OPERATING AGREEMENT

­­­­­­­

MGE TRANSCO INVESTMENT  LLC

 The undersigned enter this Operating Agreement ("Agreement") for MGE Transco
Investment  LLC ("Company"), a limited liability company organized under Chapter
183 of the Wisconsin Statutes, as members of the Company ("Members").

ARTICLE I

Formation

1.1

Agreement.  For and in consideration of the mutual covenants of this Agreement,
the Members executing this Agreement agree to the terms and conditions of this
Agreement, as it may from time to time be amended according to its terms.

1.2

Ratification.  James B. Egle, as Organizer, filed Articles of Organization with
the Wisconsin Department of Financial Institutions on August 23, 2005.  A copy
of those Articles is attached as Exhibit A.  The actions of James B. Egle, as
Organizer, in executing and causing to be duly filed and recorded the Articles
of Organization of the Company, are ratified, approved and confirmed; the
Articles of Organization as filed are accepted, and the resignation of James B.
Egle, as Organizer, is given and accepted.

1.3

Sole Source.  It is the express intention of the Members that the Agreement
shall be the sole source of agreement of the parties.  This Agreement is an
"operating agreement" within the meaning of sec. 183.0102(16), Stats.  To the
extent that any provision of this Agreement conflicts with a default provision
of Chapter 183 of the Wisconsin Statutes, and Chapter 183 allows the default
provision to be varied by operating agreement, this Agreement and its provisions
shall control.

1.4

 Purposes.  The Company shall have the right to engage in any activity and to
exercise any powers permitted to limited liability companies under the laws of
the state of Wisconsin, but the Company shall restrict its investment activities
to the American Transmission Company LLC ("ATC LLC"), a Wisconsin limited
liability company, or its successor.  The Company is the assignee of an interest
in ATC LLC held by Madison Gas and Electric Company.

1.5

Effective Date.  This Agreement shall be effective when signed by both Members.

ARTICLE II

Principal Place of Business; Resident Agent

2.1

Principal Place of Business.  The  principal place of business of the Company
shall be 133 South Blair Street, Madison, WI 53703. The Company may have such
principal and other business offices, either within or outside the State of
Wisconsin, as the Members may designate or as the Company's business may require
from time to time.

2.2

Resident Agent.   Kristine A. Euclide shall be the Company's resident agent.
 The Company's resident agent may be changed from time to time by or under the
authority of the Managers.  

ARTICLE III

Definitions

The following terms used in this Agreement shall have the following meanings
(unless otherwise expressly provided herein):

3.1

"Affiliate" means any Person which, with respect to Madison Gas and Electric
Company, meets the definition of “affiliated interests” as set forth in section
196.52(1) of the Wisconsin Statutes.

3.2

"Articles of Organization" means the Articles of Organization of MGE Transco
Investment  LLC, as filed with the Wisconsin Department of Financial
Institutions, as amended from time to time.

3.3

"Capital Account" as of any given date shall mean the capital contribution to
the Company by a Member as adjusted to that date pursuant to Article IV.

3.4

"Code" shall mean the Internal Revenue Code of 1986 or corresponding provisions
of subsequent superseding federal revenue laws.

3.5

“Member” shall mean an entity listed on Exhibit B.

3.6

"Membership Interest" shall mean a Member's entire interest in the Company,
including such Member's Percentage Interest and such other rights and privileges
that the Member may enjoy by being a Member.

3.7

"Manager" shall mean any person named by the Members to serve as Manager, as set
forth in section 6 below.

3.8

"Percentage Interest" shall have the meaning set forth in section 4.4 below.

3.9

"Person" shall mean any person or entity.

3.10

"Treasury Regulations" shall include proposed, temporary and final regulations
promulgated under the Code in effect as of the date of filing the Articles of
Organization and the corresponding sections of any regulations subsequently
issued that amend or supersede such regulations.

