United States 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: March
31, 2008  [   ] 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.

Name of Registrant, State of
Incorporation, Address
of Principal Executive Offices, and
Telephone No.

IRS Employer
Identification No.000-49965

MGE Energy, Inc.
(a Wisconsin Corporation)
133 South Blair Street
Madison, Wisconsin 53703
(608) 252-7000
www.mgeenergy.com

39-2040501000-1125

Madison Gas and Electric Company
(a Wisconsin Corporation)
133 South Blair Street
Madison, Wisconsin 53703
(608) 252-7000
www.mge.com

39-0444025  Indicate by check mark whether the registrants (1) have
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) have been subject
to such filing requirements for the past 90 days: Yes [X]  No [  ]  Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of "large accelerated filer," "accelerated
filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.  Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting CompanyMGE Energy,
Inc.
XMadison Gas and
Electric Company


X  Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).  MGE Energy, Inc. and Madison Gas and
Electric Company: Yes [   ]  No [X]  Number of Shares Outstanding of Each Class of Common Stock
as of April 30, 2008MGE Energy,
Inc.
Common stock,
$1.00 par value, 22,084,352 shares outstanding.Madison Gas and
Electric Company
Common stock,
$1.00 par value, 17,347,889 shares outstanding (all of which are owned
beneficially and of record by MGE Energy, Inc.).  Table of Contents  PART I.
FINANCIAL INFORMATION. Filing Format Forward-Looking Statements Where to Find More Information Definitions, Abbreviations, and Acronyms Used in the Text
and Notes of this Report Item 1. Financial Statements. MGE Energy, Inc. Consolidated Statements of Income
(unaudited) Consolidated Statements of Cash Flows
(unaudited) Consolidated Balance Sheets (unaudited) Madison Gas and Electric Company Consolidated Statements of Income
(unaudited) Consolidated Statements of Cash Flows
(unaudited) Consolidated Balance Sheets (unaudited) MGE Energy, Inc., and Madison Gas and Electric
Company Notes to Consolidated Financial Statements
(unaudited) Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. Item 3. Quantitative and Qualitative Disclosures About
Market Risk. Item 4. Controls and Procedures. Item 4T. Controls and Procedures. PART II. OTHER
INFORMATION. Item 1. Legal Proceedings. Item 6. Exhibits. Signatures - MGE Energy, Inc. Signatures - Madison Gas and Electric
Company   PART I. FINANCIAL
INFORMATION.   Filing Format  This combined quarterly report on Form 10-Q is being
filed separately by MGE Energy, Inc. (MGE Energy) and Madison Gas and Electric
Company (MGE). MGE is a wholly owned subsidiary of MGE Energy and represents a
majority of its assets, liabilities, revenues, expenses, and operations. Thus,
all information contained in this report relates to, and is filed by, MGE
Energy. Information that is specifically identified in this report as relating
solely to MGE Energy, such as its financial statements and information relating
to its nonregulated business, does not relate to, and is not filed by, MGE. MGE
makes no representation as to that information. The terms "we" and "our" as used
in this report refer to MGE Energy and its consolidated subsidiaries, unless
otherwise indicated.   Forward-Looking Statements  This report, and other documents filed by MGE Energy and
MGE with the Securities and Exchange Commission (SEC) from time to time, contain
forward-looking statements that reflect management's current assumptions and
estimates regarding future performance and economic conditionsespecially as
they relate to future load growth, revenues, expenses, capital expenditures,
financial resources, regulatory matters, and the scope and expense associated
with future environmental regulation. These forward-looking statements are made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995. Words such as "believe," "expect," "anticipate," "estimate," "could,"
"should," "intend," and other similar words generally identify forward-looking
statements. Both MGE Energy and MGE caution investors that these forward-looking
statements are subject to known and unknown risks and uncertainties that may
cause actual results to differ materially from those projected, expressed, or
implied.  The factors that could cause actual results to differ
materially from the forward-looking statements made by a registrant include (a)
those factors discussed in the following sections of the Registrants' 2007
Annual Report on Form 10-K: ITEM 1A. Risk Factors and ITEM 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations, as
updated by Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations in this report, and (b) other factors
discussed herein and in other filings with the SEC by the Registrants.  Readers are cautioned not to place undue reliance on
these forward-looking statements, which apply only as of the date of this
report. MGE Energy and MGE undertake no obligation to publicly release any
revision to these forward-looking statements to reflect events or circumstances
after the date of this report.   Where to Find More Information  The public may read and copy any reports or other
information that MGE Energy and MGE file with the SEC at the SEC's public
reference room at 100 F Street, NE, Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. These documents are also available to the public from
commercial document retrieval services, the Web site maintained by the SEC at
http://www.sec.gov, MGE Energy's Web site at
http://www.mgeenergy.com, and MGE's Web site at
http://www.mge.com. Copies may be obtained from our Web sites free of
charge. Information contained on MGE Energy's and MGE's Web sites shall not be
deemed incorporated into, or to be a part of, this report.   Definitions, Abbreviations, and Acronyms Used in the
Text and Notes of this Report  AFUDC
allowance for funds used during
constructionALJ
Administrative Law JudgeAlliant
Alliant Energy CorporationARB
Accounting Research BulletinATC
American Transmission Company LLCARO
Asset Retirement ObligationBlount
Blount StationCAIR
Clean Air Interstate RuleCAMR
Clean Air Mercury RuleColumbia
Columbia Energy Centercooling degree days
Measure of the extent to which the average daily
temperature is above 65 degrees Fahrenheit, increasing demand for
coolingCWDC
Central Wisconsin Development CorporationDistribution Agreement
Distribution Agreement between MGE Energy and J.P.
Morgan Securities Inc.Dth
dekathermsEGU
electric generating unitEITF
Emerging Issues Task ForceElm Road
Elm Road Generating StationEPA
U.S. Environmental Protection AgencyFAS
Financial Accounting StandardFASB
Financial Accounting Standards BoardFERC
Federal Energy Regulatory CommissionFIN
FASB Interpretation No.FSP
FASB Staff PositionFTR
Financial Transmission RightsGCIM
gas cost incentive mechanismGHG
greenhouse gasGW-hr
gigawatthourheating degree days (HDD)
Measure of the extent to which the average daily
temperature is below 65 degrees Fahrenheit, increasing demand for
heatingIBEW
International Brotherhood of Electric
WorkersIRS
Internal Revenue ServicekV
kilovoltkWh
kilowatt-hourLIBOR
London interbank offered rateLMP
Locational Marginal PricingMACT
Maximum available control technologyMAGAEL
MAGAEL, LLCMGE
Madison Gas and Electric CompanyMGE Construct
MGE Construct LLCMGE Energy or MGEE
MGE Energy, Inc.MGE Power
MGE Power LLCMGE Power Elm Road
MGE Power Elm Road, LLCMGE Power West Campus
MGE Power West Campus, LLCMGE Transco
MGE Transco Investment LLCMISO
Midwest Independent System Operator (a regional
transmission organization)Moody's
Moody's Investors Service, Inc.MW
megawattMWh
megawatt-hourNasdaq
The Nasdaq National Stock MarketNOx
nitrogen oxideNR
Natural ResourcesNSPS
new source performance standardsNYMEX
New York Mercantile ExchangePGA
Purchased Gas Adjustment clausePJM
PJM Interconnection, LLC (a regional transmission
organization)PSCW
Public Service Commission of WisconsinRTO
Regional Transmission OrganizationS&P
Standard & Poor's Ratings Group, a division of
McGraw-Hill CompaniesSAB
Staff Accounting BulletinSEC
Securities and Exchange CommissionSFAS
Statement of Financial Accounting Standards (issued
by the FASB )SO2
sulfur dioxideStock Plan
Direct Stock Purchase and Dividend Reinvestment
Plan of MGE EnergyUW
University of Wisconsin-MadisonVIE
variable interest entityWCCF
West Campus Cogeneration FacilityWDNR
Wisconsin Department of Natural ResourcesWEPCO
Wisconsin Electric Power Companyworking capital
current assets less current liabilitiesWPDES
Wisconsin Pollutant Discharge Elimination
SystemWPL
Wisconsin Power and Light
Company  Item
1. Financial Statements.  MGE Energy, Inc. Consolidated Statements of Income
(unaudited) (In thousands, except per-share
amounts)  Three Months Ended
March 31,2008

