|**SECURITIES
      AND EXCHANGE COMMISSION******                                                                                                                                                                                                                                                           
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|**Washington, D. C. 20549**                                                                                                                                                                                                                                                                                
|**FORM
      10-Q******                                                                                                                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                           
|[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
      OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                          
|For the quarterly period ended: **June 30,
        2001**                                                                                                                                                                                                                                                  
|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 Number 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, Madison, Wisconsin 53703** 
      (Address of principal executive offices and ZIP code)                                                                                                                                                                                    
|                                                                                                                                                                                                                                                                                                           
|**(608)
      252-7000** 
      (Registrant's telephone number including area code)                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                           
|**Common Stock
      Outstanding at August 14, 2001: 16,843,878 Shares******                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                           
|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 and
      (2) has been subject to such filing requirements for the past 90 days.
      Yes [X] No [ ]

**Table of Contents**

**PART I. FINANCIAL INFORMATION**

Item 1. Financial Statements

Condensed Consolidated Statements of Income for the three
  and six months ended June 30, 2001 and 2000 (unaudited)

Condensed Consolidated Statements of Cash Flows for the three
  and six months ended June 30, 2001 and 2000 (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2001
  (unaudited) and Dec. 31, 2000

Notes to Condensed Consolidated Financial Statements (unaudited)

Item 2 - Management's Discussion and Analysis of Financial
  Condition and Results of Operations

Liquidity and Capital Resources

Results of Operations

Item 3 - Quantitative and Qualitative Disclosures About Market
  Risk

**PART II. OTHER INFORMATION**

Item 4 - Results of Votes of Security Holders

Item 5 - Other Information

Item 6(a) - Exhibits

Item 6(b) - Reports on Form 8-K

**PART I. FINANCIAL
  INFORMATION******

**Item 1. Financial
  Statements**

**Condensed Consolidated
  Statements of Income********(unaudited)**

|                                                                                               | Three Months Ended | Six Months Ended
|---------------------------------------------------------------------------------------------- | ------------------ | ----------------
|*(In thousands, except per-share amounts)*                                                     | June 30,           | June 30,        
|**Operating Revenues******                                                                     | **2001**           | 2000            
|Electric                                                                                       | **$50,686**        | $48,161         
|Gas                                                                                            | **19,576**         | 15,994          
|Total Operating Revenues                                                                       | **70,262**         | 64,155          
|**Operating Expenses******                                                                     | ****               |                 
|Fuel for electric generation                                                                   | **9,725**          | 8,835           
|Purchased power                                                                                | **2,380**          | 6,618           
|Natural gas purchased                                                                          | **11,143**         | 8,331           
|Other operations and maintenance                                                               | **25,315**         | 23,719          
|Depreciation and amortization                                                                  | **8,601**          | 8,504           
|Other general taxes                                                                            | **2,602**          | 2,589           
|Income tax provision                                                                           | **2,749**          | 447             
|Total Operating Expenses                                                                       | **62,515**         | 59,043          
|**Net Operating Income**                                                                       | **7,747**          | 5,112           
|**Other Income and Deductions**                                                                | ****               |                 
|AFUDC - equity funds                                                                           | **103**            | 78              
|Equity in earnings of investee                                                                 | **978**            | -               
|Income tax provision                                                                           | **(741)**          | (207)           
|Other, net                                                                                     | **687**            | 689             
|Total Other Income and Deductions                                                              | **1,027**          | 560             
|Income Before Interest Expense and Cumulative Effect of a
      Change in Accounting Principle | **8,774**          | 5,672           
|**Interest Expense**                                                                           | ****               |                 
|Interest on long-term debt                                                                     | **3,229**          | 3,087           
|Other interest                                                                                 | **197**            | 246             
|AFUDC - borrowed funds                                                                         | **(58)**           | (40)            
|Net Interest Expense                                                                           | **3,368**          | 3,293           
|Net income before cumulative effect of a change in accounting
      principle                  | **5,406**          | 2,379           
|Cumulative effect of a change in accounting principle, net
      of tax benefit of $78         | **-**              | -               
|**Net Income**                                                                                 | **$ 5,406**        | $ 2,379         
|**Earnings Per Share of Common
      Stock** (basic & diluted):                                | ****               |                 
|Income before cumulative effect of a change in accounting
      principle                      | **$0.32**          | $0.15           
|Cumulative effect of a change in accounting principle                                          | **-**              | -               
|**Net Income**                                                                                 | **$0.32**          | $0.15           
|**Average Shares Outstanding**
      (basic & diluted)                                         | **16,762**         | 16,332          