ARTICLE IV

Capital Contributions

4.1

Initial Capital Contributions.  The Members have unanimously agreed to the
values set forth on Exhibit B as the valuation of the initial capital
contribution of Madison Gas and Electric Company, which consists of 1,875,849
membership units of ATC LLC.  MGE Energy, Inc., has not yet made any capital
contributions to the Company, but shall have the option to make any future
capital contributions requested by ATC LLC as provided by the ATC LLC operating
agreement dated January 1, 2001, as subsequently amended    If MGE Energy, Inc.
does not elect to meet a future capital contribution request by ATC LLC, then
Madison Gas and Electric Company may elect to do so (but is not required to do
so).

4.2

Capital Contribution of Dissociated Member.  No Member is entitled to receive
any distribution, or to receive a repayment of any balance of the Member's
Capital Account, except as provided in this Agreement.

4.3

No Interest; Company Loans.  No interest shall accrue on any capital
contribution. The Company shall restrict its borrowing activities to those
necessary to meet short-term working capital requirements.  At no time shall the
Company’s borrowings exceed one hundred thousand dollars ($100,000).

 

4.4

Percentage Interest.  Each Member's equity interest in the Company is
represented by a percentage (the "Percentage Interest").  The initial Percentage
Interest of each Member is set forth on Exhibit B.  The total Percentage
Interests of the Members at all times will equal 100%.The Managers shall
maintain a record of each Member's Percentage Interest, but apart from this
Agreement and such Company record, no share certificates or other evidence of
ownership of any Member's Percentage Interest will be issued.

a.

Percentage Interests shall be determined as follows:  Madison Gas and Electric
Company shall be credited with an initial capital contribution of $18,467,014.
 Madison Gas and Electric Company shall remain responsible for any deferred
taxes (and entitled to any deferred tax credits) attributable to its previous
ownership of the equity investment in ATC LLC. Future contributions by MGE
Energy, Inc., or MGE shall be valued at the amount of cash contributed to ATC
LLC pursuant to capital calls.   The initial contribution of Madison Gas and
Electric Company, and the total subsequent contributions of MGE Energy, Inc.,
and MGE shall be added to determine the denominator used in establishing the
Percentage Interests; the numerator for each party's interest shall be its
capital contributions relative to ATC LLC.  For example, if MGE Energy, Inc.
makes a $2 million capital contribution to ATC LLC in 2006, Madison Gas and
Electric Company would have a 90.228% Percentage Interest
($18,467,014/$20,467,014) and MGE Energy, Inc., would have a 9.772% Percentage
Interest ($2,000,000/$20,467,014).   For purposes of this Agreement, the
Percentage Interests shall be recalculated as of the last day of each month,
with each optional capital contribution to ATC LLC by MGE Energy, Inc., and MGE,
treated as being made at the end of the month.

 

b.

The Percentage Interests determine ownership of equity interests in the Company
for the purposes of voting.  Except as provided in Article VII, allocation of
income, deductions, profits and losses, and distributions corresponding to those
allocations, shall be made based on the Members’ pro rata share of Percentage
Interests at the time of the allocation.

4.5

Capital Account.  A Capital Account shall be established and maintained for each
Member in accordance with the following:

a.

Each Member’s Capital Account shall be increased by (i) the Member’s Capital
Contributions; (ii) the Member’s allocable share of  income and profits as
provided in section 4.4(b); and (iii) the amount of debt of the Company that is
assumed by the Member or that is secured by any property distributed to the
Member.

b.

Each Member’s Capital Account shall be decreased by (i) the amount of cash and
the fair market value, as determined by the Managers, of any Company asset
distributed to the Member; (ii) the Member’s allocable share of losses pursuant
to section 4.4(b); and (iii) the amount of any debt of the Member that is
assumed by the Company or secured by any property contributed by the Member to
the Company.

4.6

Adjustments.   The value of the Company’s property and the Capital Accounts of
the Members may be restated from time to time in accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv)(f) and (g); provided, however, that such
adjustments shall be made at any time a similar revaluation and restatement is
made by ATC LLC.

