaying the delivery of materials, equipment, and other resources that are critical to our business operations and projects under construction, including our renewable energy projects. Supply interruptions could affect our ability to operate and maintain our system and ability to implement our long-term goals. Inflation has also increased prices of equipment, materials, employee wages and benefits, and other resources. Inflationary pressures in the economy could lead to higher expenses which may adversely impact our financial condition and results of operations.

Our operations could be adversely affected by global climate change.

A changing climate creates uncertainty and could result in broad changes, both physical and financial in nature, to our operations. Physical risks arising from extreme weather events and changing climate patterns, including swings in intensity, disruption of operations, infrastructure damage, and impact of customer demand. Extreme weather events could lead to substantial financial losses including increased maintenance costs, or unanticipated capital expenditures. The cost of storm restoration efforts may also not be fully recoverable through the regulatory process. We may also incur costs associated with actions taken due to investor interest in reducing our subsidiaries' reliance on fossil fuel generation, and coal in particular. Investors may also move away from investing in fossil fuel generated electricity for reputational or perceived risk-related reasons, which could raise our costs of attracting capital. If we are seen as being proactive in addressing concerns we may experience reputational issues among our customers and the communities that we serve. Those issues could affect customers' energy choices, including efforts at self-supply, and could affect the handling and treatment of our rate requests and cost recovery. We cannot provide any assurance regarding the potential impacts of climate change or related policies and regulations to reduce GHG emissions on our operations, which could have a material adverse impact on our financial condition and results of operations.

The ability to obtain an adequate supply of coal could limit the ability to operate the co-owned coal-fired facilities from which we receive a significant portion of our electric supply.

Changes to the availability of coal and the means to transport coal could:

• Affect our operating costs due to increased costs associated with lower levels of owned generation or the need for alternate coal supply or transportation,
• Limit the ability to generate electricity if the plant operator is unable to arrange timely deliveries of adequate supplies of coal, and
• Result in potentially higher costs for replacement purchased power as well as potential lost market sales opportunities.

A significant portion of our electric generating capacity is dependent on coal. Demand for coal has been, and may continue to be, impacted by prevailing prices for natural gas and coal plant closures and may affect mine performance. Consequently, we are exposed to the risk that counterparties to these contracts will not be able to fulfill their obligations. Disruption in the delivery of fuel, including disruptions as a result of transportation delays, weather, labor relations, force majeure events, or environmental regulations affecting any of our fuel suppliers, has affected, and could in the future affect, our ability to generate electricity at our facilities at the desired level. Should counterparties fail to perform, or other unplanned disruptions occur, we may be forced to fulfill the underlying obligation at higher prices. The Columbia plant operator has been, and the plant operators may be, forced to reduce generation at our jointly-held coal units, which would cause us to replace this generation through additional power purchases from third parties. These factors may also affect the terms under which any of the existing coal supply or transportation agreements are renewed or replaced upon the expiration of their current terms.

Our ability to manage our purchased power costs is influenced by a number of uncontrollable factors.

We have been, and will continue to be, exposed to additional purchased power costs to the extent that our power needs cannot be fully covered by the supplies available from our existing facilities and contractual arrangements. Those needs, and our costs, could be affected by:

• Increased demand due to, for example, abnormal weather, customer growth, or customer obligations,
• The inability to transmit our owned or contracted power from the generation source to our customers due to transmission line constraints, outages, or equipment failures,
• Reductions in the availability of power from our owned or contracted generation sources due to equipment failures, shortages of fuel or environmental limitations on operations, and
• Failure to perform on the part of any party from which we purchase capacity or energy, whether due to equipment failures or other causes.

An unexpected change in demand or the availability of generation or transmission facilities can expose us to increased costs of sourcing electricity in the short-term market where pricing may be more volatile.

The equipment and facilities in our operational system are subject to risks that may adversely affect our financial performance.

Weather conditions, accidents, and catastrophic events can result in damage or failures of equipment or facilities and disrupt or limit our ability to generate, transmit, transport, purchase, or distribute electricity and gas. Efforts to repair or replace equipment and facilities may take place over prolonged periods or may be unsuccessful. We may also be unable to make the necessary improvements to our operational system, causing service interruptions. Furthermore, our facilities are interconnected with third-party transmission providers. Damage to or failures of these providers' equipment or facilities is out of our control but could lead to service interruptions. Any resulting interruption of services would result in lost revenues and additional costs. Lack of gas or decreased gas pressure from interstate pipeline systems may result in unexpected energy interruptions and may lead to additional costs for alternative energy sources. We are also exposed to the risk of accidents or other incidents that could result in damage to or destruction of our facilities or damage to persons or property. Such issues could adversely affect revenues or increase costs to repair and maintain our systems.

Our operations and confidential information are subject to the risk of physical or cyber attacks, which could have an adverse effect on our business and performance.

We operate in a highly engineered industry that requires the continued operation of sophisticated information technology systems and network infrastructure to manage our finances, operate our control facilities, provide electric and gas service to our customers, and enable compliance with applicable regulatory requirements. Our generation and distribution facilities and computer-based systems and other infrastructure or physical assets are vulnerable to interruption, the introduction of viruses, malware, ransomware, security breaches, terrorist-style attacks, fire, power loss, system malfunction, network outages, unauthorized access, and other events that may be beyond our control. System interruptions or failures, whether isolated or more widespread, could impact our ability to provide service to our customers, which could have a material adverse effect on our operations and financial performance.

Generation, transmission systems, and natural gas pipelines are part of an interconnected system. Therefore, a disruption caused by the impact of a cybersecurity incident on the regional electric transmission grid, natural gas pipeline infrastructure or other fuel sources of our third-party service providers' operations, could also negatively impact our business.

Our business includes the collection and retention of personally identifiable information of our customers, shareholders, and employees, who expect that we will adequately protect such information. In some cases, we outsource certain functions to vendors that could be targets of cyber attacks. A significant theft, loss, or fraudulent use of personally identifiable information may cause our business reputation to be adversely impacted and could lead to potentially large costs to notify and protect the impacted persons and subject us to legal claims, fines, or penalties.

We maintain security measures to protect our information technology and control systems, network infrastructure and other assets. Despite such measures, we have been and may in the future be subject to cyber incidents. While we have not been subject to cyber incidents that have had a material impact on operations to date, the safeguards we have may not always be effective due to the evolving nature of cyber attacks. Moreover, the rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks. We cannot guarantee that the protections we have in place will be completely successful in the event of a cyber attack. If the technology systems were to fail or be breached by a cyber attack, and not be recovered in a timely fashion, we may be unable to fulfill critical business functions, equipment may fail to work and confidential data could be compromised, any additional costs may not be recoverable in rates, or may exceed cyber insurance limits, or may not be covered by cyber insurance and could adversely impact our results of operations.

Catastrophic and unpredictable events, including, but not limited to, terrorist or other physical attacks, could have a material adverse effect on our business.