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

**Condensed Consolidated
  Statements of Cash Flows************(unaudited)**

|                                                                                                              | Three Months Ended | Six Months Ended
|------------------------------------------------------------------------------------------------------------- | ------------------ | ----------------
|*(In thousands)*                                                                                              | June 30,           | June 30,        
|****                                                                                                          | **2001**           | 2000            
|**Operating Activities******                                                                                  | ****               |                 
|Net income                                                                                                    | **$ 5,406**        | $ 2,379         
|Items not affecting cash:                                                                                     | ****               |                 
|Depreciation and amortization                                                                                 | **8,601**          | 8,504           
|Deferred income taxes                                                                                         | **243**            | 416             
|Amortization of nuclear fuel                                                                                  | **607**            | 298             
|Amortization of investment tax credits                                                                        | **(141)**          | (182)           
|AFUDC - equity funds                                                                                          | **(103)**          | (78)            
|Equity in earnings of investee                                                                                | **978**            | -               
|Cumulative effect of change in accounting principle                                                           | **-**              | -               
|Other noncash items                                                                                           | **-**              | (14)            
|Changes in working capital, excluding cash equivalents, sinking
      funds, maturities, and short-term debt: | ****               |                 
|(Increase)/decrease in current assets                                                                         | **4,181**          | (3,283)         
|Decrease in current liabilities                                                                               | **(7,343)**        | (7,526)         
|Other noncurrent items, net                                                                                   | **(2,991)**        | 1,019           
|Cash Provided by Operating Activities                                                                         | **9,438**          | 1,533           
|****                                                                                                          | ****               |                 
|**Investing Activities******                                                                                  | ****               |                 
|Additions to utility plant and nuclear fuel                                                                   | **(12,334)**       | (39,894)        
|AFUDC - borrowed funds                                                                                        | **(58)**           | (40)            
|Increase in nuclear decommissioning fund                                                                      | **(2,611)**        | (2,441)         
|Capital distribution from investee                                                                            | **15,000**         | -               
|Cash Used for Investing Activities                                                                            | **(3)**            | (42,375)        
|****                                                                                                          | ****               |                 
|**Financing Activities******                                                                                  | ****               |                 
|Issuance of common stock                                                                                      | **2,427**          | 2,482           
|Cash dividends on common stock                                                                                | **(5,544)**        | (5,362)         
|Issuance of long-term debt                                                                                    | **-**              | 20,000          
|Increase/(decrease) in short-term debt                                                                        | **(9,000)**        | 23,500          
|Cash Provided by/(Used for) Financing Activities                                                              | **(12,117)**       | 40,620          
|****                                                                                                          | ****               |                 
|**Change in Cash and Cash Equivalents**                                                                       | **(2,682)**        | (222)           
|Cash and cash equivalents at beginning of period                                                              | **5,307**          | 2,416           
|Cash and cash equivalents at end of period                                                                    | **$ 2,625**        | $ 2,194         

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

**Condensed Consolidated
  Balance Sheets**********

|*(In thousands*                                                             | Unaudited June 30, | ****Dec. 31,
|--------------------------------------------------------------------------- | ------------------ | ------------
|**ASSETS**                                                                  | **2001**           | 2000        
|**Utility
      Plant**(at original cost, in service)                       | ****               |             
|****Electric                                                                | **$547,625**       | $622,209    
|Gas                                                                         | **199,066**        | 197,093     
|Gross Plant in Service                                                      | **746,691**        | 819,302     
|Less accumulated provision for depreciation                                 | **(482,023)**      | (510,381)   
|Net Plant in Service                                                        | **264,668**        | 308,921     
|Construction work in progress                                               | **31,724**         | 22,863      
|Nuclear decommissioning fund                                                | **102,033**        | 102,891     
|Nuclear fuel, net                                                           | **6,080**          | 6,979       
|**Total Utility Plant**                                                     | **404,505**        | 441,654     
|**Other
      Property and Investments**                                    | **3,659**          | 3,988       
|Investment in ATC                                                           | **26,250**         | **-**       
|Total other property and investments                                        | **29,909**         | 3,988       
|**Current Assets******                                                      | ****               |             
|**** Cash and cash equivalents                                              | **2,625**          | 4,307       
|Accounts receivable, less reserves of $3,874 and $2,071,
      respectively | **28,904**         | 38,161      
|Unbilled revenue                                                            | **15,782**         | 27,900      
|Materials and supplies, at lower of average cost or market                  | **7,869**          | 7,735       
|Fossil fuel, at lower of average cost or market                             | **3,991**          | 3,872       
|Stored natural gas, at lower of average cost or market                      | **11,283**         | 9,785       
|Prepaid taxes                                                               | **8,095**          | 7,539       
|Other prepayments                                                           | **1,584**          | 1,221       
|Total Current Assets                                                        | **80,133**         | 100,520     
|**Deferred Charges**                                                        | **22,888**         | 25,442      
|**Total Assets**                                                            | **$537,435**       | $571,604    
|**CAPITALIZATION AND LIABILITIES**                                          | ****               |             
|******Capitalization**                                                      | **$392,455**       | $383,749    
|**Current Liabilities******                                                 | ****               |             
|**** Long-term debt due within one year                                     | **200**            | 200         
|Short-term debt - commercial paper                                          | **13,000**         | 44,000      
|Accounts payable                                                            | **17,209**         | 28,792      
|Accrued taxes                                                               | **5,266**          | 2,550       
|Accrued interest                                                            | **3,197**          | 3,162       
|Other current liabilities                                                   | **8,093**          | 8,533       
|Total Current Liabilities                                                   | **46,965**         | 87,237      
|**Other Credits******                                                       | ****               |             
|**** Deferred income taxes                                                  | **43,912**         | 43,321      
|Regulatory liabilities                                                      | **22,384**         | 26,517      
|Investment tax credit - deferred                                            | **6,490**          | 8,472       
|Other deferred liabilities                                                  | **25,229**         | 22,308      
|Total Other Credits                                                         | **98,015**         | 100,618     
|**Total Capitalization and Liabilities**                                    | **$537,435**       | $571,604    

