|**SECURITIES AND
      EXCHANGE COMMISSION******                                                                                                                                                  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**Washington, D.C. 20549**                                                                                                                                                                        
|**FORM 10-K******                                                                                                                                                                                 
|(Mark One)                                                                                                                                                                                        
|[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934                                                                                                    
|For the fiscal year ended: **December
        31, 2000**                                                                                                                                          
|**or**                                                                                                                                                                                            
|[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934                                                                                                
|For the transition period from: ________________ to
        ________________                                                                                                                      
|****                                                                                                                                                                                              
|**COMMISSION FILE
      NO. 0-1125******                                                                                                                                                          
|                                                                                                                                                                                                  
|**MADISON GAS AND ELECTRIC COMPANY** **(Exact name of registrant as specified
      in its charter)**                                                                                             
|                                                                                                                                                                                                  
|**WISCONSIN** **(State or other jurisdiction of
      incorporation or organization)**                                                                                                            
|                                                                                                                                                                                                  
|**133 South Blair Street****Post Office Box 1231** **Madison, Wisconsin 53701-1231** **(Address of principal executive
      offices, including ZIP code)**                                       
|                                                                                                                                                                                                  
|**(608) 252-7000****(Registrant's telephone
      number, including area code)**                                                                                                                  
|                                                                                                                                                                                                  
|**Securities registered pursuant to Section 12(b) of the Act:****Securities registered pursuant to Section 12(g) of the Act:**
      **Common, Par Value $1 Per Share**
      **(Title of Class)**

Indicate by check mark whether the Registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange
  Act of 1934 during the preceding 12 months (or for such shorter period that
  the Registrant was required to file such reports) and (2) has been subject
  to such filing requirements for the past 90 days. Yes X No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
  of Regulation S-K is not contained herein, and will not be contained, to the
  best of Registrant's knowledge, in definitive proxy or information statements
  incorporated by reference in Part III of this Form 10-K or any amendment to
  this Form 10-K. Yes X No

State the aggregate market value of the voting stock held by nonaffiliates
  of the Registrant: $357,851,194 based on a closing bid price of $21.391 on March
  15, 2001 (the record date for the Annual Meeting of Shareholders).

The number of shares outstanding of each of the issuer's classes of common
  stock, as of the close of the periods covered by this report, was 16,618,729
  for 2000, 16,161,305 for 1999 and 16,079,718 for 1998 of Common Stock, Par Value
  $1 Per Share.

List hereunder the following documents if incorporated by reference and the
  part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
  is incorporated: (1) Any annual report to security holders, (2) Any
  proxy or information statement and (3) Any prospectus filed pursuant to
  Rule 424(b) or (c) under the Securities Act of 1933.

- Definitive Proxy Statement filed prior to April 30, 2001 (Parts I and
  III)

**Table of Contents**

**PART I.**

Item 1 - BusinessItem 2 - PropertiesItem 3 - Legal ProceedingsItem 4 - Results of Votes of Security Holders

**PART II.**Item 5 - Market For The Registrant's Common Stock And Related
  Stockholder MattersItem 6 - Selected Financial DataItem 7 - Management's Discussion and Analysis of Financial Condition
  and Results of OperationsItem 7A - Qualitative and Quantitative Disclosures about Market
  RiskItem 8 - Financial Statements and Supplementary DataItem 9 - Changes in and Disagreements with Accountants on Accounting
  and Financial Disclosure

**PART III.**Item 10 - Directors and Executive Officers of the RegistrantItem 11 - Executive CompensationItem 12 - Security Ownership of Certain Beneficial Owners And
  ManagementItem 13 - Certain Relationships and Related Transactions

**PART IV.**Item 14 - Exhibits, Financial Statement Schedules, and Reports
  on Form 8-KSignatures

**PART I.**

**Item 1 - Business**

**GENERAL DESCRIPTION OF BUSINESS**

Madison Gas and Electric Company (MGE), a Wisconsin corporation organized in
  1896, is a public utility that generates, transmits and distributes electricity
  in Dane County, Wisconsin (250 square miles). MGE also purchases, transports
  and distributes natural gas in seven Wisconsin counties: Columbia, Crawford,
  Dane, Iowa, Juneau, Monroe and Vernon (1,325 square miles). Exhibit No. 21
  describes MGE's wholly owned subsidiaries.

The Public Service Commission of Wisconsin (PSCW) has authority to regulate
  MGE's rates, accounts, issuance of securities, plant and transmission line siting,
  and other aspects of its business. The Federal Energy Regulatory Commission
  (FERC) has jurisdiction, under the Federal Power Act, over certain accounting
  practices and certain other aspects of MGE's business. The Nuclear Regulatory
  Commission (NRC) has jurisdiction over operation of the Kewaunee Nuclear Power
  Plant (Kewaunee). MGE has a 17.8% ownership interest in Kewaunee. The other
  owners are Wisconsin Public Service Corp. (WPSC), which operates Kewaunee, and
  Alliant Energy Corp.

MGE is also subject to state and federal regulations concerning air quality,
  water quality and solid waste. MGE may be subject to other environmental regulations
  set by various federal, state and local authorities including the Wisconsin
  Department of Natural Resources (DNR), which regulates pollution and environmental
  control matters at MGE's electric generating plants. The DNR has jurisdiction
  over air and water quality as well as solid and hazardous waste standards. MGE
  has met the requirements of current environmental regulations. It is not known
  if additional expenditures will be required for pollution control equipment
  and/or modifying existing plants to comply with future unknown environmental
  regulations.

The ongoing issue of global warming could result in significant compliance
  costs for reducing carbon dioxide emissions. MGE does not yet know the amounts
  of these expenditures or the period of time over which they may be required.
  MGE is unable to predict if complying with future pollution control regulations
  could involve: (1) curtailing operations, (2) reducing capacity or
  efficiency at existing plants or (3) delaying the construction and operation
  of future generating facilities.

The National Environmental Policy Act and Wisconsin Environmental Policy Act
  require MGE to conduct a complete environmental review and issue a detailed
  environmental impact statement before obtaining necessary authorizations or
  permits from regulatory agencies. This applies to any new projects or other
  major actions that could significantly affect the environment.

**ELECTRIC OPERATIONS**

At Dec. 31, 2000, MGE supplied electric service to approximately 126,000
  customers, of whom 113,000 were located in the cities of Fitchburg, Madison,
  Middleton and Monona, and 13,000 in adjacent areas. Of the total number of customers,
  approximately 109,000 were residential and 17,000 were commercial and industrial.
  Electric revenues for 2000 comprised of residential (34%), commercial (48%),
  industrial (7%), sales to public authorities including the University of
  Wisconsin (7%) and sales to other utilities (4%). Electric operations accounted
  for 63% of MGE's total 2000 revenues.

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

MGE is a member of Mid-America Interconnected Network, Inc. (MAIN), a regional
  reliability group. MAIN members work together to better utilize reserve generating
  capacity and coordinate long-range system planning and day-to-day operations.
  MAIN seeks to maintain adequate planning generation reserve margins in the region,
  ranging from 15% to 22%.

MGE is also a member of the Mid-Continent Area Power Pool (MAPP) Regional Transmission
  Committee (RTC). RTC members pool their transmission systems allowing each member
  to easily access economical energy across the upper Midwest. Each member is
  then compensated for the energy flows on their individual transmission system.

On Oct. 29, 1999, Reliability 2000 legislation took effect (Part of 1999
  Wisconsin Act 9). Part of Reliability 2000 was the creation of a statewide for-profit
  transmission company (American Transmission Company LLC [ATC]) that will own
  the transmission assets formerly owned by investor-owned utilities. Formation
  of the ATC was to provide reliable, economic transmission service to all customers
  in a fair and equitable manner. ATC will plan, construct, operate, maintain
  and expand transmission facilities it owns to provide adequate and reliable
  transmission of power.

MGE along with the other Wisconsin investor-owned utilities, several municipals
  and retail cooperatives have joined ATC by either contributing cash and/or transferring
  their transmission assets. ATC began operations on Jan. 1, 2001, at which
  time MGE transferred its electric transmission facilities. In exchange for its
  transmission plant and related deferred taxes and deferred investment tax credits,
  MGE receives an approximate 6.0% ownership interest in the ATC. MGE expects
  to receive a return on its investment in ATC approximately equal to the return
  it would have earned by retaining its transmission facilities. ATC is regulated
  by FERC.

In 2001, MGE started paying a network service fee for using the ATC transmission
  system. MGE's transmission assets will be recovered in rates for 2001 and 2002,
  since the impact of joining ATC was unknown at the time MGE's rates were set.
  However, the difference between the revenue requirement associated with the
  contributed transmission assets and the network service fees payable to the
  ATC will be deferred subject to regulatory treatment.

**Fuel Supply and Generation**

MGE estimates its net kilowatt-hour requirements for 2001 will be provided
  from the following sources: 69% from fossil-fueled steam plants, 19% from a
  nuclear-fueled steam plant, 10% from power purchases and 2% from a combination
  of wind turbines, diesel generators and oil-fired combustion turbines.

MGE has a 22% ownership interest in the Columbia Energy Center (Columbia).
  The other owners are Alliant Energy Corp., which operates Columbia, and WPSC.
  The first (Columbia I) and second (Columbia II) units at Columbia
  were placed in commercial operation in 1975 and 1978, respectively. The Columbia
  co-owners' coal inventory supply for Columbia I and Columbia II decreased from
  68 days on Dec. 31, 1999, to 40 days on Dec. 31, 2000. The co-owners'
  goal is to maintain approximately a 40-day inventory. Columbia, with two 527-megawatt
  (MW) units, obtains 100% of its low-sulfur coal from the Powder River Basin
  coal fields located in Wyoming and Montana.

For information about a request from the Environmental Protection Agency (EPA)
  that affects Columbia, refer to the following section on "air quality."

The Kewaunee plant is a pressurized water reactor plant with a nameplate capacity
  of 562 MW. It began commercial operation in 1974. The Kewaunee operating
  license expires in 2013.

On April 7, 1998, WPSC received state regulatory approval to replace two steam
  generators at Kewaunee. The replacement work, which will take approximately
  60 days, is scheduled for fall 2001. The project will cost approximately $120 million.
  MGE will not be responsible for any portion of this cost due to a change in
  ownership described below.

On Sept. 29, 1998, MGE finalized an agreement to sell its share of Kewaunee
  to WPSC. MGE will receive a cash payment from WPSC for Kewaunee upon closing.
  The payment will be comprised of Kewaunee's book value (currently $8.9 million)
  plus the book value of other assets related to Kewaunee. MGE believes it can
  secure electric capacity and energy more cost effectively from other sources
  and eliminate the risk of future stranded costs. On May 18, 2000, MGE and
  WPSC received state regulatory approval to transfer MGE's ownership share in
  Kewaunee to WPSC, subject to the terms of the agreement described above.

MGE has an option under the sale agreement to enter into an electric capacity
  and energy agreement (up to 90 MW) at a fixed price from WPSC for two years
  after the sale closes. MGE's decommissioning liability will be limited to the
  current fund balance until the sale closes, plus all decommissioning collections
  through 2002. The qualified decommissioning trust will be transferred to WPSC
  upon closing. MGE is beginning to discuss with WPSC the disposition of the nonqualified
  nuclear decommissioning trust.

On April 22, 2000, Kewaunee shut down for its scheduled spring refueling
  outage. The plant had operated continuously (511 days) since start-up from the
  1998 refueling outage. On June 2, 2000, the plant returned to service from
  its planned maintenance and refueling outage. Inspection of the plant's two
  steam generators showed that tubes repaired in previous outages were holding
  up well. A major overhaul was also performed on the main electrical generator.
  The next shutdown for refueling and maintenance is scheduled for fall 2001.
  Kewaunee ended 2000 with 206 days of continuous operation since start-up from
  the last refueling outage.

The Kewaunee co-owners have requested approval from state regulators to defer
  all anticipated operating and capital costs related to the replacement of the
  steam generators of Kewaunee in 2001. In addition, MGE is negotiating with the
  co-owners to share the incremental 2001 costs required to keep Kewaunee on-line
  until the steam generator replacement starts.

The federal government has the responsibility to dispose of or permanently
  store spent nuclear fuel. Legislation is being considered on the federal level
  to establish an interim storage facility. Spent nuclear fuel is currently being
  stored at Kewaunee. Minor plant modifications being made to the spent fuel pools
  are almost complete. Upon completion, Kewaunee should have sufficient fuel storage
  capacity until the end of its licensed life in 2013.

The Midwest Compact Commission continues to monitor the availability of disposal
  facilities for the low-level radioactive waste created by all Midwest generators.
  A site at Barnwell, S.C., has been available for the storage of low-level radioactive
  waste from Kewaunee in the past. The availability of this site for future waste
  storage is uncertain. As a result of technology advances, waste compaction and
  the reduction of waste generated, Kewaunee has on-site low-level radioactive
  waste storage capacity sufficient to store all low-level waste expected at the
  plant over the next 10 years.

In 1997, the PSCW directed the owners of Kewaunee to develop depreciation and
  decommissioning cost levels based on full recovery by the end of 2002. Previously,
  cost estimates had been based on full collection of funds required for decommissioning
  by 2013, the year in which the operating license expires. The order was prompted
  by uncertainty about the expected useful life of the plant without steam generator
  replacement. On Dec. 31, 2000, the net carrying amount of MGE's investment
  in Kewaunee was approximately $8.9 million. MGE's share of Kewaunee decommissioning
  costs is an estimated $93.1 million in current dollars based on a site-specific
  study performed in 1992 using immediate dismantlement as the method of decommissioning.

Decommissioning trust assets at Dec. 31, 2000, totaled $102.9 million,
  its pretax fair market value. The study assumed decommissioning costs would
  inflate at an average rate of 6.0% per year. MGE's decommissioning liability
  is limited to the current fund balances plus all decommissioning contributions
  through 2002 (under the agreement that allows MGE to sell its share of Kewaunee
  to WPSC). Physical decommissioning is expected to occur from 2014 through 2021.
  Additional expenses will likely be incurred from 2022 through 2039 to store
  spent nuclear fuel at the plant site.

Nuclear decommissioning costs are currently recovered from customers in rates
  and are deposited in external trusts. For 2000, the decommissioning costs recovered
  in rates were $8.1 million.

The Kewaunee co-owners purchase uranium concentrates, conversion services,
  enrichment services and fabrication services for nuclear fuel assemblies at
  Kewaunee. Approximately one-third of the 121 fuel assemblies are removed from
  the reactor every 18 months and replaced with new assemblies. Removed assemblies
  are placed in storage at the plant site pending permanent disposal by the Department
  of Energy (DOE).

If for any reason Kewaunee was forced to suspend operations permanently, the
  maximum exposure related to fuel contracts is not expected to exceed $6.5 million.
  The increased exposure is due to a new long-term fuel fabrication contract with
  Westinghouse. No financial penalties associated with the present supply, conversion
  service and enrichment agreements exist. In addition, the exposure is further
  mitigated since the uranium inventories could be sold on the spot market.

A surcharge imposed by the National Energy Policy Act of 1992 requires nuclear
  power companies to fund the decontamination and decommissioning of DOE facilities
  that process nuclear fuel. As a result, the Kewaunee co-owners are required
  to pay a surcharge on uranium enrichment services purchased from the federal
  government prior to Oct. 23, 1992. On an inflation-adjusted basis, MGE's
  portion of the obligation related to Kewaunee is approximately $1.6 million
  at Dec. 31, 2000. MGE has agreed to continue to pay its portion of this
  annual assessment after the transfer of its ownership interest in the plant
  to WPSC.

**Air Quality**

MGE is meeting the Phase II requirements of the 1990 Federal Clean Air Act
  amendments which sets limits for allowable emissions of sulfur dioxides (SO2)
  and nitrogen oxides (NOx).