A terrorist attack, war, natural disaster, wildfire, severe storms, pandemic virus or disease, or other catastrophic or unpredictable event could adversely affect our future revenues, expenses and operating results by: interrupting our normal business operations; causing employee absences or casualties, including loss of our key employees; interrupting or affecting supplier operations; requiring substantial expenditures and expenses to repair, replace and restore normal business operations; reducing investor confidence; and disrupting, or causing volatility in, capital markets. No assurance can be given that future losses for such events will not exceed the limits of our insurance coverage, if applicable. While we maintain insurance coverage for certain losses arising from catastrophic events, such coverage may be subject to limits, retentions (deductibles), exclusions, or delays in recovery, and may materially increase in cost in the future. Uninsured or underinsured losses could materially and adversely affect our financial condition and results of operations. Facilities for electric generation, transmission, and gas and electric distribution are potential targets of terrorist threats and activities, including both physical or cyber attacks. A terrorist act or catastrophic event at our facilities or the facilities of other companies to which we are interconnected could result in a disruption of our ability to generate, transmit, transport, purchase, or distribute electricity or natural gas. Such an event would have additional adverse effects, including environmental ramifications, increased security and insurance costs, as well as general economic volatility or uncertainty within our service territories. The inability to maintain operational continuity and any additional costs incurred for repairing our facilities or making alternative arrangements could materially and adversely affect our financial condition and results of operations.

We face risk in connection with the completion of significant capital projects.

Our capital projects, such as our renewable generation and storage projects, are subject to various completion risks that could cause increases in costs or delays in completion. These risks include shortages of, the inability to obtain, the cost of, and the consistency of, labor, materials and equipment; the inability of the contractors to perform under their contracts; the inability to agree to terms of contracts or disputes in contract terms; work stoppages; adverse weather conditions; the inability to obtain necessary permits in a timely manner; changes in applicable laws or regulations; adverse interpretation or enforcement of permit conditions; governmental actions or tariffs; legal action; and unforeseen engineering or technology issues. Our capital projects may also be adversely affected by geopolitical instability, trade policy changes, or shortages of critical materials and equipment. Disruptions in global supply chains could delay project completion, increase costs, or affect system reliability. In the case of our renewable generation projects, we may face delays in the completion of the necessary transmission system connections or upgrades to accommodate the project.

If a capital project exceeds the approved project costs approved by the PSCW, we may not be able to recover those excess costs through regulated customer rates. If that happens, we may have to finance overruns through cash from operations, which may delay other projects, or by securing additional financing. Any or all of these methods may not be available when or in the amounts needed, on reasonable terms or at all.

Inability to recover excess costs, obtain additional financing when or if needed on reasonable terms or complete the project in a timely manner, could adversely impact our financial condition and results of operations. Further, our revenues and cash flows may not increase immediately following our expenditure of funds on a particular project or in the period during which the expenditure occurs, which could affect our liquidity and financial position.

Our stated long-term goals are based on various assumptions and beliefs that may not prove to be achievable in the time frame projected.

Some of our current long-term goals include MGE's target of net‐zero carbon electricity by 2050 and MGE's Energy 2030 framework, which describes our plan for growth in renewables generation. MGE is working to achieve a more sustainable energy future using cost‐effective renewable generation and storage technologies. Management established these goals in conjunction with our board of directors based upon a number of different internal and external factors that characterize and influence our current and expected future activities. These long-term goals are based on certain assumptions regarding the timing, scope, and relative costs of technological advancements, including generation, storage and energy use technologies; levels of customer participation in programs and partnerships; our ability to transition away from or displace existing coal-fired resources; our ability to complete renewable generation and storage projects in a timely manner and within approved budgets; our ability to obtain recovery of costs in rates; and our ability to obtain the necessary permits or licenses for such projects. These assumptions may differ materially from actual future developments. Accordingly, we may not achieve our stated long-term goals in the timeframe projected or at all.

Failure to attract and retain an appropriately qualified workforce could affect our operations.

Because we operate in an industry that requires employees with specialized technical skills, we must attract, train, and retain a specialized workforce to meet current and future needs. Events such as an aging workforce without sufficient replacement workers, mismatch of skill sets to future needs, labor market conditions, evolving employee culture expectations, or unavailability of contract resources may lead to operating challenges and increased costs. Some of the challenges include lack of resources, loss of knowledge, and time required for replacement employees to develop necessary skills. Failure to identify qualified replacement employees could increase costs as a result of decreased productivity and increased safety incidents. If we are unable to attract and retain an appropriately qualified workforce, our operations could be negatively affected. We are also subject to multiple collective bargaining agreements covering approximately 318 employees as of December 31, 2025. Future negotiation of these collective bargaining agreements could lead to work stoppages or other disruptions to our operations, which could adversely affect our financial condition and results of operations.

Financial Risk

We are exposed to commodity price risk relating to our purchases of natural gas, electricity, coal, oil, and environmental allowances.

We face commodity price risk exposure with respect to the purchase of natural gas, electricity, coal, oil, and environmental allowances. We also face risk through our use of derivatives, such as futures, forwards, and swaps, to manage our commodity price risk. We could experience increased costs as a result of volatility in the market values of those commodities. We could also experience losses on our derivative contracts as a result of that market value volatility or if a counterparty fails to perform under a contract.

Interest rate movements and market performance affects our employee benefit plan costs.

Prevailing interest rates affect our assessment and determination of discount rates and are a key assumption in the determination of the costs and funding of our defined benefit pension plans. Changes in rates may impact the amount of expense and timing of contributions to those plans. The performance of the capital markets affects the values of the assets that are held in trust to satisfy the future obligations under our pension and postretirement benefit plans. We have significant obligations in these areas and hold significant assets in these trusts. A decline in the market value of trust fund assets may increase our current and longer-term funding requirements by increasing the level of contributions required to meet benefit obligations. In addition, changes in workforce demographics, retirement patterns, life expectancy, or eligibility requirements for Social Security or Medicare could increase benefit costs and funding requirements for our pension and postretirement benefit plans.

We are exposed to interest rate risk.

We are exposed to interest rate risk on our variable rate financing. Our borrowing levels under commercial paper arrangements vary from period to period depending upon capital investments and other factors. Such interest rate risk means that we are exposed to potential increased financing costs and associated cash payments as a result of changes in short-term interest rates.

We are exposed to counterparty credit risk primarily through our regulated energy business.

Credit risk is the loss and additional expense that may result from counterparty nonperformance. We face credit risk primarily through MGE's regulated energy business. Failure of contractual counterparties to perform their obligations under purchase power agreements, commodity supply arrangements, or other agreements may result in increased expenses for MGE as a result of being forced to cover the shortfall in the spot or short-term market, where prices may be more volatile. That risk may be increased during periods of weak or stressed economic conditions.

As a holding company, we are dependent on upstream cash flows from our subsidiaries for the payment of dividends on our common stock.

MGE Energy is a holding company, with no operations of its own, and its ability to pay dividends on our common stock is dependent on the earnings and cash flows of operating subsidiaries and their ability to pay upstream dividends or to repay funds to MGE Energy. Our subsidiaries have financial obligations that must be satisfied before funding MGE Energy. These obligations include debt service and obligations to trade creditors, among others. Our subsidiaries are also subject to contractual and regulatory restrictions that may limit or impair their ability to pay dividends to MGE Energy. Certain regulatory orders impose conditions on dividend payments based on specified financial metrics or capital structure requirements, which could restrict the amount or timing of dividends paid to MGE Energy.

Disruptions in the financial markets or changes to our credit ratings may affect our ability to finance at a reasonable cost and in accordance with our planned schedule.