4.7

Incorporation.  The provisions of this Article IV and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulation Section 1.704-1(b), the terms and requirements
of which are incorporated hereby and shall be interpreted and applied in a
manner consistent with those terms and conditions.

ARTICLE V

Members’ Actions and Voting Rights

5.1

Authority and Powers in General.  Except to the extent otherwise provided in
this Agreement, the business of the Company shall be managed by the Managers,
and no Member shall have any right or power to take part in the management or
control of the Company or its business.   Except as such authority may be
limited, the Managers shall have full and complete authority to manage the
business of the Company, to make all decisions regarding those matters, and to
perform all other acts customary or incident to the management of the Company's
business. Members have the right to vote only on those matters expressly set
forth in this Agreement or as otherwise required by chapter 183 of the Wisconsin
Statutes.  The President of an entity that is a Member shall designate an
individual to represent the Member at any meetings of the Company; the
designation may be changed at any time by providing written notice to the
Managers of the Company.

5.2

Number of Managers; Selection of Managers; Term.   The Company shall have three
Managers.   The initial Managers shall be Gary J. Wolter, Kristine A. Euclide
and Jeffrey C. Newman.    The Members may replace a Manager or Managers at any
time, with or without cause, by Majority Consent of the Percentage Interests of
the Company held by Members.  The Managers shall devote such time, effort and
attention to the business as is reasonably necessary to accomplish the Company's
goals.  Provided, however, that Madison Gas and Electric Company, as an
operating public utility as defined in sec.196.02 of the Wisconsin Statutes,
shall have the right to name at least one Manager of the Company, which Manager
shall serve as the Company's representative on the  board of ATC Management
 Inc., as long as Madison Gas and Electric Company has the right to appoint a
member to the board of ATC Management Inc.

5.3

Quorum.  Except as otherwise provided by Chapter 183 of the Wisconsin Statutes,
Members holding a majority of the Percentage Interests entitled to vote,
represented in person or by proxy,  shall constitute a quorum at any meeting of
Members.  Action may be taken on a matter at a Members' meeting only if quorum
exists.  Once a Member is represented for any purpose at a meeting, other than
for the purpose of objecting to holding the meeting or transacting business at
the meeting, that Member is considered present for purposes of determining
whether a quorum exists for the remainder of the meeting and for any adjournment
of the meeting.  At the adjourned meeting at which a quorum is represented, any
business may be transacted that might have been transacted at the meeting as
originally noticed.

5.4

Voting.

a.

If a quorum exists, action on a matter is approved if the number of votes
represented at the meeting favoring the action exceeds the number of votes
represented at the meeting opposing the action, unless Chapter 183 of the
Wisconsin Statutes or another provision of this Agreement requires a greater
number of affirmative votes.

b.

Where this Agreement requires "Majority Consent," more than 50 percent of all
the Percentage Interests in the Company held by Members, whether or not
represented at the meeting, must approve the action, and "Unanimous Consent"
shall mean all Percentage Interests have approved the action.

c.

Each Member shall vote the Percentage Interest held by him or her in the same
manner as to any given issue.

d.

Any Member who is present at a meeting but who abstains from voting shall be
deemed to have voted his or her Percentage Interest in the same proportion and
manner as the Members not abstaining on the issue.

e.

Meetings may be conducted by telephone conference call if all Members are given
written notice of the meeting and the opportunity to participate.  One or more
Members may participate in a meeting by telephone, provided all Members
simultaneously hear all matters communicated over telephone.  A Member
participating by telephone is deemed to have attended the meeting for all
purposes.

f.

A Member who is not physically present at the meeting may assign his or her vote
to another Member by written proxy, or may vote on matters for which a vote is
taken orally if attending by telephone, or in writing transmitted by facsimile,
mail, e-mail or by courier, providing the Member's vote is received by all of
the Members participating in the meeting at the time the vote is taken.