On Jan. 1, 2000, Phase II of the 1990 Federal Clean Air Act amendments
  took effect, setting new emission limits for SO2 and NOx. MGE's generating units
  were modified well in advance to meet year 2000 NOx requirements. Early modifications
  at Blount Generating Station (Blount) allow MGE to postpone meeting more stringent
  NOx requirements at this plant until 2007.

On Oct. 27, 1998, the EPA issued final rules requiring more NOx emission
  reductions from utilities located in southern Wisconsin. However, a legal challenge
  resulted in excluding Wisconsin from this rule and returning the issue to the
  EPA on March 3, 2000, for further action. On Jan. 8, 2001, former
  EPA Administrator Carol Browner signed a proposed rule that would exclude Wisconsin
  (and MGE) from further NOx emission reductions required by the original rule.
  The proposed rule must still be finalized.

If the EPA or DNR imposes additional NOx controls, MGE is evaluating alternative
  compliance strategies including fuel switching, emissions trading, purchased
  power agreements, new emission control devices or installation of new fuel-burning
  and clean-coal technologies. Implementing any of these new measures would likely
  increase capital, operating and maintenance expenditures.

Wisconsin's acid rain law imposes limitations of SO2 emissions. Blount and
  MGE's share of Columbia are required to meet a combined SO2 emission rate of
  1.20 pounds of SO2 per million Btu. MGE does not anticipate any capital expenditure
  in order to comply with this standard.

On Dec. 14, 2000, the EPA announced it would create rules to limit the
  amount of mercury emitted by coal and oil-fired electric-steam generating facilities.
  The EPA plans to have the proposed rules published no later than Dec. 15,
  2003, and final regulations published no later than Dec. 15, 2004. The
  DNR is also evaluating its rules to limit mercury emissions from coal-fired
  boilers. If either of these regulations are issued, they may require MGE to
  evaluate emission control options for its Blount facility in order to comply
  with the regulations. These controls would likely increase capital, operating
  and maintenance expenses.

In December 2000 and February 2001, the EPA requested certain information relating
  to the operation of Columbia and other major coal-fired generating units in
  Wisconsin. The Columbia co-owners responded to the December 2000 request and
  are in the process of preparing a response to the February 2001 request. In
  some cases involving other electric generating facilities, penalties and capital
  expenditures have resulted. MGE cannot presently predict what impact, if any,
  the EPA's request may have on its financial condition or results of operations.

MGE believes all of its plants to be in full compliance with all material aspects
  of present air-pollution control regulations.

**Water Quality**

MGE is subject to water quality regulations by the DNR. These regulations include
  both categorical-effluent discharge standards and general water quality standards.
  The regulations limit discharges from MGE's plants into Lake Michigan and other
  Wisconsin waters.

The categorical-effluent discharge standards require each discharger to use
  effluent treatment processes equivalent to categorical "best practicable" or
  "best available" technologies under compliance schedules established pursuant
  to the Federal Water Pollution Control Act. The DNR has published categorical
  regulations for chemical discharges from electric-steam generating plants. MGE
  is in compliance with these standards.

**Solid Waste**

MGE is listed as a potentially responsible party for two sites that the EPA
  has placed on the national priorities Superfund list: (1) the Refuse Hideaway
  Landfill in Middleton, Wis., where MGE disposed of fly-ash sludge and general
  office waste from 1980 to 1984 and (2) the Lenz Oil site in Lemont, Ill.,
  which was used for storing and processing waste oil for several years. These
  sites require clean up under the Comprehensive Environmental Response, Compensation
  and Liability Act. A group of companies including MGE is currently negotiating
  with the EPA on the cleanup of these two sites.

MGE, a potentially responsible party, is also negotiating with the City of
  Madison for cleanup costs at the Demetral Landfill. MGE used this site for coal
  ash disposal from 1954 to 1959.

Management believes its share of the final cleanup costs for all sites will
  not result in any materially adverse effects on MGE's operations, cash flows
  or financial position. Insurance may cover a portion of the cleanup costs. Management
  believes that the cleanup costs not covered by insurance will be recovered in
  current and future rates. MGE estimates its future expense to clean up these
  sites could range from $250,000 to $550,000. At Dec. 31, 2000, MGE accrued
  a $250,000 liability on its balance sheet for this matter.

**GAS OPERATIONS**

On Dec. 31, 2000, MGE supplied natural gas service to approximately 114,000
  customers in the cities of Elroy, Madison, Middleton, Monona, Fitchburg, Lodi,
  Verona and Viroqua; 22 villages; and all or parts of 41 townships. Gas
  revenues for 2000 comprised of residential (56%), commercial (37%), industrial
  (2%) and other (5%). Transportation service accounted for slightly more than
  2% of the total 2000 gas revenues. Gas operations accounted for 37% of MGE's
  total revenues.

MGE can curtail gas deliveries to its interruptible customers. Approximately
  4% of gas sold in 2000 was to interruptible customers.

**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 four ANR and one NNG gate station.
  MGE also receives deliveries at NNG gate stations located in Viroqua and Elroy
  and in Crawford County. Interconnections with two major pipelines provide competition
  in interstate pipeline service and a more reliable and economical supply mix,
  which includes gas from Canada and the U.S. mid-continent and Gulf/offshore
  regions.

By contract, a total of 4,944,328 dekatherms can be injected into ANR's storage
  fields from April 1 through October 31. These gas supplies are then
  available for withdrawal during the subsequent heating season November 1
  through March 31. ANR's storage fields are located in Michigan. 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.

During the winter months, when customer demand is high, MGE is primarily concerned
  with meeting its obligation to firm 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.

The prior heating season (November 1999 through March 2000) was warmer than
  normal (13% fewer heating degree days). The current heating season (November
  2000 through March 2001) has been 8% colder than normal (based on actual heating
  degree days through February) and has caused storage levels to be lower than
  normal.

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

- 46,572 dekatherms (excluding storage) on ANR.
  - 48,719 dekatherms on NNG.
  - 2,457 dekatherms into Viroqua's NNG gate station.
  - 1,432 dekatherms into Crawford County's NNG gate station.

**GENERAL**

MGE's business is seasonal based on fluctuations in seasonal weather conditions.

MGE had 693 permanent employees at Dec. 31, 2000.

Information regarding MGE executive officers is included under Item 10,
  Directors and Executive Officers of the Registrant.

**Item 2 - Properties**

The following table presents the generating capability in service at Dec. 31,
  2000:

|Plants              | Commercial Operation Date | Fuel            | Net Capability (MW) | No. of Units
|------------------- | ------------------------- | --------------- | ------------------- | ------------
|Steam plants:       |                           |                 |                     |             
|Columbia            | 1975 & 1978               | Low-sulfur coal | 232 (1,2,4)         | 2           
|Kewaunee            | 1974                      | Nuclear         | 93 (1,3,5)          | 1           
|Blount (Madison)    | 1957 & 1961               | Coal/gas        | 99                  | 2           
|                    | 1938 & 1942               | Gas             | 39                  | 2           
|                    | 1949                      | Coal/gas        | 22                  | 1           
|                    | 1964-1968                 | Gas/oil         | 35                  | 4           
|Combustion turbines | 1964-2000                 | Gas/oil         | 170                 | 6           
|Portable generators | 1998-2000                 | Diesel          | 49                  | 50          
|Wind turbines       | 1999                      | Wind            | 11                  | 17          
|Total               |                           |                 | 750                 |             

1 Base load generation
  2 MGE's 22% share of two 527-MW units located near Portage, Wis.
  3 MGE's 17.8% share of 525-MW unit located near Kewaunee, Wis.
  4 See Item 3, Legal Proceedings.
  5 See Item 1, Kewaunee, and Item 7, Kewaunee, for more information.

Major electric transmission and distribution lines and substations in service
  at Dec. 31, 2000, are as follows:

|                  | Miles          
|----------------- | ---------------
|Lines             | Overhead       
|Transmission      |                
|345 kV            | 124            
|138 kV            | 96             
|69 kV             | 63             
|                  |                
|Distribution      |                
|13.8 kV and under | 1,004          
|****              |                
|                  | ****Substations
|Transmission      | 22             
|Distribution      | 33             

Gas facilities include 1,994 miles of distribution mains.

**Item 3 - Legal Proceedings**

In May 1999, MGE brought an arbitration proceeding against Alliant Energy Corp.,
  the parent company of Wisconsin Power and Light Co. (WPL). The arbitration was
  based on a claim regarding WPL's merger into Alliant and the manner in which
  the Columbia Energy Center is run that triggered MGE's right to acquire WPL's
  interest in the plant at book value.

MGE recently received an arbitration decision in the dispute. While the arbitrators
  did not grant the specific relief MGE sought in the arbitration--the right to
  purchase WPL's interest in the plant--the arbitrators did recognize one of MGE's
  primary arguments. MGE argued that WPL had transferred its interest in the Columbia
  to its parent company, Alliant, after Alliant's merger in 1998. The arbitrators
  recognized MGE's argument by formally requiring Alliant to accept responsibility
  as the operator and manager of the plant.

**Item 4 - Results of Votes
  of Security Holders**

No matters were submitted to a vote of security holders during the fourth quarter
  of the fiscal year.

**PART II.**

**Item 5 - Market For The
  Registrant's Common Stock And Related Stockholder Matters**

MGE common stock is traded on The Nasdaq Stock Market (Nasdaq) under the symbol
  MDSN. On March 1, 2001, there were approximately 17,785 stockholders of
  record. During 2000, MGE's transfer agent and registrar, Harris Trust and Savings
  Bank Shareholder Services, was acquired by Computershare Investor Services,
  L.L.C. Effective Jan. 1, 2001, MGE appointed Continental Stock Transfer &
  Trust Company to take over the transfer agent and registrar duties from Computershare
  Investor Services.

The table below shows (1) high and low sales prices for the common stock
  on Nasdaq and (2) dividends paid per common share for each quarter over
  the past two years.

|               | Common stock price range |         
|-------------- | ------------------------ | --------
|               | High                     | Low     
|**2000**       |                          |         
|First quarter  | $20-1/4                  | $17     
|Second quarter | $21-1/4                  | $17-7/16
|Third quarter  | $22-3/4                  | $18-3/16
|Fourth quarter | $22-11/16                | $20-1/2 
|**1999**       |                          |         
|First quarter  | $23-1/4                  | $16-3/8 
|Second quarter | $23-3/8                  | $18-5/8 
|Third quarter  | $22-7/8                  | $19-3/4 
|Fourth quarter | $21-7/8                  | $18-1/2 

**Item 6 - Selected Financial
  Data**

*(In thousands, except per-share amounts)*

|For the years ended Dec. 31                        | 2000     | 1999     | 1998     | 1997     | 1996    
|-------------------------------------------------- | -------- | -------- | -------- | -------- | --------
|**Summary of Operations**                          |          |          |          |          |         
|Operating Revenues:                                |          |          |          |          |         
|Electric                                           | $203,176 | $185,955 | $169,563 | $163,123 | $152,747
|Gas                                                | 120,932  | 88,079   | 80,189   | 101,525  | 100,544 
|Total                                              | 324,108  | 274,034  | 249,752  | 264,648  | 253,291 
|Operating expenses                                 | 258,411  | 219,910  | 199,954  | 212,921  | 200,486 
|Other general taxes                                | 10,180   | 9,306    | 9,263    | 8,797    | 8,736   
|Income tax items                                   | 15,416   | 12,268   | 10,723   | 11,940   | 12,553  
|Net operating income                               | 40,101   | 32,550   | 29,812   | 30,990   | 31,516  
|Other (loss)/income (including AFUDC-equity)       | 1,383    | 3,235    | 3,273    | 2,257    | (14,198)
|Income before interest expense                     | 41,484   | 35,785   | 33,085   | 33,247   | 17,318  
|Interest expense (including AFUDC-debt)            | 14,129   | 12,039   | 10,855   | 10,724   | 10,891  
|Net income                                         | 27,355   | 23,746   | 22,230   | 22,523   | 6,427   
|Preferred dividends                                | -        | -        | -        | -        | -       
|Earnings on common stock                           | $ 27,355 | $ 23,746 | $ 22,230 | $ 22,523 | $ 6,427 
|Average shares outstanding                         | 16,382   | 16,084   | 16,080   | 16,080   | 16,080  
|Earnings per share                                 | $1.67    | $1.48    | $1.38    | $1.40    | $0.40   
|Dividends paid per share                           | $1.318   | $1.308   | $1.298   | $1.287   | $1.273  
|**Assets**                                         |          |          |          |          |         
|Electric                                           | $395,622 | $342,130 | $311,563 | $313,855 | $315,022
|Gas                                                | 123,486  | 114,881  | 111,762  | 118,339  | 116,723 
|Assets not allocated                               | 52,496   | 38,499   | 42,940   | 39,596   | 52,424  
|Total                                              | $571,604 | $495,510 | $466,265 | $471,790 | $484,169
|**Capitalization including
      Short-Term Debt** |          |          |          |          |         
|Common shareholders' equity                        | $200,312 | $185,686 | $182,275 | $180,923 | $179,089
|Long-term debt*                                    | 183,637  | 159,799  | 159,761  | 129,923  | 128,886 
|Short-term debt                                    | 44,000   | 15,750   | -        | 33,500   | 29,750  
|Total Capitalization                               | $427,949 | $361,235 | $342,036 | $344,346 | $337,725

**Includes current maturities.*

**Item 7 - Management's
  Discussion and Analysis of Financial Condition and Results of Operations**

**GENERAL**

The following discussion and analysis provides information which management
  believes is relevant to an assessment and understanding of Madison Gas and Electric
  Company's (MGE) consolidated results of operations and financial condition.
  This discussion should be read in conjunction with the consolidated financial
  statements and notes.

This report, and certain other MGE public documents, contain forward-looking
  statements that reflect management's current assumptions and estimates of future
  performance and economic conditions--especially as they relate to future revenues,
  expenses, financial resources and regulatory matters. These forward-looking
  statements are made pursuant to the Safe Harbor provisions of the Private Securities
  Litigation Reform Act of 1995. MGE cautions investors that forward-looking statements
  are subject to known and unknown risks and uncertainties that may cause MGE's
  actual results to differ materially from those projected, expressed or implied.
  Some of those risks and uncertainties include:

-Economic and market conditions in MGE's service territory.
  -Magnitude and timing of capital expenditures.
  -Regulatory environment (including restructuring the electric utility industry
  in Wisconsin).
  -Availability and cost of power supplies.

**RESULTS OF OPERATIONS**

**Earnings Overview**

In 2000, MGE produced record earnings of $27.4 million, or $1.67 per share.
  Electric operating income was up $5.9 million due to increased sales and
  new generating facilities that earn a return for investors. An 8.8% increase
  in total gas deliveries added $1.7 million to gas operating income. Two
  other factors contributed significantly to higher net income: (1) performance-based
  natural gas incentives, which added $0.7 million (after tax) and (2) pension
  costs, which were down $1.1 million (after tax) due to strong performance
  in MGE's plan assets.

In 1999, MGE produced earnings of $23.7 million, or $1.48 per share. Revenues
  and net operating income were up nearly 10% in 1999 versus 1998, due to: (1) a
  5.1% electric rate increase effective in January and (2) increase in gas
  margin due to higher deliveries in 1999.

In 1998, MGE achieved earnings of $22.2 million, or $1.38 per share, despite
  one of the warmest heating seasons on record. MGE minimized the impact of weather
  on earnings by: (1) controlling costs, (2) selling its remaining assets
  in National Energy Management, L.L.C. (NEM) and (3) implementing risk management
  strategies to limit the loss of gas revenue due to abnormally warm weather.