The credit markets have experienced disruption and uncertainty. To the extent that such issues affect the ability or willingness of credit providers or investors to participate in the credit markets or particular types of investments, or affect their perception of the risk associated with particular types of investments, our cost of borrowing could be affected. Furthermore, if we are unable to access the capital and credit markets on favorable terms, it could have a material adverse effect on our business, financial condition, results of operations, cash flows and liquidity and our ability to repay or refinance our debt. We also rely on our credit ratings to access the credit markets. If our credit ratings are downgraded for any reason, borrowing costs would increase, the number of potential investors could decrease, or we could be required to provide additional credit assurance, including cash collateral, to contract counterparties.

MGE Energy and MGE

Risk management and strategy

MGE manages its cybersecurity risk in accordance with the National Institute of Standards and Technology (NIST) Cybersecurity Framework. Using the core functions of the NIST framework – identify, protect, detect, respond, recover, and governance – MGE employs a cybersecurity strategy program with input from its information technology (IT) leadership, senior management, and MGE Energy's Board of Directors (the Board). MGE maintains policies and procedures concerning cybersecurity matters, including those related to antivirus/malware protection, remote access, authentication, and confidential information. These policies go through an internal review process and are approved by appropriate executives and members of management.

Cybersecurity is considered within MGE's overall Enterprise Risk Management (ERM) program, which establishes an overall approach to enterprise risk management that can be consistently applied across the enterprise. As part of the ERM program, management identifies, assesses, mitigates, and monitors key enterprise risks. The ERM program includes evaluation of cyber risks' causes, impacts, ratings, and mitigations. Enterprise risks are reviewed and updated by management semi-annually.

MGE's IT Security team trains and collaborates across the organization along with outside partners and governmental agencies to maintain visibility and detection of continuously evolving threats and protection of MGE's digital systems. MGE has developed a security awareness program to help employees make sound security decisions through ongoing security awareness, education, and training activities. MGE has cyber incident response plans that detail identification, response, and recovery procedures in the event of a cyber incident. Periodic third-party penetration tests and vulnerability scans are performed both internally and externally to assess MGE's security measures and validate MGE's processes and procedures during a threat. In addition to assessing its own cybersecurity preparedness, MGE's security team also considers and evaluates cybersecurity risks associated with use of third-party service providers to confirm that security standards are met. MGE relies on third parties to deliver its products and services to customers, and a cybersecurity incident at a supplier, subcontractor, or joint venture partner could materially impact MGE. Third-party cybersecurity controls are assessed through a cybersecurity questionnaire, and security and privacy addendums are included in contracts when applicable. Furthermore, at least annually vendor System and Organization Controls (SOC) 1 or SOC 2 reports are reviewed by internal business owners, if available. MGE's assessment of risks associated with use of third-party providers is part of the overall cybersecurity risk management framework. MGE has a cyber insurance policy to mitigate risk of financial damages. In an event of a material cyber incident, MGE engages representatives of the insurer in accordance with the cyber incident response plan.

Governance

Enterprise-wide risk assessment and oversight are fundamental responsibilities of the Board, including cybersecurity. The Board, of which four members have technology and cybersecurity skills, is involved in the process of overseeing the primary risks faced in the conduct of our business. The Board receives, on an ongoing basis, information from management related to key business risks and mitigation strategies. These business risks include existing and emerging risks related to information technology systems and cybersecurity. Updates to the ERM risk register are provided to the Audit Committee of the Board semiannually, which includes a cybersecurity risk assessment. Annually, management presents the Company's cybersecurity strategy and initiatives to the Board. In addition, management provides quarterly cybersecurity updates to the Audit Committee to inform regarding any incidents, changes in risk or threat landscape, and provide any relevant information regarding trending topics in cybersecurity as it pertains to MGE Energy and its subsidiaries.

The Chief Financial Officer (CFO) & Treasurer and Chief Information Officer (CIO) are the system owners for electronic information and, in that capacity, are responsible for the processing, integrity, security, and availability of electronic information under their jurisdiction. The CFO has over 15 years of experience spanning several IT functions and levels of management, IT audit, applications development, project management, infrastructure and telecommunications, and cybersecurity. The CIO has over 25 years of IT experience, including ten years dedicated to cybersecurity in the utility, insurance, and financial sectors, and maintains a Certified Information Systems Security Professional (CISSP) certification. The CIO's cybersecurity experience includes engineering, architecture, incident response, and management.

MGE has had no material cyber security incidents that affected business strategy, results of operations, or financial condition as of the date of this report. However, MGE Energy and its subsidiaries face risks from cybersecurity threats, including as a result of any cyber incidents, that could materially affect its business strategy, results of operations, and financial condition, cash flows or reputation. However, such risks have not materially affected us to date. For more information about the cybersecurity-related risks we face, see the risks detailed under the heading "Our operations and confidential information are subject to the risk of physical or cyber attacks, which could have an adverse effect on our business and performance" included as part of our risk factor disclosures in Part I, Item 1A. of this Report.

Electric Generation

Net summer rated capacity in service as of December 31, 2025, was as follows:

(a) Net summer rated capacity is determined by annual testing (measured in June, July or August) and may vary from year to year due to, among other things, the operating and physical conditions of the units.

(b) All facilities shown are owned by MGE unless footnoted otherwise.

(c) MGE jointly owns these facilities with various other utilities. The capacity shown represents MGE's ownership share:

• Columbia is jointly-owned by MGE, WPSC and WPL, which operates the facility. MGE's ownership interest is 19%. See "Columbia" below for further information.
• Elm Road Units is jointly owned by MGE, WPPI Energy, Inc, and WEC, which operates the units. MGE's ownership interest is 8.33%. See "Elm Road Units" below for further information.
• WCCF is jointly-owned by MGE and UW. Per the joint plant agreement, the UW is allocated 17 MW of the net capability of these units during the summer cooling season. The net summer-rated capacity shown reflects this decrease. MGE's ownership interest is 55%. See "WCCF" below for further information.
• West Riverside is jointly owned by multiple parties including MGE and WPL, which operates the facility. Power from this facility is shared in proportion to each owner's ownership interest. Commercial operation date of facility was 2020. MGE purchased its ownership interest of 6.9% in 2023 and 2024.
• Forward is jointly owned by MGE, WPL and WPSC, which operates the facility. Power from this facility is shared in proportion to each owner's ownership interest. Commercial operation date of facility was 2008. MGE purchased its 12.8% ownership interest in 2018.
• Red Barn is jointly owned by MGE and WPSC, which operates the facility. MGE's ownership interest is 10%.
• Two Creeks and Badger Hollow I and II are both jointly owned with WPSC, which operates the facilities. MGE's ownership interest is 33%.
• Paris and Darien are both jointly owned by MGE, WPSC and WEPCO, which operates the facilities. MGE's ownership interest is 10%.

(d) ULSFO is ultra low-sulfur fuel oil.

Columbia

MGE and two other utilities jointly own Columbia, a coal-fired generating facility consisting of two units, which, as of December 31, 2025, accounted for 21% of MGE's net summer rated capacity. Power from this facility is shared in proportion to each owner's ownership interest. As of December 31, 2025, MGE had a 19% ownership interest in Columbia. The other owners are WPL, which operates Columbia, and WPSC. 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.

The Columbia units burn low-sulfur sub-bituminous coal obtained from the Powder River Basin coal fields located in Wyoming. The coal inventory supply for the Columbia units was approximately 87 days as of December 31, 2024, and approximately 84 days as of December 31, 2025.