2007Operating Revenues:Regulated revenues
$187,923

$166,607Nonregulated revenues
2,073

1,279Total Operating
Revenues
189,996

167,886Operating Expenses:Fuel for electric
generation
16,194

13,760Purchased power
21,679

21,481Natural gas purchased
77,943

67,343Other operations and
maintenance
36,096

31,705Depreciation and
amortization
9,397

8,057Other general taxes
4,379

3,907Total Operating
Expenses
165,688

146,253Operating Income
24,308

21,633Other income, net
576

1,315Interest expense, net
(3,433)

(3,540)Income before income
taxes
21,451

19,408Income tax provision
(7,614)

(7,106)Net Income
$  13,837

$  12,302Earnings per Share of Common Stock (basic
and diluted)
$0.63

$0.59Dividends paid per share of common stock
$0.355

$0.348Average Shares Outstanding (basic and
diluted)
21,989

21,026  The accompanying notes are an integral
part of the above unaudited consolidated financial statements.  MGE
Energy, Inc. Consolidated Statements of Cash Flows
(unaudited) (In thousands)  Three Months Ended
March 31,2008

2007Operating Activities:Net income
$13,837

$12,302Items not affecting
cash:Depreciation and
amortization
9,397

8,057Deferred income taxes
(2,502)

(2,188)Amortization of investment tax
credits
(88)

(103)Amortization of debt issuance
costs and discount
139

142Provision for doubtful accounts
receivable
1,098

625AFUDC - equity funds
(532)

(245)Employee benefit plan
expenses
2,026

2,040Equity earnings in ATC
(1,606)

(1,445)Gain on sale of property
(287)

-Other items
614

217Changes in working
capital:Decrease in current
assets
21,370

19,346Increase (decrease) in current
liabilities
5,833

(164)Dividend income from ATC
1,117

920Cash contributions to pension
and other postretirement plans
(5,942)

(4,760)Other noncurrent items,
net
1,303

584Cash Provided by Operating
Activities
45,777

35,328Investing Activities:Capital expenditures
(28,541)

(23,875)Capital contributions to
investments
(50)

(123)Advance to WEPCO for ATC work
related to Elm Road
(67)

(156)Proceeds from sale of
property
294

724Other
255

900Cash Used for Investing
Activities
(28,109)

(22,530)Financing Activities:Issuance of common stock
3,553

6,036Cash dividends paid on common
stock
(7,805)

(7,317)Decrease in short-term debt,
net
(14,000)

(10,000)Cash Used for Financing
Activities
(18,252)

(11,281)Change in Cash and Cash Equivalents
(584)

1,517Cash and cash equivalents at
beginning of period
3,789

3,003Cash and cash equivalents at
end of period
$  3,205

$  4,520  The accompanying notes are an integral
part of the above unaudited consolidated financial statements.  MGE Energy,
Inc.  Consolidated Balance Sheets (unaudited) (In thousands) March 31,
2008

Dec. 31,
2007ASSETSCurrent Assets:Cash and cash
equivalents
$     3,205

$
    3,789Restricted cash
215

2,896Accounts receivable, less
reserves of $3,947 and $3,709, respectively
58,166

43,668Other accounts receivable, less
reserves of $115 and $114, respectively
2,842

3,397Unbilled revenues
25,858

30,370Materials and supplies, at
lower of average cost or market
15,051

14,809Fossil fuel
5,369

5,136Stored natural gas, at lower of
average cost or market
4,629

28,483Prepaid taxes
10,063

14,696Regulatory assets -
current
-

189Other current assets
11,749

8,242Total Current
Assets
137,147

155,675Other long-term receivables
6,350

6,166Special billing projects
740

999Regulatory assets
52,146

53,375Other deferred charges
6,023

5,881Property, Plant, and Equipment, Net
700,589

638,774Construction work in progress
161,121

205,214Total Property, Plant, and
Equipment
861,710

843,988Other Property and Investments
45,255

45,503Total Assets
$1,109,371

$1,111,587LIABILITIES AND CAPITALIZATIONCurrent Liabilities:Long-term debt due within one
year
$     30,000