**Electric Sales and Revenues**

Electric retail sales increased 2.5% for the 12 months ending Dec. 31,
  2000, despite cooler-than-normal summer temperatures.

Electric revenues increased $17.2 million, or 9.3%, primarily due to:

- A 5.5% electric rate increase effective Jan. 1, 2000, combined with
  customer growth and greater use per customer ($14.5 million) (see Item 8,
  Rate Matters).

- Increased revenues associated with MGE's new electric generating assets:
  an 83-megawatt (MW) natural gas-fired combustion turbine ($2.5 million)
  and wind energy and customer backup generation ($0.7 million).

In 1999, MGE had a fourth-quarter electric fuel surcharge (described below),
  which was not in effect for 2000.

|Electric sales *(megawatt-hours)* | 2000      | 1999      | % Change
|--------------------------------- | --------- | --------- | --------
|Residential                       | 780,446   | 770,153   | 1.3     
|Commercial                        | 1,577,165 | 1,524,641 | 3.4     
|Industrial                        | 319,394   | 315,238   | 1.3     
|Other                             | 307,263   | 301,147   | 2.0     
|Total retail                      | 2,984,268 | 2,911,179 | 2.5     
|Resale - utilities                | 283,809   | 312,861   | (9.3)   
|Total sales                       | 3,268,077 | 3,224,040 | 1.4     

In 1999, electric retail sales increased 2.1% and sales for resale rose 306.9%.
  The sharp rise in sales for resale occurred when MGE started selling 30 MW of
  firm capacity to Wisconsin Public Power Inc. in March 1999 (see Item 8,
  Commitments).

Electric revenues in 1999 increased $16.4 million, or 9.7%, primarily
  due to:

-A 5.1% electric rate increase effective in January 1999, combined with customer
  growth and greater use per customer ($12.8 million).

-A 3.6% interim electric fuel surcharge in effect during the fourth quarter
  ($1.8 million) (see Item 8, Rate Matters).

-Higher sales for resale compared to 1998.

**Gas Sales and Revenues**

In 2000, total retail gas therms delivered by MGE rose 12.1%. Extremely cold
  December weather drove up total heating degree days 6.8% (the number of degrees
  that the mean daily temperature is below 65 degrees Fahrenheit) compared to
  1999. The Madison area experienced its second-coldest December in recent history,
  with an average temperature of 11.4 degrees Fahrenheit for the month. This resulted
  in higher customer demand for natural gas. The higher volume of gas delivered
  to customers contributed to our bottom line. We did not profit from unusually
  high gas prices. The Public Service Commission of Wisconsin (PSCW) requires
  utilities to pass along to customers the price paid for gas, whether it goes
  up or down.

Gas revenues were up $32.9 million, or 37.3%, in 2000 due to: (1) increased
  deliveries, (2) higher gas costs that were passed on to customers through
  the Purchased Gas Adjustment clause (PGA) and (3) an increase of $1.2 million
  in other gas revenues from MGE's Gas Cost Incentive Mechanism (GCIM). The table
  below shows total gas deliveries by customer class.

|Terms delivered *(In thousands)* | 2000    | 1999    | % Change
|-------------------------------- | ------- | ------- | --------
|Residential                      | 90,446  | 81,219  | 11.4    
|Commercial and industrial        | 78,190  | 69,246  | 12.9    
|Total retail system              | 168,636 | 150,465 | 12.1    
|Transport                        | 45,193  | 46,013  | (1.8)   
|Total gas deliveries             | 213,829 | 196,478 | 8.8     

In 1999, total retail gas therms delivered by MGE rose 4.9% over the prior
  year. Total heating degree days were up 10.4% compared to 1998. Gas revenues
  were up $7.9 million, or 9.8%, in 1999 due to: (1) increased deliveries
  and (2) higher gas costs that were passed on to customers through the PGA.

**Electric Fuel and Natural Gas Costs**

During 2000, fuel costs for electric generation rose $4.0 million, or
  12.2%. MGE customers set a record for peak demand (664 MW) on Aug. 31.

The Kewaunee Nuclear Power Plant (Kewaunee) was out of service for scheduled
  maintenance and refueling for approximately six weeks in 2000. To meet customer
  demand during this time, MGE relied on other generating units with higher fuel
  costs. MGE also had new generating assets come on-line in 2000, which in turn
  contributed to higher fuel costs.

Purchased power costs decreased $3.2 million, or 14.6%, in 2000. This
  was primarily because MGE added new generation in 2000 (previously described)
  and the company relied more on purchased power in 1999 during unexpected outages
  at the coal-fired Columbia Energy Center (Columbia).

Electric margins (revenues less fuel and purchased power expenses) were up
  $16.5 million, or 12.6%, due to: (1) a 5.5% electric rate increase
  and growth in retail sales stemming from an increase in customers and usage
  per customer ($14.5 million) and (2) revenue from a new generating
  asset, which went into service in June ($3.5 million). Some of the increase
  in the electric margin was partially offset by increased operations and maintenance
  expenses related to the Kewaunee outage.

In 1999, purchased power costs increased $12.6 million, or 130.7%, from
  the prior year. MGE paid more for purchased power when Columbia was out of service
  and during summer peak demand. Electric margins were up $3.7 million, or
  2.9%, due to the electric rate increases previously described and higher sales
  for resale.

**Natural Gas Costs**

In 2000, natural gas costs rose $28.1 million, or 56.9%, due to a 12.1%
  increase in retail sales and significantly higher wellhead prices. Natural gas
  prices (cost/therm) increased more than 60.0% in 2000 compared to 1999. These
  higher gas costs were passed on to MGE customers through the PGA. Gas margins
  (revenues less gas purchased) increased $4.8 million, or 12.3%, in 2000
  primarily as a result of: (1) higher retail deliveries, (2) a $1.0 million
  gain for recovering certain regulatory gas assets and (3) a $1.2 million
  increase in other gas revenues related to MGE's GCIM.

In 1999, natural gas costs increased $3.9 million, or 8.7%, because retail
  deliveries were up 4.9%. Gas margins rose $4.0 million, or 11.4%, in 1999.
  Contributing factors included: (1) a rise in retail deliveries and (2) a
  0.7% rate increase effective in January 1999.

**Other Operating Expenses**

*Electric:* In 2000, electric operating expense rose $2.9 million,
  or 6.1%, primarily due to higher: (1) operating cost at Kewaunee ($0.9 million),
  (2) expense for outside services ($0.8 million) and (3) transmission
  wheeling cost for purchased power ($0.7 million). Several transmission
  contracts covered a full year in 2000 compared to a partial year in 1999.

In 1999, electric operating expense increased $2.3 million, or 4.9%, primarily
  due to payroll and benefits of $1.3 million and transmission wheeling expenses
  of $1.0 million.

*Gas:* In 2000, gas operating expense rose $1.3 million, or 7.0%,
  due to higher distribution costs and other general expenses.

In 1999, gas operating expense rose approximately $0.9 million, or 5.5%,
  due to higher administrative and general expenses.

*Maintenance Expense:* Electric: In 2000, electric maintenance expense
  rose $5.2 million, or 44.1%, due to costs related to the Kewaunee outage
  ($3.0 million), additional maintenance at Blount Generating Station (Blount)
  ($0.9 million), one of MGE's combustion turbines ($0.5 million) and
  Columbia ($0.2 million).

In 1999, electric maintenance expense was down $1.8 million, or 13.6%,
  primarily because of lower costs at Kewaunee. Kewaunee completed 1999 with 100.0%
  availability.

*Depreciation:* In 2000, depreciation expense decreased slightly. Certain
  utility plant assets became fully depreciated in 2000, offsetting the impact
  on depreciation of utility plant additions.

In 1999, depreciation expense increased $2.0 million, or 5.9%. Electric
  depreciation expense totaling $1.7 million resulted from increased plant
  additions and decommissioning depreciation expense.

*Other General Taxes:* The increase ($0.9 million, or 9.4%, over
  1999) in other general taxes reflects a higher utility license fee tax, which
  is based on operating revenues.

*Income Taxes:* Effective income tax rates were generally consistent
  over the three-year period. Increases in income tax provision ($3.1 million
  and $1.5 million in 2000 and 1999, respectively) are due to progressively
  higher operating income.

*Interest Expense:* In 2000, total interest increased $2.1 million,
  or 17.3%. Compared to 1999, MGE had higher levels of short-term debt and the
  interest on $35.0 million in new long-term debt ($20.0 million issued
  on May 4, 2000, and $15.0 million issued on Sept. 20, 2000).

In 1999, interest on long-term debt increased $1.3 million, or 12.4%.
  In September 1998, MGE issued $30.0 million in unsecured debt, which was
  outstanding throughout 1999.

**Other Nonoperating Items**

In 2000, other income decreased $1.9 million, or 64.5%. MGE donated $1.8 million
  to the MGE Foundation and the MGE Innovation Center. These donations provide
  substantial benefits to the community and MGE's service territory. In 1999,
  there was a gain in other income related to MGE's gas marketing subsidiaries
  (see Item 8, Gas Marketing Subsidiaries) that was not experienced in 2000.
  This also contributed to the decrease in other income. Earnings on the decommissioning
  fund were up $0.4 million in 2000.

In 1999, MGE wrote off $0.5 million in a related acquisition adjustment
  for a gas division. These two items helped offset some of the decrease in 2000.

In 1999, MGE earned $3.1 million on its decommissioning trust. These earnings
  are included in other income and depreciation expense. MGE also resolved certain
  contingencies in the amount of $1.0 million (after tax) related to its
  gas marketing subsidiaries. In 1996, MGE wrote down its investment in both gas
  marketing subsidiaries, Great Lakes Energy Corp. (GLENCO) and American Energy
  Management, Inc. (AEM), to reflect its current value. These outstanding contingencies
  included: (1) expired lighting warranties and outstanding accounts payable
  for AEM and (2) one-time benefits on some outstanding legal and tax issues
  for GLENCO and AEM.

In 1998, MGE sold its remaining assets in NEM for $1.8 million. NEM was
  formed in January 1997 as a joint venture between MGE's gas marketing subsidiaries
  and National Gas and Electric L.P. Earnings on the decommissioning trusts totaled
  $1.8 million in 1998. This amount is included in other income and depreciation
  expense.

**Year 2000**

MGE did not experience any latent Year 2000 issues and does not expect any
  further expenditures.

**Electric and Gas Operations Outlook**

MGE anticipates electric and gas sales will grow at a compounded rate of 1.0%
  to 2.0% through December 2005. MGE expects to maintain a competitive advantage
  because of its:

-Vibrant service territory, which is well-insulated against economic downturns.
  
  -Competitive distribution costs, low percentage of industrial customers and
  lower risk of stranded investments.
  -Size and agility, which allow employees to respond quickly and offer more flexibility
  as customers' needs change.

MGE will sell its ownership interest (17.8%) in Kewaunee in the fall of 2001.
  This will help eliminate the risk of future stranded investment. The capacity
  lost from Kewaunee will be replaced with purchased power contracts.

The PSCW currently regulates MGE for both its electric and gas operations.
  The PSCW has focused on improving the infrastructure needed in Wisconsin to
  provide reliable service to consumers. MGE invests in new facilities to meet
  its customers' needs and advocates statewide solutions that will keep pace with
  the growing demand for energy.

MGE and the University of Wisconsin (UW) propose building a $170.0 million
  natural gas-fired cogeneration plant to help meet future needs of the UW and
  MGE customers. This facility will produce steam heat and chilled-water air conditioning
  for the UW and up to 100 MW of electricity to help meet growing customer
  demand in the Madison area. MGE will own the electric-generating portion of
  the plant. MGE and the UW plan to jointly operate and maintain the plant. The
  unit is expected to start operating in 2004.

MGE has a memorandum of understanding to own a portion of the coal-fired base
  load generation included in Wisconsin Energy Corp.'s (WEC) modified "Power the
  Future" proposal. The proposal includes three 600-MW coal-fired units of
  new generation. MGE's option secures ownership of 50 MW in each unit
  for a total of 150 MW. If WEC's proposal is approved and MGE exercises
  its option, MGE's expected investment over the next 10 years would range from
  $150.0 million to $175.0 million.

**KEWAUNEE NUCLEAR POWER PLANT**

Kewaunee is jointly owned by MGE, Wisconsin Public Service Corp. (WPSC) and
  Alliant Energy Corp. Kewaunee has been operated since 1974 by WPSC. The plant's
  license will expire in 2013.

On April 7, 1998, WPSC received state regulatory approval to replace two steam
  generators at Kewaunee. The replacement work, which will take approximately
  60 days, is scheduled for fall 2001. The project will cost approximately $120.0 million.
  MGE will not be responsible for any portion of this cost due to a change in
  ownership described below.

On Sept. 29, 1998, MGE finalized an agreement to sell its share of Kewaunee
  to WPSC. MGE is expected to transfer its ownership interest in Kewaunee in the
  fall of 2001. MGE will receive a cash payment from WPSC for Kewaunee upon closing
  (date plant shuts down for steam generator replacement).

The payment will be comprised of MGE's share of Kewaunee's book value (currently
  $8.9 million) plus the book value of other assets related to Kewaunee.
  MGE believes it can secure electric capacity and energy more cost-effectively
  from other sources and eliminate the risk of future stranded costs. On May 18,
  2000, MGE and WPSC received state regulatory approval to transfer MGE's ownership
  share in Kewaunee to WPSC, subject to the terms of the agreement described above.

MGE has an option under the sale agreement to enter into an electric capacity
  and energy agreement (up to 90 MW) at a fixed price from WPSC for two years
  after the sale closes.

As part of the sale agreement, MGE's decommissioning liability and the related
  trust fund assets are assumed by WPSC at closing. In exchange for this assumption,
  MGE is required to continue funding the decommissioning trusts through 2002.
  MGE expects to fully recover its decommissioning costs for Kewaunee in future
  rates.

On April 22, 2000, Kewaunee shut down for its scheduled spring refueling outage.
  The plant had operated continuously (511 days) since startup after the 1998
  refueling outage. On June 2, 2000, the plant returned to service from its planned
  maintenance and refueling outage. Inspection of the plant's two steam generators
  showed that tubes repaired in previous outages were holding up well. A major
  overhaul was also performed on the main electrical generator. The next shutdown
  for refueling and maintenance is scheduled for fall 2001. Kewaunee ended 2000
  with 206 days of continuous operation since startup from the last refueling
  outage.

The Kewaunee co-owners have requested approval from state regulators to defer
  all anticipated operating and capital costs related to the replacement of the
  steam generators of Kewaunee in 2001. In addition, MGE is negotiating with the
  co-owners to share only the costs required to keep Kewaunee on-line until the
  steam generator replacement starts.

**LIQUIDITY AND CAPITAL RESOURCES**

**Cash Provided by Operating Activities**

In 2000, cash provided by operating activities decreased $12.6 million,
  or 20.8%, compared to last year. This is primarily due to a $24.5 million
  increase in current assets (excluding cash and cash equivalents) compared to
  1999. Record-high gas costs forced average utility bills up about 40.0% during
  the last quarter of 2000. Higher accounts receivable ($10.2 million) and
  unbilled revenues ($14.7 million) contributed to the increase in MGE's
  current assets. Current liabilities increased $9.6 million in 2000 compared
  to 1999, somewhat offsetting the increase in current assets.

In 1999, cash provided by operating activities decreased $10.2 million,
  or 14.5%, primarily due to a decrease in net working capital.

**Capital Requirements and Investing Activities**

In 2000, MGE's cash used for investing activities increased $23.0 million,
  or 37.2%, due to increased plant additions of $22.6 million (mostly related
  to purchasing the 83-MW gas-fired combustion turbine previously described).