5.5

Consent Resolutions.  Any action required or permitted by the Articles of
Organization, this Agreement, or any provision of Chapter 183, Wisconsin
Statutes, to be taken by the Members may be taken without a meeting by the
consent of those Members who would have the voting power to cast at a meeting
not less than the minimum number of votes that would be necessary to authorize
or take the action at a meeting at which all Percentage Interests entitled to
vote were present and voted.  The consent of the Members shall be effective when
one or more consents describing the action taken, signed by the number of
Members sufficient to take the action, are delivered to the Company for
inclusion in the Company's records, unless some other effective date is
specified in the consent.  Within ten days after action taken by consent of the
Members pursuant to this provision becomes effective, the Company shall give
notice of the action to Members who were not represented on the written consent
or consents.

ARTICLE VI

Management

6.1

Members' Management Rights.  Pursuant to sec. 183.0401(1) and (2), Stats., the
Members have vested management of the business and affairs of the Company in its
Managers.  No Member, in his or her capacity as such, shall have the authority
to act for the Company in any matter.  This Section 6.1 restricts management
rights and duties of the Members to the extent such rights and duties have been
delegated to the Managers.

6.2

Term of Managers.  Each Manager shall serve until (1) the Manager resigns, or
(2) the Manager is removed (with or without cause) by vote of the Members with
Majority Consent.

6.3

Authority, Powers of the Managers.

a.

Except to the extent otherwise provided in this Agreement, the Managers are
authorized to do on behalf of the Company all things that in their sole
judgment, are necessary, proper or desirable to carry out the business of the
Company in its ordinary course.  Acts by a Manager involving persons other than
Members are taken in his or her role as agent of the Company.

b.

Any person dealing with the Company or a Manager may rely upon a certificate
signed by a Manager as to:

(1)

The identity of the Members and the Managers;

(2)

The existence or non-existence of any fact or facts that constitute a condition
precedent to acts by the Managers or any other matter germane to the affairs of
the Company;

(3)

The persons who are authorized to execute and deliver any instrument or document
on behalf of the Company;

(4)

Any act or failure to act by the Company or its Members, or as to any other
matter involving the Company or any Member.

c.

Only the Managers have the right, power and authority to execute documents on
behalf of and in the name of the  Company, and no person shall be obligated to
inquire into the authority of a Manager to bind the company.

6.4

Restrictions on Manager's Authority.  

a.

A Manager shall not have the authority to:

(1)

do any act in contravention of law or this Agreement that would make it
impossible to carry on the ordinary business of the Company;

(2)

possess property of the Company or assign rights in the specific property of the
Company, for other than a purpose of the Company;

(3)

perform any act that would subject the Members to liability in any jurisdiction.

b.

Without Unanimous Consent, the Manager shall not have the authority to:

(1)

confess a judgment

(2)

incur indebtedness on behalf of the Company, enter a contract or pledge assets
of the Company other than in the ordinary course of business, consistent with
the Company's limited purposes;

(3)

make capital expenditures or expenditures for maintenance, except those
requested by ATC LLC (as assumed by MGE Energy, Inc., or Madison Gas and
Electric Company pursuant to this Agreement).

6.5

Records.  Pursuant to sec. 183.0405, Stats., the Managers shall keep the
following records:

a.

An alphabetical list of the full name and last known address of each past and
present Member and Manager, as well as the date on which the person became a
Member or Manager and the date any past member ceased being a Member or Manager.

b.

A copy of the Articles of Organization and all amendments to the articles,
together with executed copies of any powers of attorney under which the articles
were executed.

c.

Copies of the Company's federal and state income and franchise tax returns for
the most recent four years.

d.

Copies of this Agreement and all amendments to this Agreement.

e.

A list of the valuation of Members' contributions as determined under sec.
183.0501(2), Stats.

f.

A list of any agreements under which a Member has agreed to make additional
contributions.

g.