Elm Road Units and WCCF

MGE Power Elm Road and two other utilities own undivided interests in the Elm Road Units, consisting of two units, which, as of December 31, 2025, accounted for 11% of MGE's net summer rated capacity. Power from these units is shared in proportion to each owner's ownership interest. MGE Power Elm Road owns an 8.33% ownership interest in the Elm Road Units, and its interest in the Elm Road Units is leased to MGE. The other owners are Wisconsin Energy Corporation, which operates the units, and WPPI Energy, Inc. The Elm Road Units burn sub-bituminous coal from the Powder River Basin in Wyoming and bituminous coal obtained from northern West Virginia and southwestern Pennsylvania. MGE's share of the coal inventory supply for the Elm Road Units was approximately 59 days as of December 31, 2024, and approximately 48 days as of December 31, 2025. MGE Power Elm Road's share of the Elm Road Units is reflected in "Property, plant, and equipment, net" on MGE Energy's and MGE's consolidated balance sheets. In October 2025, MGE, along with the plant co-owners, filed a joint application with the PSCW to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. Transition plans and costs will be subject to PSCW approval. By the end of 2030, coal is expected to be used only as a backup fuel at the Elm Road Units. By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal.

MGE Power West Campus and the UW jointly own undivided interests in a natural gas-fired cogeneration facility on the UW campus. The facility has the capacity to produce 30,000 tons of chilled water, 500,000 pounds per hour of steam, and approximately 150 MW of electricity. The UW owns 45% of the facility, which represents its interest in the chilled-water and steam assets. These assets are used to meet a part of the UW's need for air-conditioning and steam-heat capacity. MGE Power West Campus owns 55% of the facility, which represents its interest in the electric generating assets. These assets are used to provide electricity to MGE's customers. The UW's share of the plant and portion of the earnings from the WCCF are not reflected in the consolidated financial statements of MGE Energy or MGE. MGE Power West Campus's share of the plant is reflected in "Property, plant, and equipment, net" on MGE Energy's and MGE's consolidated balance sheets.

MGE leases MGE Power Elm Road's ownership interest in the Elm Road Units pursuant to two separate facility leases. MGE leases the electric generating assets owned by MGE Power West Campus and is responsible for operating the entire facility. At the end of the respective lease terms, MGE may, at its option, renew the facility lease for an additional term, purchase the leased ownership interest at fair market value, or allow the lease to end. The financial terms of the facility lease agreements are as follows:

29

Electric and Gas Distribution Facilities

As of December 31, 2025, MGE owned 811 miles of overhead electric distribution line and 1,386 miles of underground electric distribution cable, all of which are located in Wisconsin. These electric distribution facilities are connected by 47 substations, installed with a capacity of 1.2 million kVA. MGE's gas facilities include 3,117 miles of distribution mains, which are all owned by MGE.

A significant portion of MGE's electric and gas distribution facilities are located above or underneath highways, streets, other public places, or property otherwise not owned by MGE. MGE believes that it has satisfactory rights to use those places or property in the form of permits, grants, easements, and licenses; however, it has not necessarily undertaken to examine the underlying title to the land upon which the rights rest.

Encumbrances

As of December 31, 2025, the principal plants and properties of MGE were subject to a lien related to its Indenture of Mortgage and Deed of Trust dated as of January 1, 1946, as amended and supplemented, under which MGE's first mortgage bonds were issued. On January 27, 2026, MGE completed a redemption of all outstanding first mortgage bonds, and delivered to the Trustee a satisfaction and discharge which, pursuant to the terms of the Indenture, effectively discharged the Indenture. MGE Power Elm Road has collaterally assigned its right to lease payments from MGE for the Elm Road Units in order to secure the repayment of the senior secured notes issued by MGE Power Elm Road. MGE Power West Campus has collaterally assigned its right to lease payments from MGE for the WCCF in order to secure the repayment of the senior secured notes issued by MGE Power West Campus. See Footnote 14 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for additional information regarding these first mortgage bonds and the entitlement of certain senior notes issued by MGE to be equally and ratably secured if MGE issues additional first mortgage bonds.

MGE Energy and MGE

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 "Environmental Regulations" under Part I, Item 1. Business and Footnote 16.a. of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for a description of several environmental proceedings affecting MGE. See Footnote 16b. of the Notes to Consolidated Financial Statements under Part II, Item 8. Financial Statements and Supplementary Data in this Report for a description of other legal matters.

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 170,000 customers in Dane County, Wisconsin,
• Regulated gas utility operations, conducted through MGE, which distribute natural gas to approximately 180,000 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.

Our primary focus is our core utility customers, which are served by MGE as well as creating long-term value for our shareholders. MGE seeks to meet its customers' expectations for reasonably priced, reliable electric and gas service provided in a responsible manner. That responsibility is manifested in actions MGE has taken, and will continue to take, to achieve its goal of net-zero carbon by 2050.

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

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.

We have not included a discussion of results of operations and changes in financial position for the year ended December 31, 2024, as compared to the year ended December 31, 2023. That discussion can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on February 25, 2025.

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,
• Rates, 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 of this Report.

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

MGE Energy's net income (loss) was derived from our business segments as follows:

(In millions)

Our net income during 2025 compared to 2024 primarily reflects the effects of the following factors:

Electric Utility

Earnings for 2025 increased year-over-year, primarily driven by a rise in the rate base due to increased electric investments approved in the 2024/2025 rate case. Additionally, higher electric residential sales contributed to the increase, partially due to growth in residential customers. Favorable weather conditions further contributed to increased residential sales in 2025.

Gas Utility

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

Significant Events

The following events affected our results of operations in 2025:

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

The 2024/2025 rate order included an earnings sharing mechanism, under which, if MGE earns above the 9.7% ROE authorized in the rate order: (i) MGE will retain 100% of earnings for the first 15 basis points above the authorized ROE; (ii) 50% of the next 60 basis points will be required to be deferred and returned to customers; and (iii) 100% of any remaining excess earnings will be required to be refunded to customers. The earnings calculation excludes fuel rules adjustments.

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

(a) Excluding AFUDC.

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

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

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

Tax Update: On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing significant changes to tax credits and compliance requirements. See "Other Matters" below for additional information on the OBBBA.

ATC Return on Equity: As discussed in "Other Matters" below, ATC's authorized ROE, which is used in calculating its rates and revenues, was the subject of a challenge before FERC. A decrease in ATC's ROE could result in lower equity earnings and distributions from ATC in the future. MGE Energy derived approximately 6.6% and 7.4% of net income for 2025 and 2024, respectively, from the investment in ATC.

During 2026, several items may affect our financial condition and results of operations, including:

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. See "Other Matters" below for additional information on the 2026/2027 rate case settlement.

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.

• Growing renewable generation and storage. MGE is seeking to acquire, or has acquired, joint interests in several renewable generation and storage projects. The forecasted capital expenditures include approximately 252 MW of solar, 18 MW of wind, and 125 MW of storage, which include projects approved or pending PSCW approval. See the 2026-2030 capital expenditures forecast included under "Liquidity and Capital Resources" below for information on those projects.
• Transitioning away from coal. Elm Road Units: In October 2025, MGE, along with the plant co-owners, filed a joint application with the PSCW to end the use of coal as a primary fuel at the Elm Road Units and transition the plant to natural gas. See the

2026-2030 capital expenditures forecast included under "Liquidity and Capital Resources" below for additional information. By the end of 2030, coal is expected to be used only as a backup fuel at the Elm Road Units. By the end of 2032, MGE expects that the Elm Road Units will be fully transitioned away from coal.