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

**Notes to Condensed
  Consolidated Financial Statements (unaudited)**

***June 30, 2001***

MGE prepared these consolidated financial statements, without audit (except
  for balance sheet information at Dec. 31, 2000), pursuant to the rules
  and regulations of the Securities and Exchange Commission. Certain information
  and Footnote disclosures normally included in financial statements prepared
  in accordance with generally accepted accounting principles have been condensed
  or omitted pursuant to such rules and regulations. MGE believes the disclosures
  provided are accurate and not misleading. MGE management believes it has made
  all normal recurring adjustments needed to present fairly the financial statements
  and notes in this report.

It is suggested that these consolidated financial statements be read in conjunction
  with the financial statements and the notes on pages 20 through 35 of MGE's
  2000 Annual Report to Shareholders and as filed on Form 10-K.

**1. Nuclear Decommissioning**

Nuclear decommissioning costs for the Kewaunee Nuclear Power Plant (Kewaunee)
  are currently being accrued for full cost recovery by the end of 2002. These
  costs are currently recovered from customers in rates and are deposited in external
  trusts. MGE is presently funding decommissioning costs at $8.1 million
  annually. These trusts are shown on the balance sheet in the utility plant section.
  As of June 30, 2001, these trusts totaled $102 million (pretax fair
  market value) and are offset by an equal amount under accumulated provision
  for depreciation.

MGE's share of Kewaunee decommissioning costs is estimated to be $95.8 million
  in current dollars based on a site-specific study performed in 1992 using immediate
  dismantlement as the method of decommissioning.

**2. Per-share Amounts**

Earnings per share of common stock are computed on the basis of the weighted
  average of the daily number of shares outstanding since there are no dilutive
  items. For the three months ended June 30, 2001 and 2000, there were 16,762,103
  and 16,331,635 shares outstanding, respectively. Dividends declared and paid
  per share of common stock for the three months ended June 30, 2001 and
  2000, were $0.331 and $0.328, respectively.

For the six months ended June 30, 2001 and 2000, there were 16,709,445
  and 16,265,652 shares outstanding, respectively. Dividends declared and paid
  per share of common stock for the same six months were $0.662 and $0.657.

**3. Rate Matters**

In January 2001, the Public Service Commission of Wisconsin (PSCW) authorized
  (1) an electric rate increase designed to increase electric rate revenues by
  $7.5 million, or 3.9%, to cover rising fuel costs and increased system
  demands, (2) a natural gas rate increase designed to increase gas revenues by
  $3.4 million, or 2.7%, for improving the gas delivery system, and (3) a
  return on common stock equity of 12.9%.

The PSCW approved MGE's request for a temporary electric fuel surcharge of
  2.7%, or an estimated $5.4 million on an annual basis, effective May 9
  through Dec. 31, 2001. The temporary rate increase is primarily due to
  the higher cost of natural gas used to generate electricity. Revenues collected
  from this surcharge will be subject to refund, pending the PSCW's review of
  any excess revenues collected by MGE while the surcharge is in effect.

The PSCW has allowed MGE to reopen its current rate case for limited specific
  issues such as the sale of Kewaunee, rising fuel costs, and a proposed automated
  meter reading system. On July 27, 2001, MGE filed an application with the PSCW
  to recover additional costs for these specific items, net of a reduction in
  costs due to the sale of Kewaunee. The proposed rate change, subject to PSCW
  approval, is $12 million, or a 5.8% increase in electric rates and a 0.7%
  increase in gas rates.