$
    30,000Short-term debt
89,500

103,500Accounts payable
56,211

58,498Accrued interest and
taxes
11,565

3,964Deferred income taxes
782

4,153Regulatory liabilities -
current
7,189

2,924Pension liability -
current
607

607Other current
liabilities
16,125

16,466Total Current
Liabilities
211,979

220,112Other Credits:Deferred income taxes
108,475

107,393Investment tax credit -
deferred
2,999

3,087Regulatory liabilities
20,084

20,885Accrued pension and other
postretirement benefits
69,923

74,056Other deferred
liabilities
26,814

25,982Total Other
Credits
228,295

231,403Capitalization:Common shareholders'
equity
436,736

427,726Long-term debt
232,361

232,346Total
Capitalization
669,097

660,072Commitments and contingencies
(see Footnote 10)
-

-Total Liabilities and
Capitalization
$1,109,371

$1,111,587  The accompanying notes are an integral
part of the above unaudited consolidated financial statements.  Madison Gas and Electric Company Consolidated Statements of Income
(unaudited) (In thousands)  Three Months Ended
March 31,2008

2007Operating Revenues:Regulated electric
revenues
$  82,439

$  76,764Regulated gas revenues
105,484

89,843Nonregulated revenues
2,073

1,279Total Operating
Revenues
189,996

167,886Operating Expenses:Fuel for electric
generation
16,194

13,760Purchased power
21,679

21,481Natural gas purchased
77,943

67,343Other operations and
maintenance
36,032

31,606Depreciation and
amortization
9,397

8,057Other general taxes
4,379

3,906Income tax provision
7,209

6,540Total Operating
Expenses
172,833

152,693Operating Income
17,163

15,193Other Income and Deductions:AFUDC - equity funds
532

245Equity earnings in ATC
1,606

1,445Income tax provision
(145)

(464)Other deductions, net
(1,561)

(379)Total Other Income and
Deductions
432

847Income before interest
expense
17,595

16,040Interest Expense:Interest on long-term
debt
3,995

3,893Other interest, net
369

94AFUDC - borrowed funds
(221)

(104)Net Interest
Expense
4,143

3,883Net Income Before Minority Interest
$  13,452

$  12,157Minority interest, net of tax
(3,146)

(2,713)Net Income
$  10,306

$
   9,444  The accompanying notes are an integral part of the
above unaudited consolidated financial statements.   Madison
Gas and Electric Company Consolidated Statements of Cash Flows
(unaudited) (In thousands) Three Months Ended
March,2008

2007Operating Activities:Net income
$ 10,306

$   9,444Items not affecting
cash:Depreciation and
amortization
9,397

8,057Deferred income taxes
(2,502)

(2,189)Amortization of investment tax
credits
(88)

(103)Amortization of debt issuance
costs and discount
139

142Provision for doubtful accounts
receivable
1,098

625AFUDC - equity funds
(532)

(245)Employee benefit plan
expenses
2,026

2,040Equity earnings in ATC
(1,606)

(1,445)Minority interest, net of
tax
3,146

2,713Gain on sale of property
(287)

-Other items
614

217Changes in working
capital:Decrease in current
assets
19,812

18,363Increase in current
liabilities
7,423

1,004Dividend income from ATC
1,117

920Cash contributions to pension
and other postretirement plans
(5,942)

(4,760)Other noncurrent items,
net
1,284

552Cash Provided by Operating
Activities
45,405

35,335Investing Activities:Capital expenditures
(28,541)

(23,875)Advance to WEPCO for ATC work
related to Elm Road
(67)

(156)Proceeds from sale of
property
294

724Other
195

900Cash Used for Investing
Activities
(28,119)

(22,407)Financing Activities:Cash dividends paid to parent
by MGE
-

(6,561)Cash dividend paid to parent
from Power West Campus and Transco
(3,108)

(2,120)Equity contributions received
by Power Elm Road
12,159

11,177Decrease in short-term debt,
net
(27,000)

(14,500)Cash Used for Financing
Activities
(17,949)

(12,004)Change in Cash and Cash Equivalents
(663)

924Cash and cash equivalents at
beginning of period
1,859

1,246Cash and cash equivalents at
end of period
$   1,196

$
  2,170  The accompanying notes are an integral
part of the above unaudited consolidated financial statements.   Madison
Gas and Electric Company Consolidated Balance Sheets
(unaudited) (In
thousands) ASSETS
March 31,
2008

Dec. 31,
2007Utility
Plant (At Original Cost, in Service):Electric
$  755,638

$  691,162Gas
271,953

268,032Nonregulated
110,040

110,020Gross
plant in service
1,137,631

1,069,214Less
accumulated provision for depreciation
(437,172)

(430,572)Net
plant in service
700,459

638,642Construction
work in progress
161,121

205,214Total
Utility Plant
861,580

843,856Other
property and investments
2,053

2,777Investment
in ATC
41,288

40,799Total
Other Property and Investments
43,341

43,576Current
Assets:Cash
and cash equivalents
1,196

1,859Restricted
cash
215

2,896Accounts
receivable, less reserves of $3,947 and $3,709, respectively
58,166

43,668Affiliate
receivables
4

4Other
receivables, less reserves of $115 and $114, respectively
2,840

3,295Unbilled
revenues
25,858

30,370Materials
and supplies, at lower of average cost or market
15,051

14,809Fossil
fuel
5,369

5,136Stored
natural gas, at lower of average cost or market
4,629

28,483Prepaid
taxes
10,063

13,249Regulatory
assets - current
-

189Other
current assets
11,734

8,216Total
Current Assets
135,125

152,174Other
long-term receivables
5,729

5,485Special
billing projects
740

999Affiliate
receivable long-term
10,676

10,676Regulatory
assets
52,146

53,375Other
deferred charges
5,902

5,751Total
Assets
$1,115,239

$  1,115,892CAPITALIZATION
AND LIABILITIESCommon
stockholder's equity
$   339,708