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 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 the executive orders on Tariffs.

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

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 22 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report.

Results of Operations

Year Ended December 31, 2025, Versus the Year Ended December 31, 2024

Electric sales and revenues

The following table compares MGE's electric revenues and electric kWh sales by customer class for each of the years indicated:

(In thousands, except CDD)

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

(In millions)

• Sales to the market. Sales to the market typically occur when MGE has more generation in the MISO market than are needed for its customer demand. The excess electricity is then sold to other utilities or power marketers in the MISO market. During 2025, market volumes increased compared to 2024, reflecting increase in sales. Additionally, the cost of capacity sold increased, contributing to the revenue generated from increased sales to the market from excess generation and purchases. The revenue generated from these sales is largely offset by fuel rules costs, and do not have a significant impact on net income. See fuel rules discussion in Footnote 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report.
• Rate changes. In December 2024, the PSCW authorized MGE to increase 2025 rates for retail electric customers by approximately 2.63%. Rates charged to retail customers during 2025 were $10.0 million higher than those charged during 2024. See Footnote 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for further information on the rate increase. Any increase in rates associated with fuel or purchase power costs are generally offset in fuel and purchased power costs and do not have a significant impact on net income.
• Residential Volume. During 2025, residential sales increased by approximately 5% compared to 2024. This increase was driven by favorable weather conditions and an increase in customers during 2025, compared to the same period in the prior year.
• Customer fixed and demand charges. During 2025, fixed and demand charges increased $4.9 million primarily attributable to the increase in demand charges for commercial customers.
• Commercial, industrial, and other-retail/municipal volume. During 2025, there was an approximately 2% increase in commercial sales compared to the same period in the prior year. This increase was driven by more favorable weather conditions and increased use per customer in the current year.
• 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)

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

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

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 outside the fuel rules bandwidth in customer rates. See Footnote 9 of the Notes to Consolidated Financial Statements in Part II, Item 8 of 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 during each of the years indicated:

(In thousands, except HDD and average

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

(In millions)

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 2025.

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

• Volume. For 2025, retail gas deliveries increased approximately 14% compared to 2024 primarily attributable to unfavorable weather conditions in 2024.
• 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.
• Other. Other gas revenues decreased in 2025 compared to 2024 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 $24.3 million in 2025 compared to 2024. Therms delivered increased approximately 14% primarily driven by weather and cost per therm increased approximately 14%. MGE recovers the cost of natural gas in its gas segment through the PGA as described under gas deliveries and revenues above.

Consolidated operations and maintenance expenses

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

(In millions)

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

Consolidated depreciation expense

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

Electric and gas other income

Electric other income increased $1.0 million and gas other income decreased $0.4 million during 2025, compared to 2024, primarily related to pension and other postretirement costs, excluding service costs. 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 certain of MGE Energy's subsidiaries: MGE Power Elm Road (the Elm Road Units) and MGE Power West Campus (WCCF), which have been formed to own and lease electric generating capacity to assist MGE. For 2025 and 2024, net income at the nonregulated energy operations segment was $24.8 million and $24.1 million, respectively.

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 2025 and 2024, other income from the transmission investment segment primarily reflected ATC's operations and was $13.0 million and $12.3 million, respectively. See Footnote 7 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report and "Other Matters" below for summarized financial information regarding ATC.

All Other Operations - MGE Energy

Other income

The increase of $0.6 million in other income from all other operations during 2025 compared to 2024, primarily reflects results from investment gains recognized in the current year, from venture capital funds. These venture capital investments support early-stage companies working to advance smart technologies, the customer experience, distributed energy resources, electrification, cybersecurity and other priorities for utility companies, such as greater sustainability. This increase was partially offset by a $2.5 million (pre-tax) voluntary contribution to the Madison Gas and Electric Foundation, MGE's philanthropic arm, in 2025.

Consolidated Income Taxes - MGE Energy and MGE

See Footnote 10 of the Notes to Consolidated Financial Statements in Part II, Item 8 of 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 and MGE Power West Campus. 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)

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 beginning of 2025, MGE Energy issued new shares of common stock to participants in our Direct Stock Purchase and Dividend Reinvestment Plan until May 2025 when it purchased shares in the open market. Beginning in March 2026, MGE Energy expects to issue new shares of common stock to 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. 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" below for information regarding MGE Energy's and MGE's credit facilities.

Cash Flows

The following summarizes cash flows for MGE Energy and MGE during 2025 and 2024:

(In thousands)

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 (decreases) increases in cash flows from operating activities during 2025, compared to 2024, were as follows:

(In millions)

Capital Requirements and Investing Activities

The principal (decreases) increases in cash flows from investing activities during 2025, compared to 2024, were as follows:

(In millions)

See "Capital Expenditures" below for more information.

Capital Expenditures

The following table shows MGE Energy's actual capital expenditures for both 2024 and 2025, and forecasted capital expenditures for 2026 through 2030:

(In thousands)

Forecasted capital expenditures are based upon management's assumptions with respect to future events, including the timing and amount of expenditures associated with environmental compliance initiatives, legislative and regulatory action, supply chain and market disruptions, customer demand and support for electrification and renewable energy resources, energy conservation programs, load growth, the timing of any required regulatory approvals, and the adequacy of rate recovery. Actual events may differ materially from these assumptions and result in material changes to those forecasted amounts.

Forecasted capital expenditures reflect the following significant generation and storage projects that are currently under construction or pending regulatory approval:

(a) Approved by the PSCW.

(b) Excluding AFUDC.

(c) MGE received PSCW approval to recover 100% AFUDC.

(d) See Footnote 6 of Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for information on costs incurred.

(e) Pending approval by the PSCW.

(f) 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.

(g) The project was awarded with a grant from the U.S. Department of Energy Office of Clean Energy Demonstrations. The grant will reduce the total estimated project expenses. MGE holds a 19% ownership interest in this project and the cost, after grant, is expected to be approximately $16 million.

(h) In October 2025, MGE and other co-owners filed a joint application with the PSCW for upgrades to the non-regulated Elm Road Units. The project would convert existing coal-fired boilers to natural gas. MGE holds an 8.33% ownership interest in the facility. MGE's estimated cost is approximately $11 million. If approved, the project is expected to be placed in service in 2028.

(i) In February 2026, MGE executed an asset purchase agreement to acquire 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 project is expected to be placed in service in 2027.

MGE continues to assess the potential impact of procurement disruptions on current and future generation projects that may result in an increase in costs or delays in construction timelines. In the event that such disruptions cause costs to exceed the levels approved for specific projects, we have filed, and expect to continue to file, notifications with the PSCW and expect to request recovery of any increases in MGE's future rate proceedings. See further information on procurement disruptions discussed earlier under "Executive Overview."

Other local solar and battery storage projects: In 2026 through 2028, electric renewable capital expenditures include local investments in solar generation and battery storage. Forecasted total capital expenditures for those years is approximately $55 million.