A list of all events upon which the Company shall be dissolved and its business
wound up.

h.

Copies of the minutes of any meetings of the Members and all informal action
resolutions signed by the Members.

Upon reasonable request, the Company shall allow a Member to inspect and copy
the above records during ordinary business hours.  Such inspection shall be at
the Member's  expense; the Member shall pay all reasonable copying expenses.
 The Managers shall provide true and full information of all things affecting
the Members to any Member or the legal representative of the Member upon
reasonable request of the Member or the legal representative.

6.6

Capital Accounts.   The Managers shall maintain a record of the capital account
of each Member in accordance with section 4.5 through 4.7 of this Agreement.
 The Managers may retain a certified public accountant or other qualified
individual to assist in the maintenance of this record.

6.7

Tax Matters Partner.  Pursuant to § 6231 of the Internal Revenue Code,  the
initial tax  matters partner shall be MGE Energy, Inc.  The tax matters partner
shall take such action as may be necessary to cause each other Member to become
a notice partner within the meaning of § 6223 of the Code.

6.8

Standard of Care.  A Manager shall discharge his or her duties as Manager in
good faith, and in a manner he or she reasonably believes to be in the best
interest of the Company.  A Manager shall not be liable to the Company or any
Members for any breach of such duties, except for the receipt of a financial
benefit to which the Manager is not entitled, making or assenting to a
distribution to Members in violation of this Agreement, or a loss or damage
resulting from a knowing violation of the law.

6.9

Indemnification.  The Company shall indemnify the Managers and make advances for
expenses to the maximum extent permitted under sec. 183.0403, Stats.  The
Company shall indemnify its Members, employees and other agents who are not
Members to the fullest extent permitted by law, provided that such
indemnification in any given situation is approved by Majority Consent.

6.10

Bank Accounts.  The Managers, from time to time, may open bank accounts in the
name of the Company and shall be the signatories on the account.

6.11

Manner of Acting by Managers.  Except to the extent otherwise provided in this
Agreement, the Managers are authorized to do on behalf of the Company all things
that in their sole judgment, are necessary, proper or desirable to carry out the
business of the Company in its ordinary course.  

 

ARTICLE VII

Allocations, Income Tax, Distributions, Elections and Reports

7.1

Profits and Losses. Except as expressly provided in this Article VII, income,
gain, loss, or deduction of the Company shall be allocated to the Members as
provided in section 4.4(b) of this Agreement.

7.2

Tax Allocations.  The following special allocations shall be made in the
following order:

a.

To the extent that the Company has interest income or deductions with respect to
any obligation of or to a Member pursuant to section 483, sections 1271-1288, or
section 7872 of the Code, such interest income or deductions shall be specially
allocated to the Member to whom the obligation relates.

b.

This Agreement shall be deemed to contain provisions relating to “minimum gain
chargeback,” “nonrecourse deductions,” “qualified income offset,” “gross income
allocations,” and any other provision required to be contained in the Agreement
pursuant to the Treasury Regulations under section 704(b) of the Code (the
“704(b) Allocations”), other than the requirement that a Member be required to
contribute to the Company an amount equal to any deficit in the Member’s capital
account.   No allocation of loss shall be made to a Member if the allocation
would result in a negative balance in the Member’s Capital Account in excess of
(a) the amount the Member has loaned the Company, or (b) the amount of Company
debt that the Member has guaranteed.  In the event there is a negative balance
in a Member’s Capital Account in excess of the amount(s) set forth above, the
Member shall be allocated income and gain the amount of that excess as quickly
as possible.  Any loss that cannot be allocated to a Member pursuant to the
restrictions contained in this paragraph shall be allocated to other Members.
  The other provisions of section 4.4 and Article VII notwithstanding, the
704(b) Allocations shall be taken into account in allocating other profits,
losses and items of income, gain, and deduction among the Members so that, to
the extent possible, the net amount of the allocations of other profits, losses
and other items and the 704(b) Allocations to each Member shall equal the net
amount that would have been allocated to each Member had the 704(b) Allocations
not occurred.

c.

