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Derivative and Hedging Instruments | 12 Months Ended
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Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative and Hedging Instruments | Derivative and Hedging Instruments - MGE Energy and MGE. a. Purpose. As part of its regular operations, MGE enters into contracts, including options, swaps, futures, forwards, and other contractual commitments, to manage its exposure to commodity prices and gas revenues. To the extent that these contracts are derivatives, MGE assesses whether or not the normal purchases or normal sales exclusion applies. For contracts to which this exclusion cannot be applied, MGE Energy and MGE recognize such derivatives in the consolidated balance sheets at fair value. The majority of MGE's derivative activities are conducted in accordance with its electric and gas risk management program, which is approved by the PSCW and limits the volume MGE can hedge with specific risk management strategies. The maximum length of time over which cash flows related to energy commodities can be hedged is four years. If the derivative qualifies for regulatory deferral, the derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. The deferred gain or loss is recognized in earnings in the delivery month applicable to the instrument. Gains and losses related to hedges qualifying for regulatory treatment are recoverable in gas rates through the PGA or in electric rates as a component of the fuel rules mechanism. b. Notional Amounts. The gross notional volume of open derivatives is as follows:
|  | December 31, 2013 |  | December 31, 2012 |
| Commodity derivative contracts | 458,660 MWh |  | 444,650 MWh |
| Commodity derivative contracts | 3,750,000 Dth |  | 1,980,000 Dth |
| FTRs | 1,984 MW |  | 2,670 MW |
c. Financial Statement Presentation. MGE Energy and MGE offset fair value amounts recognized for the right to reclaim collateral (a receivable) or the obligation to return collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty un der a master netting agreement. MGE purchases and sells exchange-traded and over-the-counter options, swaps, and future contracts. These arrangements are primarily entered into to help stabilize the price risk associated with gas or power purchases. These transactions are employed by both MGE's gas and electric segments. Additionally, as a result of the firm transmission agreements that MGE holds on transmission paths in the MISO market, MGE holds FTRs. An FTR is a financial instrument that entitles the holder to a stream of revenues or charges based on the differences in hourly day-ahead energy prices between two points on the transmission grid. The fair values of these instruments are reflected as a regulatory asset/liability depending on whether they are in a net loss/gain position. Depending on the nature of the instrument, the gain or loss associated with these transactions will be reflected as cost of gas sold, fuel for electric generation, or purchased power expense in the delivery month applicable to the instrument. At December 31, 2013 and 2012 the fair value of exchange traded derivatives and FTRs exceeded their cost basis by $1.8 million and $0.3 million, respectively. MGE is a party to a ten-year purchased power agreement that provides MGE with firm capacity and energy during a base term from June 1, 2012 through May 31, 2022. The agreement also allows MGE an option to extend the contract after the base term. The agreement is accounted for as a derivative contract and is recognized at its fair value on the consolidated balance sheet. However, the derivative qualifies for regulatory deferral and is recognized with a corresponding regulatory asset or liability depending on whether the fair value is in a loss or gain position. The fair value of the contract at December 31, 2013 and 2012, reflects a loss position of $65.7 million and $72.6 million, respectively. The actual fuel cost will be recognized in purchased power expense in the month of purchase. The following table summarizes the fair value of the derivative instruments on the consolidated balance sheet. All derivative instruments in this table are presented on a gross basis and are calculated prior to the netting of instruments with the same counterparty under a master netting agreement as well as the netting of collateral. For financial statement purposes, MGE Energy and MGE have netted instruments with the same counterparty under a master netting agreement as well as the netting of collateral.
| Asset Derivatives |  | Liability Derivatives
(In thousands) | Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
December 31, 2013 |  |  |  |  |  |  |
Commodity derivative contracts | Other current assets | $ | 1,356 | Derivative liability (current) | $ | 51
Commodity derivative contracts | Other deferred charges |  | 167 |  | Derivative liability (long-term) |  | 48
FTRs | Other current assets |  | 363 |  | Derivative liability (current) |  | 0
Ten-year PPA | N/A |  | N/A |  | Derivative liability (current) |  | 7,750
Ten-year PPA | N/A |  | N/A |  | Derivative liability (long-term) |  | 57,930
December 31, 2012 |  |  |  |  |  |  |
Commodity derivative contracts | Other current assets | $ | 365 |  | Derivative liability (current) | $ | 394
Commodity derivative contracts | Other deferred charges |  | 95 |  | Derivative liability (long-term) |  | 11
FTRs | Other current assets |  | 206 |  | Derivative liability (current) |  | 0
Ten-year PPA | N/A |  | N/A |  | Derivative liability (current) |  | 9,270
Ten-year PPA | N/A |  | N/A |  | Derivative liability (long-term) |  | 63,320
The following tables show the effect of netting arrangements for recognized derivative assets and liabilities that are subject to a master netting arrangement or similar arrangement on the balance sheet.