$   329,944Minority
interest
149,225

137,028Long-term
debt
232,361

232,346Total
Capitalization
721,294

699,318Current
Liabilities:Long-term
debt due within one year
30,000

30,000Short-term
debt - commercial paper
34,000

61,000Accounts
payable
56,210

58,263Affiliate
payables
2,125

2,115Accrued
interest and taxes
19,173

10,148Accrued
payroll related items
5,869

6,980Deferred
income taxes
782

4,153Regulatory
liabilities - current
7,189

2,924Pension
liability - current
607

607Other
current liabilities
10,142

9,450Total
Current Liabilities
166,097

185,640Other
Credits:Deferred
income taxes
108,028

106,924Investment
tax credit - deferred
2,999

3,087Regulatory
liabilities
20,084

20,885Accrued
pension and other postretirement benefits
69,923

74,056Other
deferred liabilities
26,814

25,982Total
Other Credits
227,848

230,934Commitments
and contingencies (see Footnote 10)
-

-Total
Capitalization and Liabilities
$1,115,239

$  1,115,892  The accompanying notes are an integral
part of the above unaudited consolidated financial statements.   MGE Energy, Inc., and Madison Gas and
Electric Company  Notes
to Consolidated Financial Statements (unaudited) March 31, 2008  1. Basis of Presentation - MGE Energy
and MGE.  This report is a combined report of
MGE Energy and MGE. References in this report to "MGE Energy" are to MGE Energy,
Inc., and its subsidiaries. References in this report to "MGE" are to Madison
Gas and Electric Company.  In accordance with FIN 46R,
Consolidation of Variable Interest Entities - An Interpretation of ARB No.
51, MGE is required to consolidate MGE Power West Campus and MGE Power Elm
Road. Both entities own electric generating assets and lease those assets to
MGE. MGE is considered the primary beneficiary of the variable interest entities
as a result of these leasing arrangements.  The accompanying consolidated
financial statements as of March 31, 2008, and for the three months then ended
are unaudited, but include all adjustments that MGE Energy and MGE management
consider necessary for a fair statement of their respective financial
statements. All adjustments are of a normal, recurring nature except as
otherwise disclosed. The year-end consolidated balance sheet information was
derived from the audited balance sheet appearing in MGE Energy's and MGE's
annual reports on Form 10-K for the year ended December 31, 2007, but does not
include all disclosures required by generally accepted accounting principles.
These notes should be read in conjunction with the financial statements and the
notes on pages 53 through 102 of the 2007 Annual Report on Form 10-K.  2. Equity and Financing
Arrangements.  a. Common Stock - MGE Energy.  MGE Energy sells shares of its common
stock through its Stock Plan. Those shares may be newly-issued shares or shares
that MGE Energy has purchased in the open market for resale to participants in
the Stock Plan.  For the three months ended March 31,
2008, MGE Energy issued 109,146 new shares of common stock under the Stock Plan
for net proceeds of $3.6 million. For the three months ended March 31, 2007, MGE
Energy issued 98,606 new shares of common stock under the Stock Plan for net
proceeds of $3.4 million.  On November 9, 2006, MGE Energy
entered into a Distribution Agreement with J.P. Morgan under which MGE Energy
may offer and sell up to 1,500,000 shares of its common stock. During the three
months ended March 31, 2008, MGE Energy did not issue any shares of its common
stock under this agreement. During the three months ended March 31, 2007, MGE
Energy issued 80,000 shares of its common stock for $2.6 million in net proceeds
under this agreement.  b. Dilutive Shares Calculation - MGE
Energy.  MGE Energy does not have any dilutive
securities.  c. Accumulated Other Comprehensive
Income - MGE Energy and MGE.  The accumulated other comprehensive
income balance at March 31, 2008, includes the unrealized gains and losses on
available-for-sale securities and certain hedging transactions. The following
table illustrates the changes in Accumulated Other Comprehensive Income, net of
taxes, from December 31, 2007, to March 31, 2008, for MGE Energy and MGE:  (In thousands)
MGEE

MGEBalance,
December 31, 2007
$1,643

$898Change in
unrealized gain on available for sale securities, net of tax ($208 and
$186)
(311)

(278)Change in cash
flow hedges, net of tax ($177 and $177)
(264)

(264)Balance, March
31, 2008
$1,068

$356  3. Comprehensive Income - MGE Energy
and MGE.  The reporting of other comprehensive
income is required under the provisions of SFAS 130, Reporting Comprehensive
Income. Total comprehensive income represents the change in equity during a
period from transactions and other events and circumstances from nonowner
sources. MGE Energy and MGE's total comprehensive income is:  (In
thousands)
Three Months Ended
March 31,MGE
Energy
2008

2007Net
income
$13,837

$12,302Unrealized loss
on cash flow hedges, net of tax ($177 and $236)
(264)

(351)Unrealized loss
on available-for-sale securities, net of tax ($208 and $ -)
(311)

-Total
comprehensive income
$13,262

$11,951MGENet
income
$10,306

$9,444Unrealized loss
on cash flow hedges, net of tax ($177 and $236)
(264)

(351)Unrealized
(loss) gain on available-for-sale securities, net of tax ($186 and
$3)
(278)