In accordance with section 704(c) of the Code and the Treasury Regulations under
that section, income, gain, loss, or deduction with respect to any capital
contribution shall, solely for tax purposes, be allocated among Members so as to
take into account any variation between the adjusted basis of the property to
the Company for federal income tax purposes.

d.

Any elections or other decisions relating to such allocations shall be made by
the Managers in any manner that reasonably reflects the purpose and intent of
this Agreement.  Allocations pursuant to this Section are solely for the
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, any capital account, share of income, gain,
loss, or deduction, or distribution pursuant to any provision of this Agreement.

e.

The Members are aware of the income tax consequences of the allocations made by
this Article and agree to be bound by the provisions of this Article in
reporting their shares of income and loss for income tax purposes.

7.3

Distributions.  Distributions of distributable cash shall be made to the Members
when determined by the Managers, but in general any non-liquidating
distributions from ATC LLC shall be paid to the Members in accordance with their
respective Percentage Interests at the time of the distributions.

7.4

Limitation Upon Distributions.  Notwithstanding any provisions of this Article
to the contrary, pursuant to sec. 183.0607, Stats., no distribution shall be
declared and paid unless, after the distribution is made, the assets of the
Company are in excess of all liabilities of the Company, except liabilities to
Members on account of their contributions, or if the Company would be unable to
pay its debts in the ordinary course.

7.5

Accounting Principles.  The profits and losses of the Company shall be
determined in accordance with generally accepted accounting principles applied
on a consistent basis.  It is intended that the Company will elect those
accounting methods which provide the Company with the greatest tax benefits.

7.6

Accounting Period.  The Company's accounting period shall be the calendar year.

7.7

Returns and Other Elections. The Managers shall cause the preparation and timely
filing of all tax returns required to be filed by the Company pursuant to the
Code and all other tax returns deemed necessary and required in each
jurisdiction in which the Company does business.  Copies of such returns, or
pertinent information therefrom, shall be furnished to the Members within a
reasonable time after the end of the Company's fiscal year.

ARTICLE VIII

Transfers of Percentage Interest

A Member may voluntarily sell, assign or transfer all or a portion of its rights
with respect to, and interest in, the Company only with the consent of a
majority of the Managers.  Such a sale, assignment or transfer shall not result
in the dissolution of the Company.

ARTICLE IX

Dissolution

9.1

Dissolution.  The Company shall be dissolved and its affairs wound up upon the
first to occur of the following events:

a.

The Company being adjudicated insolvent or bankrupt;

b.

The entry of a decree of judicial dissolution pursuant to Chapter 183 of the
Wisconsin Statutes.

c.

The Unanimous Consent of the Members.

d.

The bankruptcy or insolvency of a Member.

9.2

Winding up and liquidation.  Upon a dissolution of the Company, the Managers
shall select a liquidator (the “Liquidator”) who may be a Manager of the
Company.  The Liquidator shall liquidate the Company’s assets to the extent
necessary to pay outstanding creditors of the Company and otherwise deemed
advisable by the Liquidator.  The Liquidator need not sell interests in ATC LLC.
if not required to do so to discharge debts and liabilities of the Company.  The
Liquidator shall apply and distribute the assets of the Company as follows:

a.

First, to the payment and discharge or all of the Company’s debts and
liabilities to creditors of the Company;

b.

Second, to the Members in accordance with their Capital Account balances, after
making the adjustments for allocations under Article VII, above, up to and
including the date of the liquidating distribution.

ARTICLE X

Amendment

This Agreement may be modified or amended with Unanimous Consent of the Members.
  Any amendment shall be in writing.

ARTICLE XI

Miscellaneous

11.1

Entire Agreement.  This Agreement represents the entire agreement among all the
Members and the Members and the Company.