| Offsetting of Derivative Assets |
|  |  |  |  | Gross amounts |  | Collateral |  | Net amount |
|  |  |  |  | offset in |  | posted against |  | presented in |
| (In thousands) |  | Gross amounts |  | balance sheet |  | derivative positions |  | balance sheet |
| December 31, 2013 |  |  |  |  |  |  |  |  |
| Commodity derivative contracts | $ | 1,523 | $ | (99) | $ | (175) | $ | 1,249 |
| FTRs |  | 363 |  | - |  | - |  | 363 |
| December 31, 2012 |  |  |  |  |  |  |  |  |
| Commodity derivative contracts | $ | 460 | $ | (405) | $ | - | $ | 55 |
| FTRs |  | 206 |  | - |  | - |  | 206 |
| Offsetting of Derivative Liabilities |
|  |  |  |  | Gross amounts |  | Collateral |  | Net amount |
|  |  |  |  | offset in |  | posted against |  | presented in |
| (In thousands) |  | Gross amounts |  | balance sheet |  | derivative positions |  | balance sheet |
| December 31, 2013 |  |  |  |  |  |  |  |  |
| Commodity derivative contracts | $ | 99 | $ | (99) | $ | - | $ | - |
| Ten-year PPA |  | 65,680 |  | - |  | - |  | 65,680 |
| December 31, 2012 |  |  |  |  |  |  |  |  |
| Commodity derivative contracts | $ | 405 | $ | (405) | $ | - | $ | - |
| Ten-year PPA |  | 72,590 |  | - |  | - |  | 72,590 |
The following tables summarize the unrealized and realized gains (losses) related to the derivative instruments on the consolidated balance sheet at December 31, 2013 and 2012, and the consolidated income statement for the year ended December 31, 2013 and 2012.
|  | 2013 |  |  | 2012
(In thousands) |  | Current and Long-Term Regulatory Asset |  | Other Current Assets |  |  | Current and Long-Term Regulatory Asset |  | Other Current Assets
Year Ended December 31: |  |  |  |  |  |  |  |  |
Balance at January 1, | $ | 72,329 | $ | 574 |  | $ | 42,356 | $ | 1,604
Change in unrealized loss |  | (5,069) |  | 0 |  |  | 37,822 |  | 0
Realized loss reclassified to a deferred account |  | (823) |  | 823 |  |  | (2,857) |  | 2,857
Realized loss reclassified to income statement |  | (2,544) |  | (986) |  |  | (4,992) |  | (3,887)
Balance at December 31, | $ | 63,893 | $ | 411 |  | $ | 72,329 | $ | 574
|  |  | Realized losses (gains) |
|  |  | Fuel for Electric |  |  |
|  |  | Generation/ |  | Cost of |
| (In thousands) |  | Purchased Power |  | Gas Sold |
| Year Ended December 31, 2013: |  |  |  |  |
| Commodity derivative contracts | $ | (564) | $ | 868 |
| FTRs |  | (983) |  | 0 |
| Ten-year PPA |  | 4,209 |  | 0 |
| Year Ended December 31, 2012: |  |  |  |  |
| Commodity derivative contracts | $ | 2,620 | $ | 3,072 |
| FTRs |  | (45) |  | 0 |
| Ten-year PPA |  | 3,232 |  | 0 |
MGE's commodity derivative contracts, FTRs, and ten-year PPA are subject to regulatory deferral. These derivatives are marked to fair value and are offset with a corresponding regulatory asset or liability. Realized gains and losses are deferred on the consolidated balance sheet and are recognized in earnings in the delivery month applicable to the instrument. As a result of the above described treatment, there are no unrealized gains or losses that flow through earnings. The ten-year PPA has a provision that may require MGE to post collateral if MGE's debt rating falls below investment grade (i.e., below BBB-). The amount of collateral that it may be required to post varies from $20.0 million to $40.0 million, depending on MGE's nominated capacity amount. As of December 31, 2013, no collateral has been posted. Certain counterparties extend MGE a credit limit. If MGE exceeds these limits, the counterparties may require collateral to be posted. As of December 31, 2013 and 2012, no counterparties we re in a net liability position. Nonperformance of counterparties to the non-exchange traded derivatives could expose MGE to credit loss. However, MGE enters into transactions only with companies that meet or exceed strict credit guidelines, and it monitors these counterparties on an ongoing basis to mitigate nonperformance risk in its portfolio. As of December 31, 2013, no counterparties have defaulted.

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- Definition The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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