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 2025, compared to 2024, were as follows:

(In millions)

(a) The noncontrolling interest arises from the accounting required for the entities, which are not owned by MGE but are consolidated as VIEs.

(b) During both 2025 and 2024, MGE issued $50 million of senior unsecured notes that were used to assist with financing additional capital expenditures and other corporate obligations.

Dividend Restrictions

Dividend payments by MGE to MGE Energy are subject to restrictions arising under a PSCW rate order. The PSCW order restricts any dividends that MGE may pay MGE Energy if its common equity ratio, calculated in the manner used in the rate proceeding, is less than 55%. MGE's thirteen month rolling average common equity ratio as of December 31, 2025, is 58.0%, as determined under the calculation used in the rate proceeding. This restriction did not restrict MGE's payment of dividends in 2025. Cash dividends of $51.5 million and $34.5 million, respectively, were paid by MGE to MGE Energy in 2025 and 2024. The rate proceeding calculation includes indebtedness imputed amounts for MGE's outstanding purchase power capacity payments and other PSCW adjustments but does not include the indebtedness associated with MGE Power Elm Road and MGE Power West Campus, which are consolidated into MGE's financial statements but are not direct obligations of MGE.

MGE covenanted with the holders of its first mortgage bonds not to declare or pay any dividend or make any other distribution on or purchase any shares of its common stock unless, after giving effect thereto, the aggregate amount of all such dividends and distributions and all amounts applied to such purchases, after December 31, 1945, shall not exceed the earned surplus (retained earnings) accumulated subsequent to December 31, 1945. As of December 31, 2025, approximately $807.2 million was available for the payment of dividends under this covenant. On January 27, 2026, MGE completed a redemption of all outstanding first mortgage bonds, and delivered to the Trustee a satisfaction and discharge which, pursuant to the terms of the Indenture, effectively discharged the Indenture.

MGE Power West Campus has covenanted with the holders of its outstanding senior secured notes not to declare or make distributions to us in the event that, both before and after giving effect to such distribution, its total debt to total capitalization would exceed 0.65 to 1.00 or its projected debt service coverage ratio for the following four fiscal quarters would be less than 1.25 to 1.00. Projected debt service coverage considers the projected revenues available for debt service, after deducting expenses other than debt service, in relation to projected debt service on indebtedness.

MGE Power Elm Road has covenanted with the holders of its outstanding senior secured notes not to declare or make distributions to us in the event that, both before and after giving effect to such distribution, its projected debt service coverage ratio for the following four fiscal quarters would be less than 1.25 to 1.00. Projected debt service coverage considers the projected revenues available for debt service, after deducting expenses other than debt service, in relation to projected debt service on indebtedness.

Credit Facilities

As of December 31, 2025, MGE Energy and MGE had the following aggregate bank commitments and available capacity under their credit agreements:

(In millions)

Borrowings under the Credit Agreements may bear interest at a rate based upon either a "floating rate" or an "Adjusted Term SOFR Rate," plus an adder based upon the credit ratings assigned to MGE's senior unsecured long-term debt securities. The "floating rate" is calculated on a daily basis as the highest of a prime rate and several adjusted interest rate indices (as set forth in the Credit Agreements), subject to a floor of one percent per annum or zero, depending on the credit agreement. The "floating rate" adder ranges from zero to 0.125%. The "Adjusted Term SOFR Rate" is calculated as provided in the Credit Agreements. The "Adjusted Term SOFR Rate" adder ranges from 0.625% to 1.125%.

The credit agreements require the borrower to maintain a ratio of consolidated debt to consolidated total capitalization not to exceed a maximum of 65%. In the case of MGE, the ratio calculation excludes assets, liabilities, revenues, and expenses included in MGE's financial statements as a result of the consolidation of VIEs, such as MGE Power Elm Road and MGE Power West Campus. As of December 31, 2025, the ratio of consolidated debt to consolidated total capitalization for each of MGE Energy and MGE, as calculated under the credit agreements' covenant, were 41.1% and 44.5%, respectively. See Footnote 13 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for additional information regarding the credit facilities.

Capitalization Ratios

MGE Energy's capitalization ratios were as follows:

(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.

Contractual Obligations and Commercial Commitments for MGE Energy and MGE

MGE Energy's and MGE's contractual obligations as of December 31, 2025, representing future cash obligations that are considered to be firm commitments, are as follows:

(In thousands)

(a) Long-term debt consisting of unsecured medium-term notes and Industrial Development Revenue Bonds issued by MGE, and private placement debt issued by MGE, MGE Power Elm Road, and MGE Power West Campus. See Footnote 14 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for further discussion of the long-term debt outstanding as of December 31, 2025.

(b) Short-term debt consisting of commercial paper and a promissory note for MGE. See Footnote 13 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report.

(c) Amount represents interest expense on long-term debt. See Footnote 14 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for further discussion of the long-term debt outstanding as of December 31, 2025.

(d) Leases. See Footnote 5 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report.

(e) Purchase obligations consist primarily of the purchase of electricity and natural gas, electric transmission, natural gas storage capacity, natural gas pipeline transportation, and the purchase and transport of coal. See Footnote 16.c. of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report.

(f) Construction obligations consist of solar, wind, and storage projects approved.

(g) Other obligations are primarily related to investment commitments, environmental projects, and uncertain tax positions.

The above amounts do not include any contributions for MGE's pension and postretirement plans. MGE does not expect to need to make any required contributions to the qualified plans for 2026. The contributions for years after 2026 are not yet currently estimated. Due to uncertainties in the future economic performance of plan assets, discount rates, and other key assumptions, estimated contributions are subject to change. MGE may also elect to make additional discretionary contributions to the plans.

The above amounts do not include future capital calls by ATC and ATC Holdco. In January 2026, MGE Transco made a $4.5 million contribution to ATC. The amount and timing of future capital calls to these entities is uncertain and primarily dependent on the operations and expansion of ATC and the development activities by ATC Holdco.

In January 2026, MGE entered into a private placement Note Purchase Agreement in which it issued $90 million of senior unsecured notes. In January 2026, MGE completed a redemption of all $1.2 million of its outstanding first mortgage bonds, which were the last remaining series of first mortgage bonds outstanding under the Indenture. See Footnote 14 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for information on the senior note issuance and redemption of the first mortgage bonds.

MGE Energy's and MGE's commercial commitments as of December 31, 2025, representing commitments triggered by future events and including financing arrangements to secure obligations of MGE Energy and MGE, are as follows:

(In thousands)

(a) Amount includes the facilities discussed in (b) plus an additional line of credit. MGE Energy has available at any time a $50 million committed revolving credit agreement, expiring in November 2027. As of December 31, 2025, MGE Energy had no borrowings outstanding under this credit facility.

(b) Amount includes two committed revolving credit agreements totaling $130 million expiring in November 2027. These credit facilities are used to support commercial paper issuances. As of December 31, 2025, MGE had $92.5 million of commercial paper outstanding backed by the facilities and no borrowings outstanding. As of December 31, 2025, MGE had $0.6 million of letters of credit issued inside credit facilities.

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 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.

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

(Dollars in thousands)

(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 which 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) Authorized 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.

See Footnote 9.a. of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for further discussion of rate proceedings.