**4. Supplemental Cash Flow Information**

Cash payments for interest, net of amounts capitalized, net cash payments for
  income taxes, and the investment in the American Transmission Company (ATC)
  were as follows:

|                                          | Three Months Ended June 30 | Six Months Ended
        June 30
|----------------------------------------- | -------------------------- | --------------------------------
|*(In thousands)*                          | 2001                       | 2000                            
|Interest paid, net of amounts capitalized | $3,981                     | $4,147                          
|Income taxes paid, net                    | $7,350                     | $8,102                          
|Investment in ATC (see Footnote 6)        | $ -                        | $ -                             

**5. Accounting for Financial Derivatives**

MGE has a swap agreement with a commercial bank for 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's commercial paper swap agreement has been classified as a derivative.
  The cumulative effect of the change in accounting principle, for the adoption
  of Statement of Financial Accounting Standards (FAS) No. 133, "Accounting
  for Derivative Instruments and Hedging Activities," led to a one-time charge
  of $0.1 million (after tax), which was recorded in the first quarter. MGE
  has a 22.0% ownership interest in the coal-fired Columbia Energy Center, which
  is operated by Alliant Energy, Inc. (Alliant). Alliant has entered into a long-term
  coal supply agreement with Dynegy Marketing and Trade. The contract contains
  certain put options and consequently, in accordance with the terms of FAS No. 133,
  the contract is recorded at fair value on the balance sheet. Gains and losses
  are recorded in other income. The cumulative adjustments for the two derivatives'
  fair value for the second quarter was $0.1 million (after tax).

**6. Investment in ATC**

On Jan. 1, 2001, MGE transferred substantially all of its electric transmission
  facilities to ATC. ATC is a joint venture of Wisconsin investor-owned utilities,
  several Wisconsin municipal utilities, electric cooperatives, and power supply
  agencies.

Investors in ATC have an ownership interest equal to their ratable share of
  property transferred adjusted by deferred income taxes and accumulated deferred
  investment tax credit. MGE's investment in ATC (approximately 6%) is carried
  at net book value of the transferred transmission plant and construction work
  in progress (CWIP), reduced by the FAS No. 109 regulatory liability and
  deferred investment tax credit attributable to the transmission assets. The
  investment is accounted for using the equity method of accounting. The following
  is MGE's investment in ATC, as adjusted by review of independent accountants,
  in the quarter ended June 30, 2001.

|(In millions)                                                                                                      |      
|------------------------------------------------------------------------------------------------------------------ | -----
|Net utility transmission plant cost (including CWIP)                                                               | $43.6
|Less FAS No. 109 regulatory liability and deferred investment
      tax credit attributable to transmission assets | (4.1)
|Initial investment carrying value in ATC                                                                           | $39.5

In the second quarter of 2001, MGE has received $15.0 million in cash
  distributions as a result of ATC's issuance of debt.

The reduction to the investment carrying value for the transmission component
  of the FAS No. 109 regulatory liability and deferred investment tax credit
  reflects the transfer of excess deferred taxes and accumulated deferred investment
  tax credits for ratemaking purposes to ATC. The impact on MGE's initial investment
  in ATC of the accumulated deferred investment tax credit and the FAS No. 109
  regulatory liability for excess deferred taxes of the transmission plant was
  $2.8 million and $1.3 million, respectively.

MGE accretes its investment carrying value by amortizing this FAS No. 109
  regulatory liability adjustment into income over the related regulatory life
  of the excess deferred taxes and accumulated deferred investment tax credit
  to coincide with the impact to ATC's regulated revenues. The amortization period
  is approximately ten years. In the first six months of 2001, the amount amortized
  into income was $0.2 million, which is included in equity earnings in ATC.
  MGE's equity in earnings of ATC was $1.5 million (pretax) for the first
  six months of 2001.

MGE contracts with ATC for transmission services. During the first six months
  of 2001, MGE incurred a network transmission service fee of $3.5 million,
  which is included in MGE's operating expenses. MGE is currently providing services
  to ATC for fixed capital, operations and maintenance, and transitional services.
  The contract to provide these services is for a three-year period and includes
  the actual costs of labor, material, and overheads. $1.0 million has been
  billed to ATC for these services during the first six months of 2001.

The difference between the revenue requirement associated with transmission
  services within MGE's current tariffs and the network transmission service fee
  from ATC is deferred subject to regulatory treatment. It will be adjusted in
  MGE's next rate case. During the first six months of 2001, MGE recorded a deferred
  asset of $0.5 million for this difference.

**7. Segment Information**

The following tables show MGE's segment information for electric and gas operations.

|*(In thousands)*           | Electric |  | Gas     |  | Consolidated
|-------------------------- | -------- |  | ------- |  | ------------
|Three Months Ended June 30 | 2001     |  | 2000    |  | 2001        
|Revenues                   | $50,686  |  | $48,161 |  | $19,576     
|Net Operating Income       | $7,554   |  | $4,338  |  | $193        
|                           |          |  |         |  |             
|Six Months Ended June 30   |          |  |         |  |             
|Revenues                   | $100,124 |  | $95,065 |  | $92,168     
|Net Operating Income       | $13,258  |  | $11,777 |  | $6,571      

|                     | Electric | Gas      | Other   | Consolidated
|-------------------- | -------- | -------- | ------- | ------------
|Assets               |          |          |         |             
|June 30, 2001        | $375,120 | $119,662 | $42,653 | $537,435    
|Dec. 31, 2000        | $395,622 | $123,486 | $52,496 | $571,604    
|                     |          |          |         |             
|Capital Expenditures |          |          |         |             
|June 30, 2001        | $14,128  | $3,275   | $ -     | $17,403     