MGE's liquidity is primarily affected by its construction requirements. Capital
  expenditures in 2000 totaled $73.6 million, which included: (1) purchasing
  an 83-MW natural gas-fired combustion turbine ($31.3 million), which started
  operating in June, (2) MGE-owned customer backup generators ($5.1 million),
  (3) a gas pipeline expansion project ($2.1 million), (4) improvements
  at Blount ($1.2 million) and (5) nitrogen oxide (NOx) emissions equipment
  at the jointly owned Columbia plant ($2.5 million). The remaining capital
  expenditures were related to normal system upgrades.

It is anticipated 2001 capital expenditures will be $44.6 million, which
  will include improvements at the Blount plant. These improvements comply with
  new legislation or help maintain the reliability of MGE's system.

Capital expenditures for the years 2002 through 2005 will average an estimated
  $45.0 million per year (including the UW cogeneration project previously
  described). The table below shows capital expenditures and nuclear fuel estimates
  for 2001, actuals for 2000 and the three-year average for 1997 to 1999.

|Capital Expenditures (including Nuclear Fuel)      
|---------------------------------------------------
|*(In thousands)* 
      For the years ended Dec. 31
|Electric                                           
|Production                                         
|Transmission                                       
|Distribution and general                           
|Nuclear fuel                                       
|Total electric                                     
|Gas                                                
|Common                                             
|Total                                              

MGE used internally generated funds and short-term debt to satisfy most of
  its capital requirements. For larger capital investments, MGE issued additional
  long-term debt and common stock.

In 1999, MGE's cash used for investing activities increased $21.0 million,
  or 51.5%, also due to new plant additions. MGE's capital requirements in 1999
  included $13.0 million for a wind project, $10.0 million in distributed
  generation and $3.0 million for improvements at Blount.

**Financing Activities and Capitalization Matters**

In 2000, cash provided by financing activities increased $43.2 million
  from 1999. MGE had several large capital investments in 2000, which required
  the issuance of long-term debt ($35.0 million) and short-term debt ($28.3 million).
  MGE raised $9.0 million through the issuance of common stock for its Dividend
  Reinvestment and Direct Stock Purchase Plan (Plan).

In 1999, cash used for financing activities decreased $20.8 million, or
  84.6%. MGE added short-term debt totaling $15.8 million. In December 1999,
  MGE started issuing new shares of common stock for the Plan to improve cash
  flow and capitalization ratios.

MGE's First Mortgage Bonds are currently rated Aa2 by Moody's Investors Service,
  Inc. (Moody's) and AA by Standard & Poor's Corp. (S&P). MGE's Medium-Term
  Notes are rated Aa3 by Moody's and AA- by S&P. MGE's dealer-issued commercial
  paper carries the highest ratings assigned by Moody's and S&P.

**BUSINESS AND REGULATORY ENVIRONMENT**

**American Transmission Company LLC (ATC)**

Based on a commitment made in June 2000, MGE transferred to ATC on Jan. 1,
  2001, its electric transmission facilities with a net book value of $43.6 million.
  ATC is a joint venture authorized by Reliability 2000 legislation in Wisconsin
  (1999 Wis. Act 9) to independently own and operate the transmission system in
  Wisconsin. ATC provides equal and fair access to Wisconsin's transmission system
  to all joint-venture partners. All of Wisconsin's investor-owned utilities have
  contributed their transmission facilities to ATC. In addition, several Wisconsin
  municipal utilities, retail electric cooperatives and power supply agencies
  are participating by contributing cash and/or transferring transmission assets.

In exchange for its transmission plant and related regulatory deferred taxes
  and deferred investment tax credits, MGE received an approximate 6.0% interest
  in ATC. In 2001, each member of the ATC will be subject to an independent audit
  of its contributed transmission assets in order to finalize initial ownership
  interests.

MGE will account for its investment in ATC on the equity method of accounting.

ATC is regulated by the Federal Energy Regulatory Commission. MGE expects to
  receive a return on its investment in ATC approximately equal to the return
  it would have earned by retaining its transmission facilities.

In 2001, MGE started paying a network service fee for using the ATC transmission
  system. MGE's transmission assets will be recovered in rates for 2001 and 2002,
  since the impact of joining ATC was unknown at the time MGE's rates were set.
  However, the difference between the revenue requirement associated with the
  contributed transmission assets and the network service fees payable to the
  ATC will be deferred subject to regulatory treatment.

**Industry Restructuring in Wisconsin**

Wisconsin has focused on building the infrastructure needed to provide reliable
  electric service to customers. State regulators realize a competitive market
  won't work if there is a supply shortage. The PSCW will decide when it is appropriate
  for retail competition to proceed in the electric industry. MGE cannot predict
  what impact future PSCW actions may have on its future financial condition,
  cash flows and results of operations. However, MGE believes it is well-positioned
  to compete.

Restructuring the electric industry could affect MGE's ability to continue
  establishing certain regulatory asset and liability amounts allowed under Financial
  Accounting Standard (FAS) No. 71, "Accounting for the Effects of Certain Types
  of Regulation." MGE is unable to predict whether any adjustments to regulatory
  assets and liabilities will occur in the future. However, the PSCW recognizes
  the need to allow recovery for commitments made under prior regulation.

**Gas Cost Incentive Mechanism**

Under MGE's GCIM, if actual gas commodity costs are above or below a benchmark
  set by the PSCW, then MGE's gas sales service customers and shareholders share
  equally in any increased costs or savings up to $1.5 million. Any costs
  or savings that exceed $1.5 million will be passed on to gas sales service
  customers. The PSCW allows MGE to resell gas pipeline capacity reserved to meet
  peak demands, but not needed every day to serve customers. Revenues from capacity
  release that exceed or fall short of PSCW targeted levels are shared equally.
  In 2000, MGE shareholders gained approximately $0.9 million in gas commodity
  incentives and $0.3 million in capacity release incentives in 1999.

**New Accounting Pronouncements**

In June 2000, the Financial Accounting Standards Board (FASB) issued FAS No.
  138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities,
  An Amendment of FAS No. 133." This standard includes several amendments to FAS
  No. 133 and is effective for all fiscal years beginning after June 15, 2000.
  MGE adopted FAS No. 133 and FAS No. 138 as of Jan. 1, 2001.

The new standard requires that all derivative instruments be reported on the
  balance sheet at their fair values. Special accounting for qualifying hedges
  allows a derivative's gains and losses to offset related results on the hedged
  item in the income statement. It also requires MGE to formally document, designate
  and assess the effectiveness of transactions that receive hedge accounting.
  For derivative instruments classified as fair-value hedges, the changes in the
  fair value of the derivative instrument will be offset on the income statement
  by the changes in the fair value of the hedged item. For derivative instruments
  classified as cash-value hedges, the effective portion of the hedge is reported
  in other comprehensive income until it is cleared to earnings. The ineffective
  portion of all hedges would be recognized through current earnings. For derivative
  instruments not classified as a hedge, the change in the fair value of the derivative
  will be recorded each period in current earnings.

MGE adopted FAS No. 133 on Jan. 1, 2001. There was no material effect
  on net income from adopting this new standard or making the transition adjustment.

The determination of the impact of FAS No. 133 is based on current interpretations
  of this statement, including interpretations of the Derivatives Implementation
  Group of the FASB. Final guidance, when issued, may affect MGE's implementation
  of FAS No. 133.

In September 2000, the FASB issued FAS No. 140, "Accounting for Transfers and
  Servicing of Financial Assets and Extinguishments of Liabilities, a Replacement
  of FASB Statement No. 125." FAS No. 140 revises the standards for accounting
  for securitizations and other transfers of financial assets and collateral and
  requires certain disclosures, but it carries over most of FAS No. 125's provisions
  without reconsideration. The standard provides accounting and reporting standards
  for transfers and servicing of financial assets and extinguishments of liabilities.
  Those standards are based on consistent application of a financial-components
  approach that focuses on control. The standard is effective for transfers and
  servicing of financial assets and extinguishments of liabilities occurring after
  March 31, 2001, and should be applied prospectively. At Dec. 31, 2000,
  MGE did not anticipate entering into any transactions that would be subject
  to FAS No. 140.

**INFLATION**

The current financial statements report operating results in terms of historical
  cost, but they do not evaluate the impact of inflation. Since utilities can
  depreciate only the historical cost of utility plant, there may not be adequate
  cash flows from existing plant to replace this investment. Under PSCW rate treatment,
  projected operating costs, including the impacts of inflation, are recovered
  in revenues.

**ENVIRONMENTAL ISSUES**

On Jan. 1, 2000, Phase II of the 1990 Federal Clean Air Act amendments
  took effect, setting new emission limits for sulfur dioxides and NOx. MGE's
  generating units were modified well in advance to meet year 2000 NOx requirements.
  Early modifications at Blount allow MGE to postpone meeting more stringent NOx
  requirements at this plant until 2007.

On Oct. 27, 1998, the Environmental Protection Agency (EPA) issued final rules
  requiring more NOx emission reductions from utilities located in southern Wisconsin.
  However, a legal challenge resulted in excluding Wisconsin from this rule and
  returning the issue to the EPA on March 3, 2000, for further action. On Jan. 8,
  2001, former EPA Administrator Carol Browner signed a proposed rule that would
  exclude Wisconsin (and MGE) from further NOx emission reductions required by
  the original rule. The proposed rule must still be finalized. If it is determined
  that Wisconsin is subject to the original rule, MGE will likely need to evaluate
  emission control options to bring the Blount plant into compliance. These controls
  would likely increase capital, operating and maintenance expenses.

On Dec. 14, 2000, the EPA announced it would create rules to limit the
  amount of mercury emitted by coal and oil-fired electric-steam generating facilities.
  EPA plans to have the proposed rules published no later than Dec. 15, 2003,
  and final regulations published no later than Dec. 15, 2004. The Wisconsin
  Department of Natural Resources (DNR) is also evaluating its rules to limit
  mercury emissions from coal-fired boilers. If either of these regulations are
  issued, they may require MGE to evaluate emission control options for its Blount
  facility in order to comply. These controls would likely increase capital, operating
  and maintenance expenses.

MGE is one of the first Wisconsin companies to participate in a voluntary Environmental
  Cooperation Program with the DNR. This gives MGE flexibility as it works with
  the DNR to maintain superior environmental performance at the Blount plant.

In December 2000, Columbia (in which MGE has an ownership interest) received
  a Request for Information from the EPA to evaluate compliance with the Clean
  Air Act. Alliant Energy, the plant operator, submitted a response to the EPA
  on approximately Jan. 15, 2001. Management does not believe this will have
  a significant impact on the financial statements.

MGE is listed as a potentially responsible party for two sites that the EPA
  has placed on the national priorities Superfund list: (1) the Refuse Hideaway
  Landfill in Middleton, Wis., where MGE disposed of fly ash sludge and general
  office waste from 1980 to 1984 and (2) the Lenz Oil site in Lemont, Ill.,
  which was used for storing and processing waste oil for several years. These
  sites require clean up under the Comprehensive Environmental Response, Compensation
  and Liability Act. A group of companies is currently negotiating with the EPA
  on the cleanup of these two sites.

MGE, a potentially responsible party, is also negotiating with the City of
  Madison for cleanup costs at the Demetral Landfill. MGE used this site for coal
  ash disposal from 1954 to 1959.

Management believes its share of the final cleanup costs for all sites will
  not result in any materially adverse effects on MGE's operations, cash flows
  or financial position. Insurance may cover a portion of the cleanup costs. Management
  believes that the cleanup costs not covered by insurance will be recovered in
  current and future rates. MGE estimates its future expense to clean up these
  sites could range from $250,000 to $550,000. At Dec. 31, 2000, MGE accrued
  a $250,000 liability on its balance sheet for this matter.

**Item 7A - Qualitative and
  Quantitative Disclosures about Market Risk**

*Market Risks*: MGE is potentially exposed to market risk associated
  with interest rates, commodity prices and equity returns. MGE currently has
  no exposure to foreign currency risk. MGE has risk management policies to monitor
  and assist in controlling these market risks and uses derivative instruments
  to manage some of the exposures.

*Interest Rate Risk:* MGE issues commercial paper at varying interest
  rates for its short-term borrowings (see Item 8, Notes Payable to Banks,
  Commercial Paper, and Lines of Credit). MGE has a swap agreement with a commercial
  bank at a notional amount of $5.0 million, backed by MGE's commercial paper.
  MGE pays a fixed rate of 6.91% on the swap, which was used to retire a portion
  of MGE's 7.70%, 2028 Series, First Mortgage Bonds. MGE manages its interest
  rate risk by limiting its variable rate exposure and continually monitoring
  the effects of market changes on interest rates. MGE is not exposed to changes
  in interest rates on its long-term debt until such debt matures and is refinanced
  at the then applicable rates.

*Commodity Price Risk*: MGE has commodity price risk exposure with respect
  to the price of natural gas, electricity, coal and oil. MGE employs established
  policies and procedures to reduce the market risks associated with changing
  commodity prices, including the use of commodity and financial instruments (see
  Item 8, Fair Value of Financial Instruments). MGE's commodity risks are
  somewhat mitigated by the current ratemaking process in place for the recovery
  of electric fuel, purchased energy and the cost of natural gas purchased for
  resale. MGE's electric fuel costs are subject to fuel rules, which further mitigate
  commodity risk. Under fuel rules, if electric fuel costs exceed a 3% bandwidth
  set by the PSCW, MGE can apply for a fuel surcharge from its customers. If costs
  fall below the 3% bandwidth, a refund to customers would be ordered.

MGE uses weather derivatives to reduce the impact of weather volatility on
  its margins related to gas operations. In February 2000, MGE purchased a nonexchange-traded
  heating degree day put option covering the periods of March 2000 and November
  2000 through March 2001.

MGE has purchased put options to reduce the impact on customers of wintertime
  price declines on gas purchased and injected into storage during the summer
  and withdrawn during winter months. Under MGE's natural gas risk management
  program, the cost of the put options as well as the gains or losses realized
  will not affect net income as they are not subject to the GCIM and will be recovered
  in their entirety under the PGA.

*Equity Price Risks:* MGE currently funds its liabilities related to
  employee benefits and nuclear decommissioning through trust funds. These funds
  are managed by various investment managers and hold investments in debt and
  equity securities. Changes in market value of these investments can have an
  impact on the future expenses related to these liabilities. MGE's risk of expense
  and annuity payment variations as a result of changes in the market value of
  the trust funds is mitigated in part through future rate actions by the PSCW.

**Item 8 - Financial Statements
  and Supplementary Data**

**REPORT OF INDEPENDENT ACCOUNTANTS**

**To the Board of Directors and Shareholders of Madison Gas and Electric
  Company:**

In our opinion, the consolidated financial statements listed in the index appearing
  under Item 14(a)(1) present fairly, in all material respects, the financial
  position of Madison Gas and Electric Company and subsidiaries at December 31,
  2000 and December 31, 1999, and the results of their operations and their cash
  flows for each of the three years in the period ended December 31, 2000, in
  conformity with accounting principles generally accepted in the United States
  of America. These financial statements are the responsibility of the Company's
  management; our responsibility is to express an opinion on these financial statements
  based on our audits. We conducted our audits of these statements in accordance
  with auditing standards generally accepted in the United States of America,
  which require that we plan and perform the audit to obtain reasonable assurance
  about whether the financial statements are free of material misstatement. An
  audit includes examining, on a test basis, evidence supporting the amounts and
  disclosures in the financial statements, assessing the accounting principles
  used and significant estimates made by management, and evaluating the overall
  financial statement presentation. We believe that our audits provide a reasonable
  basis for our opinion.