ATC

MISO transmission owners, including ATC, were previously involved in complaints filed at the FERC challenging the base ROE applicable to MISO transmission owners for historical periods. In October 2024, FERC issued a final order resolving the remaining matters related to these complaints, resulting in a four‑basis‑point reduction to the base ROE applicable to the first complaint period and periods subsequent to September 2016, while reaffirming dismissal of the second complaint. Prior to the ruling, MGE Energy's share of ATC’s earnings reflected a possible loss of approximately $1.2 million, inclusive of interest and net of tax, for a possible additional refund for the First Complaint Period and for the period following the Second Complaint Period. As a result of the October 2024 ruling, during the fourth quarter 2024 earnings in ATC reflected an approximately $0.8 million reduction of the reserve. These matters were fully resolved in 2024 and had no impact on the Company's results of operations, cash flows, or financial condition in 2025.

We derived approximately 6.6% and 7.4% of our net income for 2025 and 2024, respectively from our investment in ATC.

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 Prevention 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, from 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. The U.S. International Trade Commission issued a final injury ruling in favor of the tariffs, which went into effect in June 2025. In August 2025, the U.S. Court of International Trade ruled that the two-year moratorium on these duties was illegal and therefore Customs and Border Protection may collect retroactive tariffs on imports that occurred during the moratorium. The case has been appealed to the U.S. Court of Appeals for the Federal Circuit and the order is stayed pending appeal. Furthermore, in late 2025, the Department of Commerce initiated new anti-dumping and countervailing duty investigations into solar imports from India, Indonesia, and Laos. Preliminary determinations for these investigations are expected in early 2026, which may further restrict the availability of alternative supply sources. 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 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.

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

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, introducing significant changes to tax credits and compliance requirements. The OBBBA accelerates the termination of the Clean Electricity Production Tax Credit (PTC) and Clean Electricity Investment Tax Credit (ITC) for wind and solar projects placed in service after December 31, 2027, unless construction begins by July 4, 2026. 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 stringent restrictions on tax credit eligibility, disallowing credits, and other provisions for projects involving material assistance from specified foreign entities or foreign-influenced entities for projects that begin construction after December 31, 2025. The Treasury Department issued new beginning of construction guidance in August 2025. The bill also increases domestic content requirements. On February 12, 2026, the Treasury Department and the IRS issued Notice 2026-15, providing interim guidance on these restrictions, including the establishment of the Material Assistance Cost Ratio (MACR) and related safe harbors to determine the impact of foreign-sourced components on credit eligibility. MGE has evaluated the impact of the OBBBA and will continue monitoring Treasury Department updates and engaging with industry groups to ensure compliance.

Critical Accounting Estimates - MGE Energy and MGE

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, estimates are evaluated, including those related to regulatory assets and liabilities, unbilled revenues, pension obligations, and income taxes. Estimates are based on historical experience and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Those values may differ from these estimates under different assumptions or conditions. We believe the following critical accounting estimates affect the more significant judgments used in the preparation of the consolidated financial statements.

Regulatory Assets/Liabilities

Regulatory assets represent costs that have been deferred to future periods when it is probable that the regulator will allow future recovery of those costs through rates. MGE bases its assessment of recovery on precedents established by the regulatory body. Regulatory liabilities represent previous collections from customers that are expected to be refunded to customers in future periods. Regulatory assets and regulatory liabilities typically include deferral of energy costs, the normalization of income taxes, pension and other postretirement costs, the deferral of certain operating expenses, and non-ARO removal costs. The accounting for these regulatory assets and liabilities is in accordance with regulatory accounting standards.

MGE continually assesses whether the regulatory assets and liabilities meet the criteria for probability of future recovery or deferral. This assessment considers factors such as changes in the regulatory environment, recent rate orders to other regulated entities under the same jurisdiction, and the status of any pending or potential deregulation legislation. If future recovery of costs becomes no longer probable, the assets and liabilities would be recognized as current-period revenues or expenses.

Amortization of regulatory assets and liabilities is provided over the recovery or deferral period as allowed in the related regulatory agreement.

Unbilled Revenues

Revenues from the sale of electricity and gas are recorded when they are delivered to customers. Sales quantity is measured by customers' meters. Due to the large volume of those meters, it is impractical to read all of them at month end. Meters are read on a systematic basis throughout the month based on established meter-reading schedules. Consequently, at the end of any month, there exists a quantity of electricity and gas that has been delivered to customers but has not been captured by the meter readings. As a result, management must estimate revenue related to electricity and gas delivered to customers between meter-read dates and the end of the reporting period. These estimates include:

• The amount of electricity expected to be lost in the process of its transmission and distribution to customers (referred to as line loss) and the amount of electricity actually delivered to customers.
• The amount of gas expected to be lost in the process of distribution to customers and the amount of gas actually delivered to customers.
• The mix of sales between customer rate classes having different rates, which is based upon historical utilization assumptions.

MGE monitors the reasonableness of the unbilled revenue estimate through the review of ratios such as unbilled electric consumption compared to billed electric sales. To confirm the reasonableness of unbilled gas, the estimated unbilled consumption is compared to various other statistics, including percent of gas available for sale, change in unbilled month-to-month and change in unbilled compared to the prior year.

Pension and Other Postretirement Benefit Plans

MGE provides employees with certain retirement (pension) and postretirement (health care and life insurance) benefits. In order to measure the expense and obligations associated with these benefits, management must make a variety of estimates, including discount rates used to value certain liabilities, the expected return on plan assets set aside to fund these costs, the rate of compensation increase, employee turnover rates, retirement rates, health care trends, mortality rates, and other factors. These accounting estimates may change due to the uncertainty attached to the estimate as well as the fact that these estimates are difficult to measure. Different estimates used could result in recognizing different amounts of expense over different periods of time. Recovery in rates is expected.

MGE uses third-party specialists to assist with evaluating its assumptions and measurement of the costs and obligations associated with these retirement benefits. The discount rate and expected return on plan assets are based primarily on available investment yields and the historical performance of plan assets. They are critical accounting estimates because they are subject to management's judgment.

• Assumed return on assets. This assumption represents the rate of return on plan assets reflecting the average rate of earnings expected on the funds invested (or to be invested) to provide for the benefits included in the projected benefit obligation. For 2025, MGE used an assumed return on assets of 7.00% for pension and 7.00% for other postretirement benefits. In 2026, the pension asset assumption will decrease to 6.84% and the postretirement benefit assumption will increase to 7.02%. The annual expected rate of return is based on projected long-term equity and bond returns, maturities and asset allocations. Holding other assumptions constant, for every 1% reduction in the expected rate of return on plan assets, annual pension and other postretirement cost would increase by approximately $4.5 million, before taxes.
• Discount rate. The discount rate represents the rate at which pension obligations could effectively be settled on a present-value basis. MGE uses high-grade bond yields as a benchmark for determining the appropriate discount rate. MGE uses individual spot rates rather than a weighted average of the yield curve spot rates to measure the service cost and interest cost components for net periodic benefit cost. Holding other assumptions constant, a 0.5% decrease in the discount rate on the obligation balance as of December 31, 2025, would decrease annual pension and other postretirement credit by approximately $1.3 million, before taxes.
• Medical trend assumptions. The health care cost trend rate is the assumed rate of increase in per-capita health care charges.
• Mortality rate assumption. Expected mortality rates are used in the valuation to determine the expected duration of future benefit payments to the plan participants. MGE utilizes mortality tables and projection scales developed by the society of actuaries. These tables and scales were last updated in 2021.