**8. Commitments**

MGE and Wisconsin Public Service Corp. (WPSC) entered into an agreement on
  Sept. 29, 1998, pursuant to which MGE will sell its ownership interest (17.8%)
  in Kewaunee to WPSC. Under the sale agreement, MGE had the option to buy electric
  capacity and energy at a fixed price from WPSC. In June 2001, MGE executed that
  option and purchased 90 MW of electric capacity and energy from WPSC. The contract
  period runs from September 2001 through September 2003. The total contract value
  over the 24-month period is $16.1 million.

MGE and the University of Wisconsin (UW) proposed building a natural gas-fired
  cogeneration plant to help meet future needs of the UW and MGE customers. In
  July 2001, MGE entered into a contract with GE Packaged Power, Inc., for the
  purchase of two gas turbines for the cogeneration plant.

**Item 2 - Management's
  Discussion and Analysis of Financial Condition and Results of Operations**

**Liquidity and Capital Resources**

**Cash Provided by Operating Activities******

Cash provided by operating activities increased $7.9 million for the second
  quarter of 2001. Current assets decreased $4.2 million during the second
  quarter of 2001 compared to an increase of $3.3 million for the same period
  last year. The decrease in current assets during 2001 is due to a decrease in
  accounts receivable of $13.5 million and unbilled revenue of $4.3 million.
  This was somewhat offset by an increase in storage gas of $11.0 million.

Cash provided by operating activities increased $6.6 million, or 18.0%,
  for the six months ended June 30, 2001, compared to the same period last
  year. Current assets for the first half of 2001 decreased $12.0 million
  compared to 2000. The change in the decrease of current liabilities of $7.7 million
  helped to offset the decrease in current assets.

**Cash Used for Investing Activities******

Cash used for investing activities was $42.4 million less for the second
  quarter of 2001 compared to last year's second quarter. Plant additions decreased
  $27.6 million during the second quarter of 2001 because MGE purchased an
  83-MW natural gas-fired combustion turbine in the second quarter of 2000. Also
  during the second quarter of 2001, MGE received a capital distribution of $15 million
  from ATC (see Footnote 6).

Cash used for investing activities was $7.7 million for the six months
  ended June 30, 2001, compared to $58.1 million for the same period
  last year. In 2000, MGE purchased a combustion turbine, and in the second quarter
  of 2001, MGE received a capital distribution (as stated above).

**Cash Used for Financing and Capital Resources******

Cash used for financing activities was $12.1 million for the second quarter
  of 2001 compared to cash provided by financing activities of $40.6 million
  for last year's second quarter. During the second quarter of 2000, MGE issued
  $20.0 million in unsecured, variable rate, medium-term notes and increased
  its short-term debt position by $23.5 million to finance the 83-MW natural
  gas-fired combustion turbine.

Cash used for financing activities was $37.2 million for the first half
  of 2001 compared to cash provided by financing activities of $21.8 million
  for the same period last year. During the six months ended June 30, 2000,
  MGE increased its short-term debt position by $7.8 million and issued $20.0 million
  in long-term debt (as mentioned above) to help finance capital expenditures.
  For the same time period in 2001, MGE paid off $31.0 million in short-term
  debt.

Bank lines of credit available to MGE as of June 30, 2001, totaled $40 million.

MGE's capitalization ratios were as follows:

|                                                                    | June 30, 2001 | Dec. 31, 2000
|------------------------------------------------------------------- | ------------- | -------------
|Common shareholders' equity                                         | 51.7%         | 46.8%        
|Long-term debt                                                      | 45.1          | 42.9         
|Short-term debt*                                                    | 3.2           | 10.3         
|*Includes current maturities and current sinking fund requirements.

**Capital Requirements**

MGE's liquidity is primarily affected by its construction requirements. During
  the six months ended June 30, 2001, MGE's plant additions totaled $12.7 million,
  down $40.3 million, or 76.1% from the first half of last year (when MGE
  purchased an 83-MW gas-fired combustion turbine). It is anticipated that capital
  expenditures for projects in 2001 will be $44.6 million, including improvements
  to MGE's Blount Generating Station and MGE's electric and gas distribution systems.

MGE uses its internally generated funds and short-term debt to satisfy most
  of its capital requirements. Internally generated funds exceeded the funds used
  for construction and nuclear fuel expenditures during the first half of 2001.
  For larger capital investments, MGE will issue additional long-term debt or
  common stock.