4Total
comprehensive income
$
 9,764

$9,097  4. Investment in ATC - MGE Energy and
MGE.  ATC owns and operates electric
transmission facilities primarily in Wisconsin. MGE received an interest in ATC
when it, like other Wisconsin electric utilities, contributed its electric
transmission facilities to ATC. That interest is presently held by MGE Transco,
which is jointly owned by MGE and MGE Energy.  MGE Transco, through MGE, has a seat
on the Board of Directors of ATC and has a 20% ownership interest in ATC
Management, Inc. Due to MGE Transco's ability to exercise significant control
over management activities, MGE Transco has accounted for its investment in ATC
under the equity method of accounting. For the three months ended March 31, 2008
and 2007, MGE Transco recorded equity earnings from the investment in ATC of
$1.6 million (pretax) and $1.4 million (pretax), respectively. Dividend income
received from ATC was $1.1 million and $0.9 million for the three months ended
March 31, 2008 and 2007, respectively. During both the three months ended March
31, 2008 and 2007, MGE Transco made no cash contributions to ATC. However, on
February 15, 2007, MGE (through MGE Transco) transferred $1.4 million in
additional transmission assets to ATC. In exchange, MGE Transco received an
additional $0.7 million investment in ATC and $0.7 million in cash
consideration.  At March 31, 2008, MGE is the
majority owner and MGE Energy, the holding company, is the minority owner of MGE
Transco. MGE Energy's proportionate share of the equity and net income of MGE
Transco is classified within the MGE financial statements as minority
interest.  5. Taxes - MGE Energy and
MGE.  a. FIN 48.  On January 1, 2007, MGE Energy and
MGE adopted FIN 48, Accounting for Uncertainty in Income Taxes, an
interpretation of SFAS No. 109, Accounting for Income Taxes. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109. The
interpretation applies to all tax positions accounted for in accordance with
SFAS No. 109 and requires a recognition threshold and measurement standard for
the financial statement recognition and measurement of a tax position taken, or
expected to be taken, in an income tax return. FIN 48 defines the threshold for
recognizing tax return positions in the financial statements as "more likely
than not" that the position is sustainable, based on its merits. Subsequent
recognition, derecognition, and measurement is based on management's best
judgement given the facts, circumstances and information available at the
reporting date.  For both MGE Energy and MGE, there
have been no changes to unrecognized tax benefits existing at December 31, 2007,
nor any additions for new tax positions, during the quarter ended March 31,
2008.  b. Effective Tax Rate.  MGE Energy's effective income tax
rate for the three months ended March 31, 2008, is 35.5% compared to 36.6% for
the same period in 2007. This decrease is primarily attributable to an increased
federal tax credit for production of electricity from wind energy, as a result
of placing the Top of Iowa III wind project into production in February 2008.
Electricity generated from wind energy produces a two cents per kilowatt hour
federal tax credit. The Top of Iowa III wind project will substantially increase
the wind energy tax credit.  The decrease in the effective tax
rate for MGE from 36.6% in the first quarter of 2007 to 35.3% for the first
quarter of 2008 is also primarily attributable to the increased wind energy tax
credit.  6. Elm Road - MGE Energy and
MGE.  a. Construction.  On November 4, 2005, MGE Power Elm
Road acquired a 8.33% ownership interest in each of two 615 MW generating units
being constructed in Oak Creek, Wisconsin (Oak Creek expansion). MGE Power Elm
Road's sole principal asset is the 8.33% undivided ownership interest in the
aforementioned coal-fired generating plants. The estimated share of capital
costs for that ownership interest in both units is approximately $172 million
(excluding capitalized interest). The operator has informed MGE Power Elm Road
that adverse weather during the 2007-2008 winter season presented difficulties
for the construction contractor. However, the contractor continues to forecast
that the units will be completed on schedule. At this time we cannot predict
what impact there will be on the project's construction costs and schedule.  At March 31, 2008, $118.4 million
(excluding capitalized interest) related to this project is reflected in the
Construction Work In Progress balance on MGE and MGE Energy's consolidated
balance sheets. MGE Power Elm Road calculates capitalized interest in accordance
with SFAS 34, Capitalization of Interest Cost, on the Elm Road project.
At March 31, 2008, MGE Power Elm Road recorded a total of $7.2 million in
capitalized interest related to the Elm Road project.  b. Consolidation.  In connection with this project, MGE
Energy and its subsidiaries entered into various agreements, including a
facility lease agreement between MGE Power Elm Road (a nonregulated subsidiary
of MGE Energy) and MGE. The financial terms of the facility lease include a
capital structure of 55% equity and 45% long-term debt, and return on equity of
12.7%, a lease term of 30 years, and a 5% lease payment reduction in the first
five years.  Based on the nature and terms of the
leasing agreement and the relationship it establishes, MGE absorbs a majority of
the expected losses, residual value, or both, associated with the ownership of
MGE Power Elm Road. MGE also is the party most closely associated with MGE Power
Elm Road. As a result, MGE is the primary beneficiary and MGE Power Elm Road is