/s/ PricewaterhouseCoopers LLP
  Philadelphia, Pennsylvania
  February 7, 2001

**CONSOLIDATED STATEMENTS OF INCOME***(In thousands, except per-share amounts)*

|For the years ended December 31                                      | 2000     | 1999     | 1998    
|-------------------------------------------------------------------- | -------- | -------- | --------
|**Operating Revenues******                                           |          |          |         
|****Electric                                                         | $203,176 | $185,955 | $169,563
|Gas                                                                  | 120,932  | 88,079   | 80,189  
|Total Operating Revenues                                             | 324,108  | 274,034  | 249,752 
|****                                                                 |          |          |         
|******Operating Expenses******                                       |          |          |         
|****Fuel for electric generation                                     | 36,338   | 32,388   | 32,289  
|Purchased power                                                      | 18,963   | 22,198   | 9,624   
|Natural gas purchased                                                | 77,482   | 49,395   | 45,458  
|Other operations                                                     | 72,015   | 67,471   | 64,231  
|Maintenance                                                          | 18,532   | 13,304   | 15,167  
|Depreciation and amortization                                        | 35,081   | 35,154   | 33,185  
|Other general taxes                                                  | 10,180   | 9,306    | 9,263   
|Income tax provision                                                 | 15,416   | 12,268   | 10,723  
|Total Operating Expenses                                             | 284,007  | 241,484  | 219,940 
|                                                                     |          |          |         
|******Net Operating
      Income**                                   | 40,101   | 32,550   | 29,812  
|                                                                     |          |          |         
|****AFUDC - equity funds                                             | 343      | 302      | 122     
|Other income, net                                                    | 1,040    | 2,933    | 3,151   
|Income Before Interest Expense                                       | 41,484   | 35,785   | 33,085  
|****                                                                 |          |          |         
|******Interest Expense******                                         |          |          |         
|****Interest on long-term debt                                       | 12,622   | 11,500   | 10,234  
|Other interest                                                       | 1,683    | 694      | 687     
|AFUDC - borrowed funds                                               | (176)    | (155)    | (66)    
|Net Interest Expense                                                 | 14,129   | 12,039   | 10,855  
|                                                                     |          |          |         
|******Net Income**                                                   | $ 27,355 | $ 23,746 | $ 22,230
|                                                                     |          |          |         
|******Earnings Per
      Share of Common Stock** (basic and diluted) | $1.67    | $1.48    | $1.38   
|                                                                     |          |          |         
|******Average Shares
      Outstanding** (basic and diluted)         | 16,382   | 16,084   | 16,080  

*The accompanying notes are an integral part of the above statements.*

**CONSOLIDATED STATEMENTS OF CASH FLOWS***(In thousands)*

|For the years ended December 31                                                                             | 2000     | 1999     | 1998    
|----------------------------------------------------------------------------------------------------------- | -------- | -------- | --------
|**Operating Activities******                                                                                | ****     |          |         
|****Net income                                                                                              | $27,355  | $23,746  | $22,230 
|Items not affecting cash:                                                                                   | ****     |          |         
|****
      Depreciation and amortization                                                                    | 35,081   | 35,154   | 33,185  
|Deferred income taxes                                                                                       | (1,074)  | (708)    | (1,229) 
|Amortization of nuclear fuel                                                                                | 2,194    | 2,638    | 2,321   
|Amortization of investment tax credits                                                                      | (727)    | (739)    | (747)   
|AFUDC - equity funds                                                                                        | (343)    | (302)    | (122)   
|Other items                                                                                                 | (825)    | (1,430)  | (2,066) 
|Changes in working capital, excluding cash equivalents,sinking
      funds, maturities and short-term debt: | ****     |          |         
|****
      (Increase)/decrease in current assets                                                            | (27,019) | (2,512)  | 3,577   
|Increase in current liabilities                                                                             | 12,911   | 3,354    | 1,283   
|Other noncurrent items, net                                                                                 | 221      | 1,142    | 12,093  
|Cash Provided by Operating Activities                                                                       | 47,774   | 60,343   | 70,525  
|****                                                                                                        |          |          |         
|**********Investing
      Activities******                                                                  | ****     |          |         
|****Additions to utility plant and nuclear fuel                                                             | (73,606) | (50,988) | (30,829)
|AFUDC - borrowed funds                                                                                      | (176)    | (155)    | (66)    
|Increase in nuclear decommissioning fund                                                                    | (11,059) | (10,692) | (9,910) 
|Cash Used for Investing Activities                                                                          | (84,841) | (61,835) | (40,805)
|****                                                                                                        |          |          |         
|**********Financing
      Activities******                                                                  | ****     |          |         
|****Issuance of common stock                                                                                | 8,964    | 1,678    | -       
|Cash dividends on common stock                                                                              | (21,588) | (21,038) | (20,878)
|Increase in long-term debt                                                                                  | 35,000   | **-**    | 30,000  
|Maturity/redemption of long-term debt                                                                       | (11,200) | (200)    | (200)   
|Increase/(decrease) in short-term debt                                                                      | 28,250   | 15,750   | (33,500)
|Cash Provided by/(Used) for Financing Activities                                                            | 39,426   | (3,810)  | (24,578)
|                                                                                                            |          |          |         
|**********Change
      in Cash and Cash Equivalents**                                                       | 2,359    | (5,302)  | 5,142   
|Cash and cash equivalents at beginning of period                                                            | 1,948    | 7,250    | 2,108   
|Cash and cash equivalents at end of period                                                                  | $ 4,307  | $ 1,948  | $ 7,250 

*The accompanying notes are an integral part of the above statements.*

**CONSOLIDATED BALANCE SHEETS***(In thousands)*

|At December 31                                                        | 2000      | 1999     
|--------------------------------------------------------------------- | --------- | ---------
|**ASSETS**                                                            |           |          
|******Utility Plant**
      (at original cost, in service)            |           |          
|****Electric                                                          | $622,209  | $554,392 
|Gas                                                                   | 197,093   | 190,137  
|Gross Plant in Service                                                | 819,302   | 744,529  
|Less accumulated provision for depreciation                           | (510,381) | (484,428)
|Net Plant in Service                                                  | 308,921   | 260,101  
|Construction work in progress                                         | 22,863    | 31,134   
|Nuclear decommissioning fund                                          | 102,891   | 97,056   
|Nuclear fuel, net                                                     | 6,979     | 6,534    
|Total Utility Plant                                                   | 441,654   | 394,825  
|**Other Property and Investments**                                    | 3,988     | 3,591    
|**Current Assets******                                                |           |          
|****Cash and cash equivalents                                         | 4,307     | 1,948    
|Accounts receivable, less reserves of $2,071 and $1,391, respectively | 38,161    | 27,913   
|Unbilled revenue                                                      | 27,900    | 13,167   
|Materials and supplies, at lower of average cost or market            | 7,735     | 6,149    
|Fossil fuel, at lower of average cost or market                       | 3,872     | 4,061    
|Stored natural gas, at lower of average cost or market                | 9,785     | 10,039   
|Prepaid taxes                                                         | 7,539     | 6,802    
|Other prepayments                                                     | 1,221     | 1,063    
|Total Current Assets                                                  | 100,520   | 71,142   
|**Deferred Charges**                                                  | 25,442    | 25,952   
|**Total Assets**                                                      | $571,604  | $495,510 
|****                                                                  |           |          
|******CAPITALIZATION AND LIABILITIES**                                |           |          
|******Capitalization**
      (see statement)                          | $383,749  | $334,285 
|**Current Liabilities******                                           |           |          
|****Long-term debt due within one year                                | 200       | 11,200   
|Short-term debt - commercial paper                                    | 44,000    | 15,750   
|Accounts payable                                                      | 28,792    | 19,553   
|Accrued taxes                                                         | 2,550     | 891      
|Accrued interest                                                      | 3,162     | 2,770    
|Accrued payroll-related items                                         | 4,968     | 4,064    
|Other                                                                 | 3,565     | 2,848    
|Total Current Liabilities                                             | 87,237    | 57,076   
|**Other Credits******                                                 |           |          
|****Deferred income taxes                                             | 43,321    | 42,981   
|Investment tax credit - deferred                                      | 8,472     | 9,199    
|Regulatory liability - FAS No. 109                                    | 21,532    | 22,875   
|Other regulatory liabilities                                          | 4,985     | 5,078    
|Other deferred liabilities                                            | 22,308    | 24,016   
|Total Other Credits                                                   | 100,618   | 104,149  
|Total Liabilities                                                     | 187,855   | 161,225  
|**Total Capitalization and Liabilities**                              | $571,604  | $495,510 

*The accompanying notes are an integral part of the above statements.*

**CONSOLIDATED STATEMENTS OF CAPITALIZATION***(In thousands)*

|At December 31                                                                                                 | 2000     | 1999         
|-------------------------------------------------------------------------------------------------------------- | -------- | -------------
|**Common Equity******                                                                                          |          |              
|****Common stock - par value $1 per share:                                                                     |          |              
|****
      Authorized 50,000,000 shares                                                                        |          |              
|****
      Outstanding 16,618,729 and 16,161,305 shares, respectively                                          | $ 16,619 | $ 16,161     
|Additional paid-in capital                                                                                     | 122,661  | 114,155      
|Retained earnings                                                                                              | 62,112   | 56,345       
|Accumulated other comprehensive income/(loss)                                                                  | (1,080)  | (975)        
|Total Common Shareholders' Equity                                                                              | 200,312  | 185,686      
|                                                                                                               |          |              
|******Redeemable Preferred Stock**,
      cumulative, $25 par value, 
      1,175,000 authorized, but unissued | -        | **** 
      -
|                                                                                                               |          |              
|******First Mortgage Bonds******                                                                               |          |              
|****6-1/2%, 2006 Series:                                                                                       |          |              
|****
      Pollution Control Revenue Bonds                                                                     | 6,075    | 6,275        
|8.50%, 2022 Series                                                                                             | 40,000   | 40,000       
|6.75%, 2027A Series:                                                                                           |          |              
|****
      Industrial Development Revenue Bonds                                                                | 28,000   | 28,000       
|6.70%, 2027B Series:                                                                                           |          |              
|****
      Industrial Development Revenue Bonds                                                                | 19,300   | 19,300       
|7.70%, 2028 Series                                                                                             | 21,200   | 21,200       
|First Mortgage Bonds Outstanding                                                                               | 114,575  | 114,775      
|Unamortized discount and premium on bonds, net                                                                 | (938)    | (976)        
|Long-term debt sinking fund requirements                                                                       | (200)    | (200)        
|Total First Mortgage Bonds                                                                                     | 113,437  | 113,599      
|                                                                                                               |          |              
|******Other Long-Term Debt******                                                                               |          |              
|****Variable rate, due 2002                                                                                    | 20,000   | **-**        
|6.91%, due 2004                                                                                                | 5,000    | 5,000        
|7.49%, due 2007                                                                                                | 15,000   | **-**        
|6.02%, due 2008                                                                                                | 30,000   | 30,000       
|Total Long-Term Debt                                                                                           | 183,437  | 148,599      
|                                                                                                               |          |              
|****
      **Total Capitalization**                                                                            | $383,749 | $334,285     

*The accompanying notes are an integral part of the above statements.*

**CONSOLIDATED STATEMENTS OF COMMON EQUITY***(In thousands, except per-share amounts)*

|                                                                  | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income/(Loss) | Comprehensive Income
|----------------------------------------------------------------- | ------------ | -------------------------- | ----------------- | --------------------------------------------- | --------------------
|1998                                                              |              |                            |                   |                                               |                     
|Beginning balance - Jan. 1, 1998                                  | $16,080      | $112,558                   | $ 52,285          | $ -                                           | $ -                 
|Net income                                                        | -            | -                          | 22,230            | -                                             | 22,230              
|Other comprehensive
          income/(loss)                       | -            | -                          | -                 | -                                             | -                   
|Total comprehensive income                                        |              |                            |                   |                                               | $22,230             
|Common stock dividends ($1.30 per share)                          | -            | -                          | (20,878)          | -                                             |                     
|Ending balance - Dec. 31, 1998                                    | $16,080      | $112,558                   | $ 53,637          | $ -                                           |                     
|                                                                  |              |                            |                   |                                               |                     
|**1999**                                                          |              |                            |                   |                                               |                     
|Net income                                                        | $ -          | $ -                        | $ 23,746          | $ -                                           | $23,746             
|Other comprehensive income/(loss):                                |              |                            |                   |                                               |                     
|Minimum pension liability 
          adjustment (net of $654 tax) | -            | -                          | -                 | (975)                                         | (975)               
|Total comprehensive income                                        |              |                            |                   |                                               | $22,771             
|Common stock dividends ($1.31 per share)                          | -            | -                          | (21,038)          | -                                             |                     
|Common stock issued                                               | 81           | 1,597                      | -                 | -                                             |                     
|Ending balance - Dec. 31, 1999                                    | $16,161      | $114,155                   | $ 56,345          | $ (975)                                       |                     
|                                                                  |              |                            |                   |                                               |                     
|**2000**                                                          |              |                            |                   |                                               |                     
|Net income                                                        | $ -          | $ -                        | $ 27,355          | $ -                                           | $27,355             
|Other comprehensive income/(loss):                                |              |                            |                   |                                               |                     
|Minimum pension liability 
          adjustment (net of $70 tax)  | -            | -                          | -                 | (105)                                         | (105)               
|Total comprehensive income                                        |              |                            |                   |                                               | $27,250             
|Common stock dividends ($1.32 per share)                          | -            | -                          | (21,588)          | -                                             |                     
|Common stock issued                                               | 458          | 8,506                      | -                 | -                                             |                     
|Ending balance - Dec. 31, 2000                                    | $16,619      | $122,661                   | $ 62,112          | $(1,080)                                      |                     

*The accompanying notes are an integral part of the above statements.*

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**Dec. 31, 2000, 1999, and 1998

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**a. General**

Madison Gas and Electric Company (MGE) is an investor-owned public utility
  headquartered in Madison, Wis. MGE generates, transmits and distributes electricity
  to more than 126,000 customers in a 250-square-mile area of Dane County. MGE
  also transports and distributes natural gas to nearly 114,000 customers in 1,325
  square miles of service territory in seven south-central counties in Wisconsin.

The consolidated financial statements reflect the application of certain accounting
  policies described in this note. Certain 1999 balances have been reclassified
  to conform to the 2000 presentation. The financial statements include the accounts
  of MGE and its subsidiaries. All significant intercompany accounts and transactions
  have been eliminated in consolidation.

In order to prepare consolidated financial statements in conformity with generally
  accepted accounting principles, management must make estimates and assumptions
  that affect the following: (1) reported amounts of assets and liabilities
  at the dates of the financial statements, (2) reported amounts of revenues
  and expenses during the reported periods and (3) disclosure of contingencies.
  Actual results could differ from management's estimates.

**b. Revenues**

Revenues are recorded based on services rendered or energy delivered to customers.
  MGE accrues a monthly estimate for unbilled revenue. Gas revenues are subject
  to an adjustment clause related to periodic changes in the cost of gas. In November
  1999, MGE started operating under the new GCIM. Under the GCIM, if actual gas
  commodity costs are above or below a benchmark set by state regulators, MGE
  gas sales service customers and shareholders share equally in the higher costs
  or savings up to $1.5 million. Any costs or savings that exceed $1.5 million
  will be passed on to the gas sales service customers.

**c. Nuclear Fuel**

The cost of nuclear fuel used for electric generation is amortized to fuel
  expense and recovered in rates based on the units of production method for generating
  electricity at the Kewaunee plant.

These costs include a provision for estimated future disposal costs of spent
  nuclear fuel. MGE currently pays disposal fees to the Department of Energy based
  on net nuclear generation. MGE has recovered through rates its known fuel disposal
  liability for past nuclear generation.