MGE's pretax interest coverage for the 12 months ended June 30, 2001,
  was 4.10 times. MGE's current credit ratings are:

|                                                                                | Standard & Poor's        | Moody's                
|------------------------------------------------------------------------------- | ------------------------ | -----------------------
|First Mortgage Bonds 
      Unsecured medium term notes 
      Commercial paper | AA 
      AA- 
      A1+ | Aa2
      Aa3 
      P1

**Results of Operations**

**Sales and Revenues**

***Electric***

Retail sales increased 2.0% and 2.2%, respectively, during the three and six
  months ended June 30, 2001.

|*Electric Sales* *(megawatt-hours)* | Three Months Ended June 30, | Six Months Ended June 30,
|----------------------------------- | --------------------------- | -------------------------
|2001                                | 2000                        | % Change                 
|Residential                         | 166,041                     | 167,768                  
|Large commercial                    | 293,739                     | 277,885                  
|Small commercial                    | 191,219                     | 192,214                  
|Other                               | 79,824                      | 78,595                   
|Total Retail                        | 730,823                     | 716,462                  
|Sales for Resale                    | 27,232                      | 74,108                   
|Total Sales                         | 758,055                     | 790,570                  

During the second quarter of 2001, electric operating revenue increased $2.5 million,
  or 5.2%. The increase in electric revenues was due to a 3.9% electric rate increase
  effective Jan. 1, 2001, combined with customer growth and greater use per customer
  ($3.6 million), and a .00176 cents/kWh electric fuel surcharge effective
  May 9, 2001 ($0.6 million) (see Footnote 3). Sales for resale
  were down $1.2 million for the second quarter of 2001 because a contract
  with Wisconsin Public Power Inc. (WPPI) expired. MGE sold 30 MW of firm energy
  and capacity to WPPI from March 1999 through the end of 2000.

For the six months ended June 30, 2001, electric operating revenue increased
  $5.1 million, or 5.3%, over the prior year. This increase was due to the
  electric rate increase, customer growth, greater use per customer, and the surcharge
  mentioned previously, which totals $7.7 million. Sales for resale were
  down $2.7 million for the six months ended June 30, 2001, due to a
  contract expiring with WPPI (as stated above).

***Gas***

For the three months ended June 30, 2001, retail gas deliveries were down
  10.4% because of warmer weather in April 2001. For the six months ended June 30,
  2001, retail gas deliveries increased 7.7% over the prior year. This increase
  is primarily attributable to the colder winter weather experienced during the
  first quarter of 2001. The average temperature for the first quarter 2001 was
  24.6 degrees Fahrenheit, which was 18.1% colder than last year's first quarter.

|*Gas Deliveries*
      *(thousands of therms)* | Three Months Ended June 30, | Six Months Ended June 30,
|---------------------------------------------- | --------------------------- | -------------------------
|2001                                           | 2000                        | % Change                 
|Residential                                    | 10,780                      | 12,133                   
|Commercial and Industrial                      | 9,330                       | 10,319                   
|Total Retail                                   | 20,110                      | 22,452                   
|Transport                                      | 8,838                       | 9,709                    
|Total Gas Deliveries                           | 28,948                      | 32,161                   

Gas revenues increased $3.6 million, or 22.4%, and $38.5 million,
  or 71.8%, for the three and six months ended June 30, 2001, respectively.
  The increased revenues were primarily attributable to the significant increase
  in the cost of gas.

Gas incentive revenues increased $0.1 million for the three months ended
  June 30, 2001, when compared to last year's second quarter due to the gas
  cost incentive mechanism (GCIM). Under MGE's GCIM, if actual gas commodity costs
  are above or below a benchmark set by the PSCW, MGE's gas sales service customers
  and shareholders share equally in any increased costs or savings up to $1.5 million.
  Any cost or savings that exceed $1.5 million for the gas year are passed
  on to the customers. MGE's gas commodity costs were below the GCIM benchmark
  by $1.0 million for the three months ended June 30, 2001. This savings
  was shared equally ($0.5 million each) by shareholders and gas sales service
  customers.

Revenues from the GCIM decreased $0.9 million for the six months ended
  June 30, 2001, compared to the same period last year. High gas prices and
  increased demand during the first quarter of 2001 caused MGE's gas commodity
  costs to exceed the GCIM benchmark by $0.4 million for the six months ended
  June 30, 2001.

**Electric Fuel and Purchased Power******

Fuel for electric generation increased $1.0 million, or 10.1%, for the
  three months ended June 30, 2001. For the six months ended June 30,
  2001, fuel used for electric generation increased $4.9 million, or 30.4%.
  Fuel costs for MGE's electric generating units were up compared to last year
  primarily due to (1) the increased use of base-load power plants, especially
  in the second quarter of 2001 and (2) the higher cost of natural gas used
  to generate electricity.

Purchased power decreased $4.2 million and $5.0 million for the three
  and six months ended June 30, 2001. The decrease in purchased power is
  attributed to the following:

- MGE's base-load units operated at full capacity in 2001, requiring no additional
  capacity purchases from outside sources. During the second quarter of 2000,
  a six-week scheduled refueling and maintenance outage occurred at the Kewaunee
  plant, requiring MGE to purchase more expensive open-market replacement power.