a VIE under FIN 46R. Accordingly, MGE Power Elm Road has been consolidated in
the financial statements of MGE.  MGE Energy's share of the equity and
net income (through its wholly owned subsidiary MGE Power) of MGE Power Elm Road
is classified within the MGE financial statements as minority interest.  c. Nonregulated Revenues.  MGE has approval from the PSCW to
defer the recovery of the payments made to MGE Power Elm Road for carrying costs
during construction of the facility, management fees, and community impact
mitigation costs. MGE estimates that the total carrying costs on the Elm Road
project will be $55.9 million. This estimate is subject to change based on
changes in interest rates, timing of capital expenditures, and the total project
cost. During 2008, MGE will recover $12.1 million in electric rates for its
investment in MGE Power Elm Road. Of this amount, $9.6 million relates to
carrying costs and $2.5 million relates to management fees, community impact
mitigation costs, and other related costs.  MGE began collecting the carrying
costs in rates in 2006. These amounts are being collected over multiple years.
Of these costs, MGE estimates that $20.5 million relates to the capitalized
interest and the debt portion of the facility. These costs will be recognized
over the period in which the facility will be depreciated. The remaining $35.4
million is estimated to represent the equity portion and is being recognized
over the period allowed for recovery in rates. For the three months ended March
31, 2008, $2.4 million related to the carrying costs were recovered in rates. Of
this amount, $0.6 million relates to the debt portion of the facility and was
deferred on the consolidated financial statements of MGE and MGE Energy. The
remaining $1.8 million represents the equity portion and was recognized as
nonregulated revenues in the consolidated financial statements of MGE and MGE
Energy.  d. WPDES Permit.  On November 29, 2007, the
Administrative Law Judge (the "ALJ") in the proceeding related to the previously
issued Wisconsin Pollution Discharge Elimination System ("WPDES") permit
determined that the two additional coal units that are part of the Oak Creek
expansion are "new facilities" under Section 316(b) of the Federal Clean Water
Act.  The ALJ did not vacate the WPDES
permit or any other permit necessary to continue construction of the two
additional coal units, pointing out that, based upon the present record, the
water intake system currently under construction as part of the Oak Creek
expansion may be permittable under the standards that apply to new facilities.  The ALJ remanded the WPDES permit to
the Wisconsin Department of Natural Resources (the "WDNR") and directed the WDNR
to reissue or modify the permit to reflect "best technology available" to comply
with the standards applicable to new facilities under Wisconsin state law. As
part of the decision, the ALJ restated his prior opinion that the water intake
system currently under construction may not be operated so long as it remains a
contested matter. The ALJ's ruling was appealed to circuit court, but the court
dismissed the appeal on February 11, 2008, on the grounds that the ALJ decision
was not a final order and further ruled that all issues decided by the ALJ may
be judicially reviewed when there is a final decision.  The plant operator has advised us
that there are alternatives under the United States Environmental Protection
Agency's (the "EPA") rule for new facilities that would permit the use of the
once-through cooling system rather than the use of cooling towers. The operator
has requested the WDNR to issue a modified permit and has submitted additional
information to the WDNR supporting the request for approval of the once-through
cooling system under this rule. The operator anticipates the WDNR will complete
the WPDES permit modification process in the first half of 2008. A reissued
permit would be subject to public comment and possible administrative and legal
review. We cannot predict the timing or results, or the effect upon construction
schedule or costs, of any decision by the WDNR or any administrative or legal
process that may follow.  While the process for modifying the
WPDES permit proceeds, construction of the additional coal units continues on
the current schedule.  7. Top of Iowa III Wind Project - MGE
Energy and MGE.  MGE has constructed a 29.7 MW (18
turbines) wind-powered electric generating facility in Iowa. In February 2008,
the project was placed into service.  At March 31, 2008, MGE had incurred
$56.1 million of costs on the project and $2.9 million in AFUDC, which are
reflected in the property, plant, and equipment balance on MGE and MGE Energy's
consolidated balance sheets. During the three months ended March 31, 2008 and
2007, MGE had recorded $0.6 million and $0.3 million, respectively, in AFUDC
related to this project. MGE was permitted to recover 100% AFUDC on the Top of
Iowa III wind project during construction of the facility.  8. Pension and Postretirement Plans -
MGE Energy and MGE.  MGE maintains qualified and
nonqualified pension plans, health care, and life insurance benefits.
Additionally, MGE has deferred contribution 401(k) benefit plans.  a. Net Periodic Cost.  The following table presents the
components of MGE and MGE Energy's net periodic benefit costs recognized for the
three months ended March 31, 2008 and 2007. A portion of the net periodic
benefit cost is capitalized within the consolidated balance sheets.  Pension
Benefits
(In
thousands)
Three Months Ended March 31,2008