The 1992 National Energy Policy Act requires all utilities that have used federal
  enrichment facilities to pay a special assessment for decontaminating and decommissioning
  these facilities. This special assessment is based on past enrichment. MGE has
  accrued in other regulatory liabilities and deferred in deferred charges an
  estimated $1.6 million for its portion of the special assessment. MGE believes
  any additional costs will be recovered in future rates.

**d. Utility Plant**

Utility plant is stated at the original cost of construction, which includes:
  indirect costs consisting of payroll taxes, pensions, postretirement benefits,
  other fringe benefits, administrative and general costs and an allowance for
  funds used during construction (AFUDC).

AFUDC represents the approximate cost of debt and equity capital devoted to
  plant under construction. MGE presently capitalizes AFUDC at a rate of 10.58%
  on 50.0% of average construction work in progress. The AFUDC rate approximates
  MGE's cost of capital. The portion of the allowance that applies to: (1) borrowed
  funds is presented in the Consolidated Statements of Income as a reduction of
  interest expense and (2) equity funds is presented as other income. Although
  the allowance does not represent current cash income, it is recovered under
  the ratemaking process over the service lives of the related properties.

**e. Depreciation**

Provisions at composite straight-line depreciation rates, excluding decommissioning
  costs, approximate the following percentages for the cost of depreciable property:

- Electric: 3.2% in 2000 and 3.6% in 1999 and 1998
  - Gas: 3.4% in 2000, 1999 and 1998

Depreciation rates are approved by the PSCW and are generally based on the
  estimated economic lives of property.

Nuclear decommissioning costs are being accrued to an end-of-service life of
  2002 for Kewaunee. These costs are currently recovered from customers in rates
  and are deposited in external trusts. For 2000, the decommissioning costs recovered
  in rates were $8.1 million.

Decommissioning costs are recovered through depreciation expense with a corresponding
  liability in accumulated depreciation. Net earnings on the trusts are included
  in other income. It is expected that the decommissioning contributions to the
  trusts, along with earnings on the trusts, will provide sufficient funds for
  decommissioning the plant. It is assumed the long-term, after-tax earnings on
  the assets held by the trusts are 5.6%.

As required by Statement of Financial Accounting Standards (FAS) No. 115,
  "Accounting for Certain Investments in Debt and Equity Securities," MGE's debt
  and equity security investments in the trusts are classified as available for
  sale. Gains and losses on the trusts were determined based on specific identification.
  Net unrealized holding gains on the trusts were recorded as part of accumulated
  provision for depreciation.

As of Dec. 31, 2000, the decommissioning trusts totaled $102.9 million,
  its pre-tax fair market value. Realized earnings on the trusts were $3.5 million,
  $3.1 million and $1.8 million for the years ended Dec. 31, 2000,
  1999 and 1998, respectively. Unrealized earnings of the trusts totaled $28.0 million,
  $33.3 million and $26.0 million at Dec. 31, 2000, 1999 and 1998,
  respectively.

MGE's share of Kewaunee decommissioning costs is an estimated $93.1 million
  in current dollars based on a site-specific study performed in 1992 using immediate
  dismantlement as the method of decommissioning. This study assumed decommissioning
  costs would inflate at an average rate of 6.0% per year. MGE's decommissioning
  liability is limited to the current fund balances plus all decommissioning contributions
  through 2002. This is based on the agreement that allows MGE to sell its share
  of Kewaunee to WPSC. Physical decommissioning is expected to occur from 2014
  through 2021. Additional expenses will likely be incurred from 2022 through
  2039 to store spent nuclear fuel at the plant site.

**f. Regulatory Matters**

Pursuant to FAS No. 71 "Accounting for the Effects of Certain Types of
  Regulation," MGE capitalizes (as deferred charges) incurred costs that are expected
  to be recovered in future electric and natural gas rates. MGE also records (as
  other credits) obligations to customers to refund previously collected revenue
  or to spend revenue collected from customers on future costs.

Restructuring the electric industry could affect MGE's ability to continue
  establishing certain regulatory asset and liability amounts allowed under FAS
  No. 71. MGE is unable to predict whether any adjustments to regulatory
  assets and liabilities will occur in the future. However, the PSCW recognizes
  the need to allow recovery for commitments made under prior regulation.

MGE's regulatory and deferred assets and liabilities consisted of the following
  as of Dec. 31:

|                                                     | 2000    | 1999       
|---------------------------------------------------- | ------- | -----------
|*(In thousands)*                                     | Assets  | Liabilities
|Demand-side management                               | $ 3,910 | $ 1,345    
|Decommissioning and decontamination                  | 1,584   | 1,584      
|Environmental costs                                  | 592     | -          
|Regulatory liability - FAS 109                       | -       | 21,532     
|Other                                                | 1,604   | 2,056      
|Subtotal regulatory assets/liabilities               | 7,690   | 26,517     
|Pension and deferred compensation assets/liabilities | 4,938   | 15,426     
|Unamortized debt expense                             | 5,038   | -          
|Customer advances for construction                   | -       | 4,325      
|Other deferred items                                 | 7,776   | 2,557      
|Subtotal deferred assets/liabilities                 | 17,752  | 22,308     
|Total                                                | $25,442 | $48,825    

MGE contracted with WPSC to build an 83-MW natural gas-fired combustion turbine
  near Marinette, Wis. MGE received a return component on this asset in rate order
  Docket 3270-UR-109. The revenue for this asset was deferred until the unit
  came on-line in June 2000. This allowed MGE to match the revenues with the expenses.
  MGE recorded revenues of $2.5 million on this asset in 2000. The cost of
  the unit ($31.3 million) was added to MGE's utility plant balances in 2000.

**g. Statement of Cash Flows**

MGE considers cash equivalents to be those investments that are highly liquid
  with original maturity dates of less than three months.

Supplementary noncash investing items and cash paid for interest and income
  taxes for the years ended Dec. 31 were as follows:

|*(In thousands)*                         | 2000    | 1999    | 1998   
|---------------------------------------- | ------- | ------- | -------
|Interest paid, net of amount capitalized | $13,822 | $12,053 | $10,227
|Income taxes paid, net                   | $16,078 | $15,857 | $14,188
|Noncash investing items                  | $ -     | $ 5,301 | $ -    

**h. Comprehensive Income**

Comprehensive income includes all changes in equity during a period, except
  those resulting from investments by and distributions to shareholders. Comprehensive
  income is reflected in the Consolidated Statements of Common Equity.

**i. Hedge Accounting**

Hedge accounting is applied only if the derivative reduces the risk of the
  underlying hedged item and is designated at inception as a hedge, with respect
  to the hedged item. If a derivative instrument ceased to meet the criteria for
  deferral, any gains or losses were recognized in income.

**j. New Accounting Pronouncements**

In June 2000, the Financial Accounting Standards Board (FASB) issued FAS No. 138
  "Accounting for Certain Derivative Instruments and Certain Hedging Activities,
  An Amendment of FAS No. 133." This standard includes several amendments
  to FAS No. 133 and is effective for fiscal years beginning after June 15,
  2000. MGE adopted FAS No. 133 and FAS No. 138 as of Jan. 1, 2001.

The new standard requires that all derivative instruments be reported on the
  balance sheet at their fair values. Special accounting for qualifying hedges
  allows a derivative's gains and losses to offset related results on the hedged
  item in the income statement. It also requires MGE to formally document, designate
  and assess the effectiveness of transactions that receive hedge accounting.
  For derivative instruments classified as fair-value hedges, the changes in the
  fair value of the derivative instrument will be offset on the income statement
  by the changes in the fair value of the hedged item. For derivative instruments
  classified as cash-value hedges, the effective portion of the hedge is reported
  in other comprehensive income until it is cleared to earnings. The ineffective
  portion of all hedges would be recognized through current earnings. For derivative
  instruments not classified as a hedge, the change in the fair value of the derivative
  will be recorded each period in current earnings.

MGE adopted FAS No. 133 on Jan. 1, 2001. There was no material effect
  on net income from adopting this new standard or making the transition adjustment.

The determination of the impact of FAS No. 133 is based on current interpretations
  of this statement, including interpretations of the Derivatives Implementation
  Group of the FASB. Final guidance, when issued, may affect MGE's implementation
  of FAS No. 133.

In September 2000, the FASB issued FAS No. 140, "Accounting for Transfers
  and Servicing of Financial Assets and Extinguishments of Liabilities, a Replacement
  of FASB Statement No. 125." FAS No. 140 revises the standards for
  accounting for securitizations and other transfers of financial assets and collateral
  and requires certain disclosures, but it carries over most of FAS No. 125's
  provisions without reconsideration. The standard provides accounting and reporting
  standards for transfers and servicing of financial assets and extinguishments
  of liabilities. Those standards are based on consistent application of a financial-components
  approach that focuses on control. The standard is effective for transfers and
  servicing of financial assets and extinguishments of liabilities occurring after
  March 31, 2001, and should be applied prospectively. At Dec. 31, 2000,
  MGE did not anticipate entering into any transactions that would be subject
  to FAS No. 140.

**2. JOINT PLANT OWNERSHIP**

MGE and two other utilities jointly own two electric generating facilities,
  which account for 54.0% of MGE's net generating capability, 325 MW. Power from
  these facilities is shared in proportion to each company's ownership interest.
  MGE owns:

-22.0% (232 MW) of the coal-fired Columbia, which is operated by Alliant Energy
  Corp. 
  -17.8% (93 MW) of Kewaunee, which is operated by WPSC.

On Sept. 29, 1998, MGE finalized an agreement to sell its share of Kewaunee
  to WPSC. MGE is expected to transfer its ownership interest in Kewaunee in the
  fall of 2001. MGE will receive a cash payment from WPSC for Kewaunee upon closing
  (date plant shuts down for steam generator replacement). The payment will be
  comprised of MGE's share of Kewaunee's book value (currently $8.9 million)
  plus the book value of other assets related to Kewaunee. MGE's decommissioning
  liability will be limited to the current value of the trust assets balance until
  the sale closes, plus all decommissioning collections through 2002. MGE believes
  it can secure electric capacity and energy more cost-effectively from other
  sources and eliminate the risk of future stranded costs. This agreement, approved
  by state regulators in 2000, will close when the plant shuts down for steam
  generator replacement. The work, which will take approximately 60 days, is scheduled
  for fall 2001.

Each owner provides its own financing and reflects its respective portion of
  facilities and operating costs in its financial statements. MGE's interest in
  these facilities, included in its gross utility plant in service, and the related
  accumulated depreciation reserves at Dec. 31 were as follows:

|                         | Columbia | Kewaunee
|------------------------ | -------- | --------
|*(In thousands)*         | 2000     | 1999    
|Utility plant            | $ 91,993 | $ 86,875
|Accumulated depreciation | (55,877) | (53,417)
|Net plant                | $ 36,116 | $ 33,458

**3. INCOME TAXES**

Total income taxes in the Consolidated Statements of Income are as follows:

|*(In thousands)*                     | 2000    | 1999    | 1998   
|------------------------------------ | ------- | ------- | -------
|Income taxes charged to operations   | $15,416 | $12,268 | $10,723
|Income taxes charged to other income | 336     | 1,608   | 2,384  
|Total income taxes                   | $15,752 | $13,876 | $13,107

Total income taxes consist of the following provision (benefit) components
  for the years ended Dec. 31:

|*(In thousands)*                 | 2000    | 1999    | 1998   
|-------------------------------- | ------- | ------- | -------
|Currently payable:               |         |         |        
|Federal                          | $14,280 | $11,772 | $11,832
|State                            | 3,273   | 3,551   | 3,251  
|Net-deferred:                    |         |         |        
|Federal                          | (878)   | (476)   | (1,092)
|State                            | (196)   | (232)   | (137)  
|Amortized investment tax credits | (727)   | (739)   | (747)  
|Total income taxes               | $15,752 | $13,876 | $13,107

Deferred income taxes are provided to reflect the expected tax consequences
  of temporary differences between the tax basis of assets and liabilities and
  their reported amounts in the financial statements. 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 which do not meet
  the more-likely-than-not criterion. Investment tax credits from regulated operations
  are amortized over related property service lives.

The differences between the federal statutory income tax rate and MGE's effective
  rate are as follows:

|                                           | 2000  | 1999  | 1998 
|------------------------------------------ | ----- | ----- | -----
|Statutory federal income tax rate          | 35.0% | 35.0% | 35.0%
|Amortized investment tax credits           | (1.7) | (2.0) | (2.1)
|State income taxes, net of federal benefit | 5.0   | 5.7   | 5.7  
|Valuation allowance                        | (1.1) | (0.3) | (0.4)
|Renewable electricity production credit    | (0.9) | (0.5) | -    
|Other, individually insignificant          | 0.2   | (1.0) | (1.1)
|Effective Income Tax Rate                  | 36.5% | 36.9% | 37.1%

The significant components of deferred tax liabilities (assets) that appear
  on the Consolidated Balance Sheets as of Dec. 31 are as follows:

|*(In thousands)*                        | 2000     | 1999    
|--------------------------------------- | -------- | --------
|Property-related                        | $57,564  | $56,869 
|Bond transactions                       | 1,720    | 1,803   
|Energy conservation                     | 1,030    | 1,757   
|Pension expense                         | 2,282    | 1,598   
|Other                                   | 1,002    | 556     
|Gross deferred income tax liabilities   | 63,598   | 62,583  
|Accrued expenses                        | (4,513)  | (3,836) 
|Retirement benefits, other than pension | (2,107)  | (1,929) 
|Other                                   | (1,986)  | (1,813) 
|Deferred tax regulatory account         | (12,042) | (12,873)
|Gross deferred income tax assets        | (20,648) | (20,451)
|Less valuation allowance                | 371      | 849     
|Net deferred income tax assets          | (20,277) | (19,602)
|Deferred income taxes                   | $43,321  | $42,981 

The valuation allowance reduces MGE's deferred tax assets to estimated realizable
  value. The deferred tax assets for which a valuation allowance is necessary
  arise primarily from state tax carryforward losses. In 2000, MGE reduced the
  valuation allowance applied against these state tax carryforward losses based
  upon management's estimate that, more likely than not, these deferred tax assets
  will be realized. The remaining valuation allowance at Dec. 31, 2000, is
  necessary due to the uncertainty of future income estimates.

For tax purposes, as of Dec. 31, 2000, MGE had approximately $14.0 million
  of state tax net operating loss deductions that expire in 2013, if unused.

Excess deferred income taxes result from past taxes provided at rates higher
  than current rates. The regulatory liability--FAS No. 109 associated with
  these excess deferred income taxes and investment tax credit--deferred was $21.5 million
  and $22.9 million at Dec. 31, 2000 and 1999, respectively.

**4. PENSION PLANS**

MGE maintains qualified and nonqualified pension plans. MGE also provides health
  care and life insurance benefits for its retired employees. The table on page II-27
  provides a reconciliation of benefit obligations, plan assets and funded status
  of the plans.

The funded status information reported on page II-27 includes a nonqualified
  pension plan and a postretirement plan with accumulated benefit obligations
  in excess of the fair value of assets. The projected benefit obligation, accumulated
  benefit obligation and fair value of assets for a nonqualified pension plan
  were $7.6 million, $7.2 million and $0, respectively, at Dec. 31,
  2000, and $6.9 million, $6.6 million and $0, respectively, at Dec. 31,
  1999. Similarly, the accumulated benefit obligation and fair value of assets
  for a postretirement plan were $18.3 million and $7.0 million at Dec. 31,
  2000, and $15.6 million and $6.4 million at Dec. 31, 1999.

MGE has elected to recognize the cost of its transition obligation (the accumulated
  postretirement benefit obligation as of Jan. 1, 1993) by amortizing it
  on a straight-line basis over 20 years.

MGE maintains two defined contribution 401(k) benefit plans for its employees.
  MGE's costs of the 401(k) plans were $0.6 million in 2000, $0.5 million
  in 1999 and $0.5 million in 1998.