See Footnote 11 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for additional discussion of these plans.

Income Tax Provision

MGE Energy's and MGE's income tax provisions, including both current and deferred components, are based on estimates, assumptions, calculations, and interpretation of tax statutes for the current and future years. Determination of current-year federal and state income tax will not be settled for years.

Management regularly makes assessments of tax return outcomes relative to financial statement tax provisions and adjusts the tax provisions in the period when facts become final.

Additionally, in determining the current income tax provision, an assessment is completed on temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in the balance sheets. For deferred tax assets, a likelihood assessment is completed to determine if these assets will be recovered through adjustments to future taxable income. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. A valuation allowance is recorded for those benefits that do not meet this criterion. An allowance is recorded reducing the asset to a value that is believed to be recoverable based on the expectation of future taxable income. The accounting estimate related to the valuation allowance is believed to be a critical accounting estimate because it is highly susceptible to change from period to period as it requires management to make assumptions about the future income over the lives of the deferred tax assets, and the impact of increasing or decreasing the valuation allowance is potentially material to the results of operations.

MGE Energy and MGE are potentially exposed to market risk associated with interest rates, commodity prices, and equity returns. MGE currently has no exposure to foreign currency risk. MGE manages some risk exposure through risk management policies and the use of derivative instruments. MGE's risk management policy prohibits speculative trading transactions.

Commodity Price Risk

MGE has commodity price risk exposure with respect to the price of natural gas, electricity, coal, emission credits, and oil. MGE's electric operations burn natural gas in several of its power plants and, in many cases, the cost of purchased power is tied to the cost of natural gas. MGE employs established policies and procedures to reduce the market risks associated with changing commodity prices. MGE's commodity risks are substantially mitigated by the current ratemaking process in place for recovering electric fuel cost, purchased energy costs, and the cost of natural gas.

The recovery of MGE's electric fuel costs is subject to fuel rules established by the PSCW. Fuel rules require Wisconsin utilities to defer electric fuel-related costs that fall outside a symmetrical cost tolerance band. 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. MGE was subject to a plus or minus 2% range in 2025. MGE assumes the risks and benefits of variances that are within the cost tolerance band. For 2026, $65 million in fuel and purchased power costs is expected to be recovered in rates and are subject to this rule to the extent that actual costs vary from that amount. See Footnote 9.b. of the Notes to Consolidated Financial Statements in Part II, Item 8 of this Report for additional information on fuel rules.

MGE recovers the cost of natural gas in its gas utility 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. If the commodity costs of gas exceed a monthly benchmark amount, the excess amount is subject to a prudence review and approval by the PSCW before it can be passed through to customers.

MGE also reduces price risk caused by market fluctuations via physical contracts and financial derivative contracts, including futures, swaps, options, forwards, and other contractual commitments. The maximum length of time over which cash flows related to energy commodities can be hedged under applicable PSCW approvals is four years.

MGE has financial gas and electric commodity contracts to hedge commodity price risk in the gas and electric utility segments. These contracts are primarily comprised of exchange-traded option and future contracts. MGE also holds financial transmission rights (FTRs), which are used to hedge the risk of increased transmission congestion charges. As of December 31, 2025, the cost basis of exchange traded derivatives and FTRs exceeded their fair value by $1.4 million. Under the PGA clause and electric fuel rules, MGE may include the costs and benefits of the aforementioned fuel price risk management tools in the costs of fuel (natural gas or power). Because these costs or benefits are recoverable, the related unrealized loss or gain has been deferred on the consolidated balance sheets as a regulatory asset or liability, respectively.

Interest Rate Risk

Both MGE Energy and MGE may have short term borrowings at varying interest rates. MGE issues commercial paper for its short-term borrowings, while MGE Energy draws from its current credit facility to meet short-term borrowing needs. Borrowing levels vary from period to period depending upon capital investments and other factors. Future short-term interest expense and payments will reflect both future short-term interest rates and borrowing levels. MGE Energy and MGE manage interest rate risk by limiting their variable rate exposure and continually monitoring the effects of market changes on interest rates. MGE is not exposed to changes in interest rates on a substantial portion of its long-term debt until that debt matures and is refinanced at market rates. Assuming the current level of short-term borrowings and assuming a 1% change in the 2025 average interest rate under those borrowings, it is estimated that 2025 interest expense and net income would have increased/decreased by $0.3 million for both MGE Energy and MGE.

Equity Price Risk - Pension-Related Assets

MGE currently funds its liabilities related to employee benefits through trust funds. These funds, which include investments in debt and equity securities, are managed by various third-party investment managers. Changes in the market value of these investments can have an impact on the future expenses related to these liabilities. Holding other assumptions constant, for every 1% reduction in the expected rate of return on plan assets, annual pension and other postretirement cost would increase by approximately $4.5 million, before taxes. MGE's risk of expense and annuity payments, as a result of changes in the market value of the trust funds, is mitigated in part through future rate actions by the PSCW. For the years ended December 31, 2025 and 2024, the value of employee benefit plans trusts' assets increased in value by approximately 14% and 11%, respectively.

Credit Risk - Counterparty

Credit risk is the loss that may result from counterparty nonperformance. MGE is exposed to credit risk primarily through its merchant energy business. MGE uses credit policies to manage credit risk, which include an established credit approval process, counterparty limits, credit mitigation measures such as collateral or prepayment arrangements, and using netting agreements.

Due to the possibility of extreme volatility in the prices of energy commodities and derivatives, the market value of contractual positions with individual counterparties could exceed established credit limits or collateral provided by those counterparties. If such a counterparty were then to fail to perform its obligations under its contract (for example, fail to deliver the electricity MGE originally contracted for), MGE could sustain a loss that could have a material impact on its financial results.

Additionally, if a counterparty were to default and MGE were to liquidate all contracts with that entity, MGE's credit loss could include: the loss in value of mark-to-market contracts, the amount owed for settled transactions, and additional payments to settle unrealized losses. As of December 31, 2025, no counterparties had defaulted.

MGE is obligated to provide service to all electric and gas customers within its franchised territories. MGE's franchised electric territory includes a 264 square-mile area in Dane County, Wisconsin, and MGE's franchised gas territory includes a service area covering 1,722 square miles in Wisconsin. Based on results for the year ended December 31, 2025, no one customer constituted more than 10% of total operating revenues for MGE Energy and MGE. Credit risk for electric and gas is managed by MGE's credit and collection policies, which are consistent with state regulatory requirements.

Cash, cash equivalents, and customer accounts receivable are the financial instruments that potentially subject MGE Energy and MGE to concentrations of credit risk. MGE Energy and MGE place their cash and cash equivalents with high credit-quality financial institutions. MGE has limited concentrations of credit risk from customer accounts receivable because of the large number of customers and relatively strong economy in its service territory.

MGE Energy and MGE

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

During the fourth 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 December 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.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 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.

MGE Energy and MGE

Management of MGE Energy and MGE are required to assess and report on the effectiveness of its internal control over financial reporting as of December 31, 2025. As a result of that assessment, management determined that there were no material weaknesses as of December 31, 2025 and, therefore, concluded that MGE Energy and MGE's internal control over financial reporting was effective. Management's Report on Internal Control Over Financial Reporting is included in Item 8. Financial Statements and Supplementary Data of this Report.