2007Components of
net periodic benefit cost:Service
cost
$
1,304

$
1,311Interest
cost
2,829

2,655Expected
return on assets
(3,345)

(3,085)Amortization
of:Transition
obligation
36

36Prior
service cost
111

111Actuarial
loss
99

218Net periodic
benefit cost
$
1,034

$
1,246  Postretirement
Benefits
(In
thousands)
Three Months Ended March 31,2008

2007Components of
net periodic benefit cost:Service
cost
$
  466

$
  435Interest
cost
949

762Expected
return on assets
(324)

(288)Amortization
of:Transition
obligation
107

107Prior
service cost
72

52Actuarial
loss
76

44Net periodic
benefit cost
$1,346

$1,112  b. Expected Cash Flows.  There are no required contributions
for the 2008 plan year. Likewise, there were no required contributions for the
2007 plan year. MGE elected to make discretionary deductible contributions of
$5.9 million during the three months ended March 31, 2008. MGE may elect to make
additional discretionary deductible contributions.  c. Pension Protection Act.  During the third quarter of 2006,
President Bush signed into law the Pension Protection Act of 2006, which will
affect the manner in which companies, including MGE and MGE Energy, administer
their pension plans. This legislation will require companies to, amongst other
things, increase the amount by which they fund their pension plans, pay higher
premiums to the Pension Benefit Guaranty Corporation if they sponsor defined
benefit plans, amend plan documents, and provide additional plan disclosures in
regulatory filings and to plan participants. This legislation became effective
on January 1, 2008. The U.S. Treasury Department's interim guidance indicates
that further guidance is forthcoming. MGE does not expect significant changes in
expected cash flows as a result of the Act. Absent changes in plan design as a
result of the Act, the Act is not expected to materially impact MGE and MGE
Energy's results of operations.  9. Share Based Compensation - MGE
Energy and MGE.  The MGE Energy Board approved a
Performance Unit Plan (the "Plan") on December 15, 2006. Under the Plan,
eligible participants may receive performance units that entitle the holder to
receive a cash payment equal to the value of a designated number of shares of
MGE Energy's common stock, plus dividend equivalent payments thereon, at the end
of the set performance period.  On January 1, 2007, the Board of
Directors granted 22,479 units based on the MGE Energy December 31, 2006,
closing stock price. On January 18, 2008, the Board of Directors granted 18,538
units based on the MGE Energy closing stock price as of that date. These units
are subject to either a four or five year graded vesting schedule. Based on the
provisions of SFAS 123R, Share Based Payment, on the grant date, MGE
Energy and MGE measured the cost of the employee services received in exchange
for the award based on current market value of MGE Energy common stock. The fair
value of the awards has been subsequently re-measured at March 31, 2008. Changes
in fair value as well as the original grant have been recognized as compensation
cost. Because this amount will be remeasured throughout the vesting period, the
compensation cost is subject to variability.  For nonretirement eligible employees,
stock based compensation costs are accrued and recognized using the graded
vesting method. Pursuant to the provisions of SFAS 123R and the terms of the
plan, compensation cost for retirement eligible employees or employees that will
become retirement eligible during the vesting schedule, are recognized on an
abridged horizon also using the graded vesting method.  During each of the three months ended
March 31, 2008 and 2007, MGE recorded $0.1 million in compensation expense as a
result of this plan. No forfeitures or cash settlements occurred during the
aforementioned period.  10. Commitments and Contingencies.  a. Environmental - MGE Energy and
MGE.  MGE is listed as a potentially
responsible party for a site the EPA has placed on the national priorities
Superfund list. The Lenz Oil site in Lemont, Illinois, was used for storing and
processing waste oil for several years. This site requires clean up under the
Comprehensive Environmental Response, Compensation and Liability Act. A group of
companies, including MGE, is currently working on cleaning up the site.
Management believes that its share of the final cleanup costs 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. At March 31, 2008, MGE accrued a $0.1 million gross
liability for this matter. The expected range of loss for this item is estimated
to be between $0.1 million and $0.2 million.  Effective March 31, 2006, Wisconsin
adopted the Energy Efficiency and Renewables Act that focuses on three areas:
increasing the use of renewable energy in Wisconsin, promoting the development
of renewable energy technologies, and strengthening the state's energy
efficiency programs. This new legislation requires that by 2015, 10% of the
state's electricity be generated from renewable resources. As part of this
initiative, MGE plans to add additional renewable energy resources, such as wind
farms. MGE expects the cost to comply with regulations will be recoverable
through current and future rates.  Air quality regulations promulgated
by the EPA and WDNR in accordance with the Federal Clean Air Act and the Clean
Air Act Amendments of 1990 impose restrictions on emission of particulates,
sulfur dioxide (SO2), nitrogen oxides (NOx), and other
pollutants and require permits for operation of emission sources. These permits
have been obtained by MGE and must be renewed periodically.  On March 12, 2008, the U.S. EPA
announced a new national ambient air quality standard for ozone which is more
stringent than the current standard (standard lowered from 0.08 to 0.0750 parts
per million). States (including Wisconsin) must monitor and collect data on
ozone levels in order to determine attainment or nonattainment status on a
county and/or area basis. Currently available monitoring data for Dane and
Columbia counties demonstrates attainment with this new standard. However, final
attainment designations will not be made until 2010 using the monitoring data
collected during the period 2007 through 2009. There is a possibility that
future monitoring data for one or both of these counties will demonstrate
nonattainment for this new ozone standard which could result in additional
operating and capital expenditures at Columbia (located in Columbia county) and
Blount (located in Dane county). Similarly, new standards for particulate
emissions under 2.5 microns and monitoring data may result in a nonattainment
designation for Dane county for particulate emissions which could also result in
increased expenditures at Blount.  Various initiatives including, but
not limited to, the Clean Air Interstate Rule (CAIR), Clean Air Mercury Rule
(CAMR), maximum achievable control technology (MACT) standards, new source
performance standards (NSPS), and existing and proposed state mercury emissions
limits, are expected to result in significant additional operating and capital
expenditures at Columbia, Elm Road, and Blount. There is some uncertainty
concerning the mercury emission reduction requirements in light of a February 8,
2008, U.S. Court of Appeals decision vacating CAMR. Further, in February 2008,
the WDNR proposed new revisions to the state mercury rules under NR 446 that are
significantly different than CAMR and if finalized, will further increase
mercury control compliance costs at these facilities.  The Columbia operator's current
estimates show that MGE's share of the capital expenditures required to comply
with these environmental initiatives will be between $130 million and $200
million. According to current estimates, compliance with these initiatives is
also expected to result in an increase to MGE's pro-rata share of Columbia's
on-going operating expenses. The operator and MGE management are continuing to
explore various alternatives to comply with these standards. Accordingly, actual
capital expenditures may fall above or below the range provided. These standards
and initiatives may also result in additional capital and operating expenditures
at MGE's other generating facilities. MGE expects that the costs to comply with
these standards will be fully recoverable through rates. The PSCW is permitting
MGE to defer pre-certification and pre-construction costs related to compliance
with CAIR and CAMR regulations at Columbia. Additionally, MGE is entitled to
100% AFUDC on the related pre-construction costs. As of March 31, 2008, MGE had
incurred $0.9 million in costs at Columbia related to these initiatives.  As of March 31, 2008, Columbia
entered into various contractual commitments with vendors for a small portion of