**Sensitivity of retiree welfare results**: The assumed health
  care cost percentage was 7.0% as of Dec. 31, 2000. Assumed health care
  trend rates, which have a significant effect on the amounts reported for health
  care plans, have been declining as shown in the table on page II-28. The
  following table shows how an assumed 1% increase or 1% decrease in health care
  cost trends could impact postretirement benefits in 2000 dollars.

|*(In thousands)*                           | 1% Increase | 1%
      D ecrease
|------------------------------------------ | ----------- | ------------------
|Effect on:                                 |             |                   
|Total service and interest cost components | $ 369       | $ (294)           
|Postretirement benefit obligation          | $3,103      | $(2,513)          

MGE reports comprehensive income in accordance with FAS No. 130, "Reporting
  Comprehensive Income." Comprehensive income includes the minimum pension liability
  adjustment, net of tax, for a nonqualified pension plan and is reflected in
  the Consolidated Statements of Common Equity.

|*(In thousands)*                                    | Pension Benefits | Postretirement Benefits
|--------------------------------------------------- | ---------------- | -----------------------
|                                                    | 2000             | 1999                   
|**Change in Benefit Obligation**                    |                  |                        
|Net benefit obligation at beginning of year         | $81,675          | $81,548                
|Service cost                                        | 2,350            | 2,020                  
|Interest cost                                       | 6,424            | 5,868                  
|Plan participants' contributions                    | -                | -                      
|Plan amendments                                     | 1,696            | 3,244                  
|Actuarial (gain)/loss                               | 2,432            | (8,390)                
|Gross benefits paid                                 | (2,892)          | (2,615)                
|Net benefit obligation at end of year               | $91,685          | $81,675                
|                                                    |                  |                        
|**Change in Plan Assets**                           |                  |                        
|Fair value of plan assets at beginning of year      | $99,767          | $81,118                
|Actual return on plan assets                        | 1,263            | 19,370                 
|Employer contributions                              | 368              | 1,894                  
|Plan participants' contributions                    | -                | -                      
|Gross benefits paid                                 | (2,892)          | (2,615)                
|Fair value of plan assets at end of year            | $98,506          | $99,767                
|                                                    |                  |                        
|Funded status at end of year                        | $ 6,821          | $18,092                
|Unrecognized net actuarial gain                     | (12,976)         | (24,385)               
|Unrecognized prior service cost                     | 5,142            | 3,889                  
|Unrecognized net transition obligation              | 1,479            | 1,583                  
|Net amount recognized at end of year                | $ 466            | $ (821)                
|                                                    |                  |                        
|Amounts recognized in the balance sheet consist of: |                  |                        
|Prepaid benefit cost                                | $4,938           | $ 3,121                
|Accrued benefit liability                           | (4,472)          | (3,942)                
|Additional minimum liability                        | (2,756)          | (2,697)                
|Intangible asset                                    | 951              | 1,068                  
|Accumulated other comprehensive income              | 1,805            | 1,629                  
|Net amount recognized at end of year                | $ 466            | $ (821)                

|*(In thousands)*                                                                | Pension Benefits | Postretirement Benefits
|------------------------------------------------------------------------------- | ---------------- | -----------------------
|                                                                                | 2000             | 1999                   
|**Components of Net Periodic Benefit Cost**                                     |                  |                        
|Service cost                                                                    | $2,350           | $2,020                 
|Interest cost                                                                   | 6,424            | 5,868                  
|Expected return on assets                                                       | (9,355)          | (7,597)                
|Amortization of:                                                                |                  |                        
|Transition obligation (asset)                                                   | 104              | 104                    
|Prior service cost                                                              | 442              | 352                    
|Actuarial gain (loss)                                                           | (883)            | 89                     
|Regulatory effect based on phase-in                                             | 112              | 113                    
|Net periodic benefit cost                                                       | $ (806)          | $ 949                  
|                                                                                |                  |                        
|**Weighted-average Assumptions as of Dec. 31**                                  |                  |                        
|Discount rate                                                                   | 7.50%            | 7.50%                  
|Expected return on plan assets                                                  | 9.50%            | 9.50%                  
|Rate of compensation increase                                                   | 5.00%            | 5.00%                  
|Health care cost trend on covered charges                                       | NA               | NA                     
|1 Decreasing gradually to 5.0% in 2003 and remaining constant
      thereafter.

**5. FAIR VALUE OF FINANCIAL INSTRUMENTS**

At Dec. 31, 2000 and 1999, the carrying amount of cash, cash equivalents
  and outstanding commercial paper approximates fair market value due to the short
  maturity of those investments and obligations. MGE's nuclear decommissioning
  trusts are recorded at fair market value.

The estimated fair market value of MGE's long-term debt and interest rate swap
  agreements are based on quoted market prices at Dec. 31. The estimated
  fair market value of MGE's financial instruments are as follows:

|                                     | 2000            | 1999      
|------------------------------------ | --------------- | ----------
|*(In thousands)*                     | Carrying Amount | Fair Value
|Assets:                              |                 |           
|Cash and cash equivalents            | $ 4,307         | $ 4,307   
|Decommissioning fund                 | $102,891        | $102,891  
|Liabilities:                         |                 |           
|Short-term debt                      | $ 44,000        | $ 44,000  
|Long-term debt                       | $184,575        | $187,527  
|Other long-term debt swap agreements | $ -             | $ (194)   

Cash, cash equivalents and customer accounts receivable are the financial instruments
  that potentially subject MGE to concentrations of credit risk. MGE places its
  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 strong economy in its service territory.

MGE has interest rate swap agreements with commercial banks totaling $5.0 million
  for 2000 and $16.0 million for 1999, with effective interest rates of 6.3%
  and 5.1%, respectively. These agreements have a fixed rate and are backed by
  MGE's commercial paper. MGE believes counterparties to the agreements will meet
  their obligations based on their high credit ratings.

In February 2000, MGE entered into a nonexchange-traded heating degree day
  (HDD) put option covering March 2000 and November 2000 through March 2001. MGE
  uses weather derivatives to reduce the impact of weather volatility on its gas
  margin. MGE does not use weather derivatives for trading or speculative purposes.
  MGE accounts for these weather derivatives in accordance with EITF 99-2, "Accounting
  for Weather Derivatives," which uses the intrinsic value method.

The premium cost is amortized over the expected HDD of the contract and any
  gains or losses are recorded in other income. Nonperformance of counterparties
  to these weather derivatives could expose MGE to credit loss. However, MGE enters
  into transactions only with companies that meet or exceed strict credit guidelines.
  MGE considers it has minimal risk for counterparty default. No gain or loss
  has been recognized on this weather derivative.

MGE purchased nonexchange-traded financial put options to reduce the impact
  on customers if winter gas prices drop below the price MGE paid for its gas
  in storage. MGE typically injects gas into storage in the summer and draws it
  out during the winter months. The put options have contract terms of January
  and February 2001. Under MGE's natural gas risk management program approved
  by the PSCW, the cost of these put options (as well as the gains or losses realized)
  will be recovered under the PGA and will not affect net income. These financial
  put options had no fair market value at Dec. 31, 2000.

**6. CAPITALIZATION MATTERS**

**a. Common Stock**

Beginning in December 1999, MGE switched from buying shares on the open market
  to issuing new shares for its Dividend Reinvestment and Direct Stock Purchase
  Plan (Plan). Issuing new shares, rather than buying shares on the open market,
  helps improve cash flow and strengthen MGE's capital structure.

In 2000, a total of 458,000 new shares of common stock were issued under the
  Plan. The $9.0 million proceeds were allocated to common stock and amounts
  received in excess of par value.

In 1999, a total of 81,000 new shares of common stock were issued under the
  Plan. The proceeds were allocated to common stock and amounts received in excess
  of par value.

**b. Preferred Stock**

MGE has authorized but not issued 1,175,000 shares of $25 par value redeemable
  preferred stock, cumulative, at Dec. 31, 2000 and 1999.

**c. First Mortgage Bonds and Other Long-Term Debt**

MGE's utility plant is subject to the lien of its First Mortgage Bonds.

On May 4, 2000, MGE issued $20.0 million of unsecured, variable-rate Medium-Term
  Notes (MTN) maturing on May 3, 2002. Interest on these notes will be paid quarterly
  on the third Wednesday of March, June, September and December. The variable
  rate, based on the three-month London Interbank Offering Rate (LIBOR) plus 13.0
  basis points, was 6.67% as of Dec. 31, 2000. The proceeds were used to
  finance the 83-MW natural gas-fired combustion turbine that MGE purchased
  from WPSC.

On Sept. 20, 2000, MGE issued $15.0 million of unsecured MTN at a rate
  of 7.49%. Interest on these notes will be paid semiannually on March 1 and Sept.
  1 until the notes mature on Sept. 20, 2007. The proceeds were used to retire
  the $11.0 million, 6.01% debt issue that matured in November.

Long-term debt maturities, including mandatory sinking fund requirements relating
  to the 6-1/2%, 2006 Series, First Mortgage Bonds are:

|*(In thousands)* | Amount | Debt Issue 
|---------------- | ------ | -----------
|2001             | $ 200  | -          
|2002             | 20,200 | VAR%, MTN  
|2003             | 500    | -          
|2004             | 6,000  | 6.91%, SWAP
|2005             | 2,000  | -          

**d. Notes Payable to Banks, Commercial Paper and Lines of Credit**

For short-term borrowings, MGE generally issues commercial paper (at the prevailing
  discount rate when issued) that is supported by unused bank lines of credit.
  Through negotiations with several banks, MGE has $55.0 million in bank
  lines of credit.

Information concerning short-term borrowings for the past three years is shown
  below:

|*(In thousands)*               | 2000    | 1999    | 1998   
|------------------------------ | ------- | ------- | -------
|As of December 31:             |         |         |        
|Available lines of credit      | $55,000 | $40,000 | $45,000
|Commercial paper outstanding   | $44,000 | $15,750 | $ -    
|Weighted-average interest rate | 6.73%   | 6.44%   | 0.00%  
|During the year:               |         |         |        
|Maximum short-term borrowings  | $44,000 | $15,750 | $33,500
|Average short-term borrowings  | $17,117 | $ 1,899 | $ 9,223
|Weighted-average interest rate | 6.07%   | 5.68%   | 5.70%  

**7. RATE MATTERS**

In January 2001, the PSCW authorized: (1) an electric rate increase of
  $7.5 million, or 3.9%, to cover rising fuel costs and increased system
  demands, (2) a natural gas rate increase of $3.4 million, or 2.7%,
  for improving the gas delivery system and (3) a return on common stock
  equity of 12.9%. MGE's next rate case period is expected to begin Jan. 1,
  2003. MGE has a limited reopener in its current rate case to reflect items that
  may significantly impact rates for 2002. MGE's reopener will reflect the full-year
  impact of the disposition of Kewaunee and also address implementing a proposed
  automated meter reading system.

MGE contracted with WPSC to build and operate an 83-MW natural gas-fired
  combustion turbine near Marinette, Wis. MGE received rate recovery for this
  asset and related operating and maintenance expenses. Associated revenues collected
  in 1999 ($1.7 million) and the first five months of 2000 ($0.8 million)
  were deferred until the unit went on-line in June 2000. MGE recognized the collection
  of these deferred revenues ($2.5 million) starting in June 2000.

In January 2000, the PSCW approved an electric rate increase of $9.7 million,
  or 5.5%, to cover rising fuel costs, repair costs at Kewaunee and additional
  backup generator costs. These rates were in effect through 2000. In MGE's previous
  rate case, it was assumed that Kewaunee ownership, and related costs, would
  have transferred to WPSC in spring 2000 (when steam generators were scheduled
  to be replaced). Delays in manufacturing the steam generators postponed this
  work until fall 2001.

In January 1999, the PSCW authorized an electric rate increase of $8.4 million,
  or 5.1%, and a natural gas rate increase of $0.7 million, or 0.7%. These
  rates were based on a 12.2% authorized return on common stock equity.

In August 1999, the PSCW approved a temporary retail electric rate surcharge
  of 3.6%, on average. This surcharge, which ended Dec. 31, 1999, covered
  higher fuel and purchased power costs caused by extended outages at the Columbia
  plant, which MGE owns jointly with Alliant Energy and WPSC.

**8. GAS MARKETING SUBSIDIARIES**

After selling its interest in a gas marketing joint venture in December 1998,
  MGE favorably resolved various contingencies in 2000 and 1999, including: warranty
  claims, accounts payable, and legal and tax issues related to its former investment.
  The after-tax benefit was approximately $0.3 million and $1.0 million
  in 2000 and 1999, respectively.

**9. COMMITMENTS**

*Coal Contracts:* MGE has no coal contracts that contain demand obligations
  for Blount. Fuel procurement for MGE's jointly owned Columbia plant is handled
  by Alliant Energy, the operating company. If any demand obligations must be
  paid under these contracts, management believes these would be considered costs
  of service and recoverable in rates.

*Purchased Power Contracts:* MGE has several purchased power contracts
  to help meet future electric supply requirements. As of Dec. 31, 2000,
  MGE's total commitments for energy and purchased power contracts for capacity
  are estimated to be $6.3 million in 2001, $10.9 million in 2002, $14.7 million
  in 2003 and $11.0 million in 2004 and 2005. Management expects to recover
  these costs in future customer rates.

In March 1999, MGE entered into an agreement with Commonwealth Edison to purchase
  60 MW of firm capacity and energy for approximately $10.2 million
  (which includes about $0.5 million for securing firm transmission to deliver
  firm capacity and energy to MGE's system). In March 1999, MGE also agreed to
  sell 30 MW of the 60 MW to Wisconsin Public Power, Inc., for approximately
  $4.8 million, plus any applicable taxes.

*Purchased Gas Contracts:* MGE has natural gas transportation contracts
  that provide for the availability of firm pipeline capacity under which it must
  make fixed monthly payments. The pricing component of the fixed monthly payment
  for these contracts is established, but may be subject to change by the Federal
  Energy Regulatory Commission (FERC). These payments are estimated to be: $16.2 million
  in 2001, $14.2 million in 2002, $12.6 million in 2003, $11.8 million
  in 2004 and $9.8 million in 2005. Management expects to recover these costs
  in future customer rates.

*Environmental:* On Jan. 1, 2000, Phase II of the 1990 Federal
  Clean Air Act amendments took effect, setting new emission limits for sulfur
  dioxides and NOx. MGE's generating units were modified well in advance to meet
  year 2000 NOx requirements. Early modifications at Blount allow MGE to postpone
  meeting more stringent NOx requirements at this plant until 2007.

On Oct. 27, 1998, the EPA issued final rules requiring more NOx emission reductions
  from utilities located in southern Wisconsin. However, a legal challenge resulted
  in excluding Wisconsin from this rule and returning the issue to the EPA on
  March 3, 2000, for further action.

On Jan. 8, 2001, former EPA Administrator Carol Browner signed a proposed
  rule that would exclude Wisconsin (and MGE) from further NOx emission reductions
  required by the original rule. The proposed rule must still be finalized. If
  it is determined Wisconsin is subject to the original rule, MGE will likely
  need to evaluate emission control options to bring the Blount plant into compliance.
  These controls would likely increase capital, operating and maintenance expenses.

On Dec. 14, 2000, the EPA announced it would create rules to limit the
  amount of mercury emitted by coal and oil-fired electric-steam generating facilities.
  EPA plans to have the proposed rules published no later than Dec. 15, 2003,
  and final regulations published no later than Dec. 15, 2004. The DNR is
  also evaluating its rules to limit mercury emissions from coal-fired boilers.
  If either of these regulations are issued, they may require MGE to evaluate
  emission control options for its Blount facility in order to comply. These controls
  would likely increase capital, operating and maintenance expenses.