- A decrease in the hourly purchase from Commonwealth Edison. During the first
  half of 2001, MGE purchased 15 MW from Commonwealth compared to 30 MW during
  the first half of last year.

Electric margin (revenues less fuel and purchased power) increased $5.9 million,
  or 18.0%, for the three months ended June 30, 2001, and increased $5.2 million,
  or 7.7%, for the six months ended June 30, 2001. The margin increased because
  revenues were up (previously described) and purchased power costs were down.

**Natural Gas Purchased******

Natural gas purchases increased $2.8 million, or 33.7%, for the three
  months ended June 30, 2001, compared to the same period last year. The
  average cost per therm of natural gas for the second quarter increased 49.4%
  over the prior year's second quarter. Under the Purchased Gas Adjustment Clause
  authorized by the PSCW, MGE passes along to customers the cost of gas, subject
  to certain limited incentive participation. Gas margin (revenues less gas purchased)
  increased $0.8 million, or 10.1%, for the three months ended June 30,
  2001, primarily due to a 2.7% rate increase effective Jan. 1, 2001, and recovery
  of certain regulatory gas assets, which have been recovered over the past 12
  months.

Natural gas purchases increased $35.1 million, or 112.7%, for the six
  months ended June 30, 2001, compared to the same period last year. The
  average cost per therm of natural gas for the six months ended June 30,
  2001, increased 97.8%. Gas margin increased $3.5 million, or 15.4%, for
  the six months ended June 30, 2001, primarily due to (1) higher retail
  deliveries in the first quarter, (2) the Jan. 1, 2001, rate increase, and
  (3) the recovery of regulatory gas assets.

**Other Operations (Electric and Gas)******

Operating costs increased $3.6 million for the second quarter, or 20.4%.
  Operating costs for the first six months of 2001 increased $5.4 million,
  or 15.8%.

-Beginning Jan. 1, 2001, MGE pays a network service charge to ATC for transmission
  usage. In the second quarter, MGE paid $1.9 million to ATC (see Footnote 6).
  For the six months ended June 30, 2001, MGE paid $3.5 million to ATC.

-Uncollectible account expense for electric and gas increased by $1.4 million
  due to the significant rise in natural gas costs and customers' utility bills
  during the first quarter.

**Maintenance**

Electric maintenance expenses decreased $2.0 and $1.9 million for the
  three and six months ended June 30, 2001. MGE had good performance from
  its base-load units in 2001. During the second quarter of 2000, Kewaunee was
  out of service for scheduled refueling and maintenance.

**Depreciation Expense**

Depreciation expense for electric increased $0.1 million and $0.5 million,
  respectively, for the three and six months ended June 30, 2001, despite
  the $0.5 million reduction related to transferring MGE's transmission facilities.
  Depreciation increased after adding an 83-MW natural gas-fired combustion turbine
  in the second quarter of 2000. There were no significant impacts to gas depreciation
  for the three or six months ended June 30, 2001.

**Income Taxes and Other General Taxes******

MGE's effective tax rate for the six months ended June 30, 2001, increased
  to 38.6% (from 36.5% in 2000) due to lower relative amounts of amortized excess
  deferred income taxes and amortized investment tax credits. The lower amounts
  of amortization result from the transfer of MGE's transmission assets to ATC
  (see Footnote 6). Increases in income tax provision amounts for the three
  and six months ended June 30, 2001, compared to the same period last year,
  are primarily due to increases in pretax operating income.

General taxes increased $0.3 million for the six months ended June 30,
  2001, compared to the same period last year due to an increase in MGE's license
  fee tax, which is based on operating revenues. The increase in general taxes
  for the three months ended June 30, 2001, compared to the same period last
  year, is not material.

**Other Income and Deductions******

Other income and deductions increased $0.5 million, or 83.4%, and $1.0 million,
  or 74.3%, during the three and six months ended June 30, 2001. MGE received
  $0.6 million (after tax) in the second quarter and $1.1 million (after
  tax) for the six months ended June 30, 2001, as equity earnings from ATC
  (see Footnote 6).

**Interest Expense**

Interest expense on long-term debt increased $0.1 million and $0.6 million,
  respectively, for the three and six months ended June 30, 2001, due to
  financing several major capital projects needed to improve reliability for MGE
  customers. Also, significantly higher natural gas costs increased short-term
  debt and caused other interest expense to rise $0.2 million for the six
  months ended June 30, 2001.