11.2

No Partnership Intended for Non-Tax Purposes.  The Members have formed the
Company under chapter 183 of the Wisconsin Statutes.  The Members expressly do
not intend hereby to form a partnership.  The Members do not intend to be
partners to one another, or partners as to any third party.  To the extent any
Director, Officer or Member, by word or action, represents to another person
that any Member is a partner or that the Company is a partnership, the Member
making such wrongful representation shall be liable to any other Member who
incurs personal liability by reason of such wrongful representation.

11.3

Rights of Creditors and Third Parties Under Agreement.  The Agreement is
expressly not intended for the benefit of any creditor of the Company or any
other person.  Except and only to the extent provided by applicable statute, no
such creditor or third party shall have any rights under this Agreement or any
agreement between the Company and any member with respect to a capital
contribution or otherwise.

11.4

Execution of Additional Instruments.  Each Member hereby agrees to execute such
other and further statements of interest and holdings, designations, powers of
attorney and other instruments necessary to comply with any laws, rules or
regulations.

11.5

Construction.  Whenever the singular number is used in this Agreement and when
required by the context, the same shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice
versa.

11.6

Headings.  The headings in this Operating Agreement are inserted for convenience
only and are in no way intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement or any of its provisions.

11.7

Waiver.  The failure of any party to seek redress for violation of, or to insist
upon the strict performance of any covenant or condition of this Agreement shall
not prevent the subsequent act, which would have originally constituted a
violation, from having the effect of an original violation.

11.8

Rights and Remedies Cumulative.  The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive the right to use any or all other remedies.  These
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.

11.9

Severability.  If any provision of this Agreement or the application thereof to
any person or circumstance shall be invalid, illegal or unenforceable to any
extent, the remainder of this Agreement and the application thereof shall not be
affected and shall be enforceable to the fullest extent permitted by law.

11.10

Binding Effect.  Each and all of the covenants, terms, provisions and agreements
herein contained shall be binding upon and inure to the benefit of the parties
hereto and, to the extent permitted by this Agreement, their respective heirs,
legal representatives, successors and assigns.

11.11

Investment Representations.  The undersigned Members  acknowledge that the
Membership Interests evidenced by this Agreement have not been registered under
the Securities Act of 1933 or any other state securities laws and may not be
resold or transferred by the Member without appropriate registration or the
availability of an exemption from such requirements.

CERTIFICATE

The undersigned hereby agree, acknowledge and certify that this Agreement
constitutes the Operating Agreement of MGE Transco Investment  LLC, adopted by
the Members of the Company effective October 28, 2005.

MGE Transco Investment  LLC

MEMBERS

MADISON GAS AND ELECTRIC

MGE ENERGY, INC.

COMPANY

By:

/s/ Terry A. Hanson

By:

/s/ Jeffrey C. Newman

Terry A. Hanson

Jeffrey C. Newman

Vice President, Chief

Vice President and Treasurer

Financial Officer and Secretary

MANAGERS

By:

/s/ Gary J. Wolter

/s/ Kristine A. Euclide

Gary J. Wolter

Kristine A. Euclide

By:

/s/ Jeffrey C. Newman

Jeffrey C. Newman

ACKNOWLEDGEMENT

I acknowledge that Exhibit A contains a true and correct copy of the Articles of
Organization filed by me with the Wisconsin Department of Financial Institutions
to organize the Company.

10/26/05

/s/ James B. Egle

Date

James B. Egle, Organizer

Attachments:

Exhibit A (Articles of Organization)

Exhibit B (List of Capital Contributions)

EXHIBIT B

Member

Contribution

Value

Percent. Interest

Madison Gas and Electric Company

1,875,849 units in ATC LLC

$18,467,014

100%

MGE Energy, Inc.

Option right to make future capital contributions requested by ATC LLC*

                   0

0%

* As MGE Energy, Inc.,or MGE makes capital contributions to ATC LLC in future,
Percentage Interests will be recalculated as provided in Operating Agreement.