MGE is one of the first Wisconsin companies to participate in a voluntary Environmental
  Cooperation Program with the DNR. This gives MGE flexibility as it works with
  the DNR to maintain superior environmental performance at the Blount plant.

In December 2000, Columbia (in which MGE has an ownership interest) received
  a Request for Information from the EPA to evaluate compliance with the Clean
  Air Act. Alliant Energy, the plant operator, submitted a response to the EPA
  on approximately Jan. 15, 2001. Management does not believe this will have
  a significant impact on the financial statements.

MGE is listed as a potentially responsible party for two sites that the EPA
  has placed on the national priorities Superfund list: (1) the Refuse Hideaway
  Landfill in Middleton, Wis., where MGE disposed of fly ash sludge and general
  office waste from 1980 to 1984 and (2) the Lenz Oil site in Lemont, Ill.,
  which was used for storing and processing waste oil for several years. These
  sites require clean up under the Comprehensive Environmental Response, Compensation
  and Liability Act. A group of companies is currently negotiating with the EPA
  on the cleanup of these two sites.

MGE, a potentially responsible party, is also negotiating with the City of
  Madison for cleanup costs at the Demetral Landfill. MGE used this site for coal
  ash disposal from 1954 to 1959.

Management believes its share of the final cleanup costs for all sites will
  not result in any materially adverse effects on MGE's operations, cash flows
  or financial position. Insurance may cover a portion of the cleanup costs. Management
  believes that the cleanup costs not covered by insurance will be recovered in
  current and future rates. MGE estimates its future expense to clean up these
  sites could range from $250,000 to $550,000. At Dec. 31, 2000, MGE accrued
  a $250,000 liability on its balance sheet for this matter.

**10. AMERICAN TRANSMISSION COMPANY LLC (ATC)**

Based on a commitment made in June 2000, MGE transferred to ATC on Jan. 1,
  2001, its electric transmission facilities with a net book value of $43.6 million.
  ATC is a joint venture authorized by Reliability 2000 legislation in Wisconsin
  (1999 Wis. Act 9) to independently own and operate the transmission system in
  Wisconsin. ATC provides equal and fair access to Wisconsin's transmission system
  to all joint-venture partners. All of Wisconsin's investor-owned utilities have
  contributed their transmission facilities to ATC. In addition, several Wisconsin
  municipal utilities, retail electric cooperatives and power supply agencies
  are participating by contributing cash and/or transferring transmission assets.

In exchange for its transmission plant and related regulatory deferred taxes
  and deferred investment tax credits, MGE received an approximate 6.0% interest
  in ATC. In 2001, each member of the ATC will be subject to an independent audit
  of its contributed transmission assets in order to finalize initial ownership
  interests.

MGE will account for its investment in ATC on the equity method of accounting.

ATC is regulated by the FERC. MGE expects to receive a return on its investment
  in ATC approximately equal to the return it would have earned by retaining its
  transmission facilities.

In 2001, MGE started paying a network service fee for using the ATC transmission
  system. MGE's transmission assets will be recovered in rates for 2001 and 2002,
  since the impact of joining ATC was unknown at the time MGE's rates were set.
  However, the difference between the revenue requirement associated with the
  contributed transmission assets and the network service fees payable to the
  ATC will be deferred subject to regulatory treatment.

**11. SEGMENTS OF BUSINESS**

MGE has two main business segments, electric and gas, which are both regulated.
  The electric business generates, transmits and distributes electricity. The
  gas business transports and distributes natural gas. The following table shows
  key information about MGE's electric and gas operations, including the distribution
  of net assets for the years ended Dec. 31.

|*(In thousands)*                                    | 2000     | 1999     | 1998    
|--------------------------------------------------- | -------- | -------- | --------
|**Electric Operations**                             |          |          |         
|Total revenues                                      | $203,176 | $185,955 | $169,563
|Operation and maintenance expenses                  | 124,101  | 115,204  | 102,006 
|Depreciation and amortization                       | 29,137   | 29,319   | 27,586  
|Other general taxes                                 | 8,296    | 7,622    | 7,378   
|Pre-tax operating income                            | $ 41,642 | $ 33,810 | $ 32,593
|Income tax provision                                | 11,534   | 9,599    | 8,883   
|Net Operating Income                                | $ 30,108 | $ 24,211 | $ 23,710
|                                                    |          |          |         
|Electric Construction and Nuclear Fuel Expenditures | $ 65,312 | $ 44,297 | $ 25,970
|**Gas Operations**                                  |          |          |         
|Operating revenues                                  | $120,932 | $ 88,079 | $ 80,189
|Revenues from sales to electric utility             | 6,106    | 7,352    | 6,362   
|Total revenues                                      | 127,038  | 95,431   | 86,551  
|Operation and maintenance expenses                  | 105,335  | 76,904   | 71,125  
|Depreciation and amortization                       | 5,944    | 5,835    | 5,599   
|Other general taxes                                 | 1,884    | 1,684    | 1,885   
|Pre-tax operating income                            | 13,875   | 11,008   | 7,942   
|Income tax provision                                | 3,882    | 2,669    | 1,840   
|Net Operating Income                                | $ 9,993  | $ 8,339  | $ 6,102 
|                                                    |          |          |         
|Gas Construction Expenditures                       | $ 8,294  | $ 6,691  | $ 4,859 
|**Assets (year-end)**                               |          |          |         
|Electric                                            | $395,622 | $342,130 | $311,563
|Gas                                                 | 123,486  | 114,881  | 111,762 
|Assets not allocated                                | 52,496   | 38,499   | 42,940  
|Total                                               | $571,604 | $495,510 | $466,265

**12. QUARTERLY SUMMARY OF OPERATIONS (unaudited)**

*(In thousands, except per-share amounts)*

|                           | **Quarters Ended
|-------------------------- | ----------------
|**2000******               | March 31        
|Operating Revenues         |                 
|Electric                   | $46,904         
|Gas                        | 37,639          
|Total                      | 84,543          
|Operating Expenses         | 72,136          
|Net Operating Income       | 12,407          
|Interest and Other         | 2,297           
|Net Income                 | $10,110         
|Earnings per Common Share  | 62.0 cents      
|Dividends per Common Share | 32.8 cents      
|**1999**                   |                 
|Operating Revenues         |                 
|Electric                   | $41,194         
|Gas                        | 38,340          
|Total                      | 79,534          
|Operating Expenses         | 67,758          
|Net Operating Income       | 11,776          
|Interest and Other         | 2,720           
|Net Income                 | $ 9,056         
|Earnings per Common Share  | 56.0 cents      
|Dividends per Common Share | 32.6 cents      

**Notes:**

(1)The quarterly results of operations within a year are not comparable because
  of seasonal and other factors.

(2)The sum of earnings per share of common stock for any four quarters may
  vary slightly from the earnings per share of common stock for the equivalent
  12-month period due to rounding.

**Item 9 - Changes in
  and Disagreements with Accountants on Accounting and Financial Disclosure**

None.

**PART III.**

**Item 10 - Directors and Executive
  Officers of the Registrant**

Information concerning the Directors of the Company is contained in the definitive
  proxy statement under the section "Election of Directors" filed prior to April 30,
  2001, with the Securities and Exchange Commission, which is incorporated herein
  by reference.

**Executive Officers of the Registrant**
  (elected annually by Directors)

|Executive                            | Title                                                                                                                                                                                      | Effective Date                                           | Service Years as an Officer
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------- | ---------------------------
|David C. Mebane 
      Age: 67       | Chairman of the Board 
      Chairman, President & CEO                                                                                                                                     | 02/01/00
      05/09/94                                  | 19                         
|Gary J. Wolter 
      Age: 46        | President & Chief Executive Officer 
      Senior Vice President - Administration & Secretary                                                                                              | 02/01/00
      05/01/95                                  | 9                          
|Mark C. Williamson 
      Age: 47    | Executive Vice President & Chief Strategic Officer 
      Senior Vice President - Energy Services                                                                                          | 02/01/00
      05/01/95                                  | 8                          
|Ronald L. Semmann 
      Age: 65     | Executive Vice President 
      Group Vice President 
      Vice President - Human Resources 
      Special Assistant to the Chairman                                                      | 02/01/00
      01/01/98
      07/18/97
      05/12/97    | 3                          
|Lynn K. Hobbie 
      Age: 42        | Senior Vice President 
      Vice President - Marketing                                                                                                                                    | 02/01/00
      05/01/96                                  | 6                          
|Thomas R. Krull 
      Age: 51       | Group Vice President 
      Vice President - Gas & Electric Operations 
      Vice President - Electric Transmission & Distribution                                                        | 02/01/00 
      11/01/97 
      05/01/96                 | 7                          
|James G. Bidlingmaier 
      Age: 54 | Vice President - Admin. & Chief Information Officer                                                                                                                                        | 02/01/00                                                 | -                          
|Mark A. Frankel 
      Age: 52       | Vice President, General Counsel & Secretary 
      Vice President & General Counsel                                                                                                        | 02/01/00
      08/23/99                                  | -                          
|Terry A. Hanson 
      Age: 49       | Vice President and Chief Financial Officer 
      Vice President - Finance 
      Vice President & Treasurer                                                                               | 05/01/00 
      11/01/97 
      10/01/96                 | 9                          
|Scott A. Neitzel 
      Age: 40      | Vice President - Business Development & Fuels 
      Vice President - Gas Rates & Fuels 
      Assistant Vice President - Gas Rates & Fuels                                                | 09/22/00 
      02/01/00 
      08/04/97                 | 3                          
|Jeffrey C. Newman 
      Age: 38     | Vice President and Treasurer 
      Treasurer 
      Exec. Director - Budgets & Financial Management                                                                                       | 01/01/01 
      11/01/97 
      05/01/96                 | 3                          
|Peter J. Waldron 
      Age: 43      | Vice President - Power Supply 
      Vice President - Power Supply Ops. & Eng. 
      Asst. Vice President - Power Supply Ops. & Eng. 
      Executive Director - Power Supply Ops. & Eng. | 04/24/98 
      04/23/97 
      05/01/96 
      10/01/95 | 4                          

Note: Ages, years of service and positions as of Jan. 1, 2001.

**Item 11 - Executive Compensation**

See Item 12 below.

**Item 12 - Security Ownership
  of Certain Beneficial Owners And Management**

The required information for Items 11 and 12 is included in the Company's definitive
  proxy statement under the section "Executive Compensation," not including "Report
  on Executive Compensation" and "Company Performance," and under the section
  "Beneficial Ownership of Common Stock by Directors and Executive Officers" filed
  with the Securities and Exchange Commission prior to April 30, 2001, which
  is incorporated herein by reference.

**Item 13 - Certain Relationships
  and Related Transactions**

None.

**PART IV.**

**Item 14 - Exhibits, Financial
  Statement Schedules, and Reports on Form 8-K**

Index

(a)1. Financial Statements

> - Report of Independent Accountants
>     - Consolidated Statements of Income for the years ended Dec. 31, 2000, 1999
>     and 1998
>     - Consolidated Statements of Cash Flows for the years ended Dec. 31, 2000,
>     1999 and 1998
>     - Consolidated Balance Sheets as of Dec. 31, 2000 and 1999
>     - Consolidated Statements of Capitalization as of Dec. 31, 2000 and 1999
>     - Consolidated Statements of Common Equity as of Dec. 31, 2000, 1999 and 1998
>     - Notes to Consolidated Financial Statements

2. Financial Statement Schedules

> None.

3. All Exhibits Including Those Incorporated by Reference

> Exhibits (an asterisk (*) indicates a management contract or compensatory
>     plan or arrangement):
>   No. Description of document
>   3.(i) - Articles of Incorporation as in effect at May 6, 1996. (Incorporated
>     by reference to Exhibit 3.(i) with 1996 Form 10-K in File No. 0-1125.)
>   3.(ii) - By-Laws as in effect at May 4, 1999. (Incorporated by reference
>     to Exhibit 3.(ii) with 1999 Form 10-K in File No. 0-1125.)
>   4A - Indenture of Mortgage and Deed of Trust between MGE and Firstar Trust
>     Co., as Trustee, dated as of Jan. 1, 1946, and filed as Exhibit 7-D to
>     SEC File No. 0-1125 and the following indentures supplemental thereto are
>     incorporated herein by reference:

|Supplemental Indenture | Dated as of | Exhibit No. | SEC File No.      
|---------------------- | ----------- | ----------- | ------------------
|Tenth                  | 11/01/76    | 2.03        | 2-60227           
|Fourteenth             | 04/01/92    | 4C          | 0-1125 (1992 10-K)
|Fifteenth              | 04/01/92    | 4D          | 0-1125 (1992 10-K)
|Sixteenth              | 10/01/92    | 4E          | 0-1125 (1992 10-K)
|Seventeenth            | 02/01/93    | 4F          | 0-1125 (1992 10-K)

> 4B - Indenture between the Company and Bank One, N.A., as Trustee, dated
>     as of Sept. 1, 1998. (Incorporated by reference to Exhibit 4B with
>     1999 Form 10-K in File No. 0-1125.)
>   10A - Copy of Joint Power Supply Agreement with Wisconsin Power and Light
>     Co. and Wisconsin Public Service Corp. dated Feb. 2, 1967. (Incorporated
>     by reference to Exhibit 4.09 in File No. 2-27308.)
>   10B - Copy of Joint Power Supply Agreement (Exclusive of Exhibits) with Wisconsin
>     Power and Light Co. and Wisconsin Public Service Corp. dated July 26,
>     1973, amending Exhibit 5.04. (Incorporated by reference to Exhibit 5.04A in
>     File No. 2-48781.)
>   10D - Copy of revised Agreement for Construction and Operation of Columbia
>     Generating Plant with Wisconsin Power and Light Co. and Wisconsin Public Service
>     Corp. dated July 26, 1973. (Incorporated by reference to Exhibit 5.07
>     in File No. 2-48781.)
>   10F* - Form of Severance Agreement. (Incorporated by reference to Exhibit
>     10F with 1994 Form 10-K in File No. 0-1125.)
>   12 - Statement regarding computation of ratio of earnings to fixed charges.
>   21 - Subsidiaries of the Registrant.
>   23 - Consent of Independent Accountants.

4. Reports on Form 8-K

> No Current Report on Form 8-K was filed for the quarter ended Dec. 31,
>     2000.

**Signatures**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
  Act of 1934, the registrant has duly caused this report to be signed on its
  behalf by the undersigned, thereunto duly authorized.

|                     | **MADISON GAS AND ELECTRIC COMPANY**
      
      (Registrant)
|-------------------- | --------------------------------------------------------------
|Date: March 30, 2001 | /s/ Gary J. Wolter                                            
|                     | President and Chief Executive Officer                         

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
  has been signed below by the following persons on behalf of the registrant and
  in the capacities indicated on March 30, 2001.

|/s/ Gary J. Wolter     | President and Chief Executive Officer and Director (Principal
      Executive Officer)                               
|---------------------- | ---------------------------------------------------------------------------------------------------------------------
|                      
|/s/ Terry A. Hanson    | Vice President and Chief Financial Officer (Principal Financial
      Officer
      and Principal Accounting Officer)
|                      
|/s/ David C. Mebane    | Chairman of the Board and Director                                                                                   
|/s/ Jean M. Biddick    | Director                                                                                                             
|/s/ Richard E. Blaney  | Director                                                                                                             
|/s/ F. Curtis Hastings | Director                                                                                                             
|/s/ Regina M. Millner  | Director                                                                                                             
|/s/ Frederic E. Mohs   | Director                                                                                                             
|/s/ John R. Nevin      | Director                                                                                                             
|Donna K. Sollenberger  | Director                                                                                                             
|H. Lee Swanson         | Director