**Accounting for Financial Derivatives**

MGE has a swap agreement with a commercial bank for 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's commercial paper swap agreement has been classified as a derivative.
  The cumulative effect of the change in accounting principle, for the adoption
  of FAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
  led to a one-time charge of $0.1 million (after tax), which was recorded
  in the first quarter. MGE has a 22.0% ownership interest in the coal-fired Columbia
  Energy Center, which is operated by Alliant Energy, Inc. (Alliant). Alliant
  has entered into a long-term coal supply agreement with Dynegy Marketing and
  Trade. The contract contains certain put options and consequently, in accordance
  with the terms of FAS No. 133, the contract is recorded at fair value on
  the balance sheet. Gains and losses are recorded in other income. The cumulative
  adjustments for the two derivatives' fair value for the second quarter was $0.1 million
  (after tax).

**Item 3 - Quantitative
  and Qualitative Disclosures About Market Risk**

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.

MGE manages its interest rate risk by limiting its variable rate exposure through
  various financial instruments to lock in fixed rates and continually monitoring
  the effects of market changes on interest rates. MGE has a long-term swap agreement
  that manages short-term commercial paper. MGE's fixed rate on this swap agreement
  is 6.91%. 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.

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 uses weather derivatives to reduce the
  impact of weather volatility on its margins related to gas operations.

MGE currently funds its liabilities related to employee benefits and nuclear
  decommissioning through trust funds. 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.

**PART II. OTHER
  INFORMATION**********

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

MGE's Annual Meeting of Shareholders was held on May 22, 2001, in Middleton,
  Wisconsin. Proxies for the meeting were solicited pursuant to Regulation 14A
  of the Securities Exchange Act of 1934. The election of three persons to serve
  as Class III Directors to hold office until 2004 was voted on by the shareholders
  at the meeting. Listed below are the nominees for Class III Director and the
  results of the voting.

Three Class III members of the Board of Directors were elected to hold
  office until 2004.

|                   | For        | Withhold Authority
|------------------ | ---------- | ------------------
|Richard E. Blaney  | 13,335,611 | 149,822           
|Frederic E. Mohs   | 13,340,662 | 144,771           
|F. Curtis Hastings | 13,346,286 | 139,147           

No votes were cast for any other nominee. The directors continuing in office
  until the 2002 annual meeting are Jean M. Biddick, David C. Mebane,
  Regina M. Millner, and Donna K. Sollenberger. The directors continuing
  in office until the 2003 annual meeting are John R. Nevin, H. Lee
  Swanson, and Gary J. Wolter.

**Item 5 - Other
  Information**

**Forward-Looking Statements**

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.

**Purchase of Prairie du Chien Gas Service Territory**

In the second quarter of 2001, MGE announced its agreement to purchase the
  Prairie du Chien-area natural gas system from Wisconsin Electric/Wisconsin Gas.

The purchase includes facilities in the city of Prairie du Chien and other
  surrounding villages and townships located in west-central Wisconsin, within
  Crawford County. Approximately 3,500 residential and commercial customers are
  part of the transfer. MGE currently serves natural gas customers in Crawford
  County.

Another part of the transaction includes establishing a definitive gas service
  boundary agreement between the two companies within Dane County. The new boundary
  lines do not involve transfer of any customers and are located primarily through
  undeveloped land north of the Madison city limits.

The sale is subject PSCW approval. The transaction is expected to close in
  the fourth quarter of 2001.

**Kewaunee Nuclear Power Plant**

Kewaunee is jointly owned by MGE, WPSC, and Alliant. Kewaunee has been operated
  since 1974 by WPSC. The plant's license will expire in 2013.

On March 27, 2001, the Kewaunee co-owners received approval from the PSCW to
  apply deferred accounting treatment to Kewaunee's incremental costs associated
  with its accelerated five-year program to adopt current industry standards.
  In connection with this program, progress has been made on improving processes
  at Kewaunee during the first six months of 2001. MGE is continuing its negotiations
  with the co-owners to share only the costs required to keep Kewaunee on-line
  until the replacement of the steam generators begins this fall.

Information regarding the replacement of two steam generators at Kewaunee and
  WPSC's agreement to buy MGE's 17.8% share of Kewaunee is included in the registrant's
  Annual Report on Form 10-K for the year ended December 31, 2000.

**Item 6(a) - Exhibits**

Exhibit 4 - Indenture of Mortgage and Deed of Trust between MGE and Firstar
  Trust Company, as Trustee (and supplements). Reference was provided in MGE's
  2000 Annual Report on Form 10-K (Commission File No. 0-1125).

Exhibit 12 - Ratio of Earnings to Fixed Charges.

**Item 6(b) - Reports
  on Form 8-K**

No reports on Form 8-K were filed during the quarter for which this report
  is filed.

**SIGNATURES**

Pursuant to the requirements 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: August 14, 2001 | /s/ Gary J. Wolter                                                                        
|                      | President and Chief Executive Officer 
      (Duly Authorized Officer)                    
|Date: August 14, 2001 | /s/ Terry A. Hanson                                                                       
|                      | Vice President and Chief Financial Officer 
      (Chief Financial and Accounting Officer)