the aforementioned expenditures as well as other Columbia environmental
projects. MGE is indirectly a party to these agreements as a result of its joint
ownership of Columbia and is also contractually obligated, under the applicable
ownership and operating agreements, with respect to any commitments made. MGE
has a 22% ownership interest in Columbia. MGE's share of these commitments is
estimated to be $0.6 million for the remainder of 2008. These costs are expected
to be capitalized and included in the consolidated balance sheet of MGE.  On April 30, 2008, the Circuit Court
in Columbia County, Wisconsin entered judgment and approved a Stipulation and
Order for Judgment (Stipulation) entered into by the State of Wisconsin and WPL,
the operating owner of Columbia and the other Columbia owners, including MGE, to
address a failure by the plant operator to file with the WDNR a timely
application to renew an air permit for Columbia. The Stipulation was agreed to
in response to a referral of enforcement action from the WDNR to the Wisconsin
Attorney General following the previously announced notice of intent to sue
alleging that the operator did not timely file its application for renewal of an
air permit for Columbia and, thus, alleging that Columbia was operating without
the necessary air permit. The Stipulation requires the operator to pay $285,000
in penalties and charges and to establish an environmental management system at
Columbia to address environmental compliance matters, but allows the continued
operation of Columbia in accordance with the terms and conditions of the expired
air permit until a renewed permit is issued. The Stipulation bars any further
action against the Columbia owners by the State of Wisconsin on this matter.  b. Chattel Paper Agreement and Other
Guarantees - MGE Energy and MGE.  MGE makes available to qualifying
customers a financing program for purchasing and installing energy-related
equipment that will provide more efficient use of utility service at the
customer's property. MGE is party to a chattel paper purchase agreement with a
financial institution under which it can sell or finance an undivided interest
with recourse, in up to $10.0 million of the financing program receivables,
until August 31, 2008. At March 31, 2008, MGE had sold an outstanding $4.3
million interest in these receivables, which MGE accounted for as a sale under
SFAS 140, Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities - A Replacement of FASB Statement No. 125. MGE
retains the servicing responsibility for these receivables.  On January 1, 2007, MGE adopted SFAS
156, Accounting for Servicing of Financial Assets, an amendment of SFAS
140. SFAS 156 clarified when to separately account for servicing rights,
requires these rights to be initially measured at fair value, and provides the
option to subsequently account for those servicing rights at either fair value
or under the amortization method previously required under SFAS 140. MGE
continues to account for servicing rights under the amortization method. Initial
determination of the servicing asset fair value is based on the present value of
the estimated future cash flows. The discount rate is based on the PSCW
authorized weighted cost of capital.  MGE would be required to perform
under its guarantee if a customer defaulted on its loan. The energy-related
equipment installed at the customer sites is used to secure the customer loans.
The loan balances outstanding at March 31, 2008, approximate the fair value of
the energy-related equipment acting as collateral. The length of the MGE
guarantee to the financial institution varies from one to ten years depending on
the term of the customer loan. Principal payments for the next five years on the
loans are $0.8 million in 2008, $0.6 million in 2009, $0.9 million in 2010, $0.5
million in 2011, and $0.3 million in 2012.  MGE Energy also has guaranteed debt
service payments on a development project. This guarantee is a two year
commitment ending in 2009 with a maximum financial exposure of $0.2 million for
the remaining term of the guarantee.  c. Other Legal Matters - MGE Energy
and MGE.  MGE is involved in various other
legal matters that are being defended and handled in the normal course of
business. MGE maintains accruals for such costs that are probable of being
incurred and subject to reasonable estimation. As of March 31, 2008, MGE has a
total of $1.5 million accrued in the financial statements for such matters. The
ultimate outcome of such matters is uncertain and may have an adverse effect on
MGE's results of operations or cash flows.  d. Venture Debt Commitment - MGE
Energy.  On January 15, 2008, MGE Energy
entered into a three year agreement with a venture debt fund. As a result of
this agreement, MGE Energy has committed $0.5 million to this venture debt fund.
The timing of infusions is dependent on the needs of the venture debt fund and
is therefore uncertain at this time.  e. ATC Capital Commitment - MGE
Energy and MGE.  On March 18, 2008, MGE Transco
elected to participate in a voluntary capital call for ATC. As a result, MGE
Transco contributed $1.3 million to ATC in April 2008.  11. Restructuring Activities - MGE
Energy and MGE.  On January 19, 2006, MGE announced a
plan, subject to certain conditions, that includes discontinuing coal use at the
end of 2011 at Blount. The plant will continue to run on natural gas but will be
reduced from its current approximate 190 MW capacity to 100 MW when coal burning
is discontinued. MGE has determined that certain employee positions will be
eliminated in 2011 as a result of this exit plan.  MGE has entered into severance
agreements providing severance benefits to the nonunion employees affected by
the exit plan. Additionally, MGE ratified a labor agreement with the IBEW
providing those union employees affected by the exit plan with involuntary and
voluntary severance benefits. MGE has accounted for the involuntary union and
nonunion severance benefits in accordance with the provisions of SFAS 146,
Accounting for Costs Associated with Exit or Disposal Activities. These
benefits were recognized initially at the respective communication dates based
on the fair value of the liability as of the termination date and are being
recognized ratably over the future service period of the employees. Benefits are
expected to be paid as follows: $0.2 million in 2010 and $1.3 million in 2011. MGE will recover in rates the costs
associated with the discontinuance of coal at Blount. As such, the severance
charges for the nonunion and union employees have been deferred and recognized
on the consolidated balance sheet of MGE Energy and MGE as a regulatory
asset.  The following table presents the
activity in the restructuring accrual from December 31, 2007, through March 31,
2008:  (In thousands)Balance at
December 31, 2007
$609Additional
expense, net (deferred)
67Cash payments
during the period
(149)Balance, March
31, 2008
$527  The aforementioned exit plan has also
resulted in accelerated depreciation for the Blount assets expected to be
retired in 2011. These assets will be recovered in rates over a four year period
starting in 2008. For the three months ended March 31, 2008, $0.8 million of
accelerated depreciation expense had been recognized and recovered in rates.  12. Derivative and Hedging Instruments
- MGE Energy and MGE.  As part of its regular operations,
MGE enters into contracts, including options, swaps, futures, forwards, and
other contractual commitments, to manage its exposure to interest rates,
commodity prices, and gas margin. MGE evaluates its derivative contracts in
accordance with SFAS 133, Accounting for Derivative Instruments and Hedging
Activities, as amended and interpreted. To the extent that these contracts
are derivatives, MGE assesses whether or not the normal purchases or normal
sales exclusion applies. For contracts in which this exclusion can not be
applied, SFAS 133 requires MGE Energy and MGE to recognize such derivatives in
the consolidated balance sheets at fair value, with changes in the fair value of
derivative instruments to be recorded in current earnings or deferred in
accumulated other comprehensive income (loss), depending on whether a derivative
is designated as, and is effective as, a hedge and depending on the type of
hedge transaction. If the derivative qualifies for regulatory deferral subject
to the provisions of SFAS 71, Accounting for the Effects of Certain Types of
Regulation, the derivatives are marked to fair value pursuant to SFAS 133
and are offset with a corresponding regulatory asset or liability.  MGE's gas and electric segments
purchased and sold exchange traded and over-the-counter options, swaps, and
futures and, in addition, holds FTRs for certain transmission paths in the MISO
market. At March 31, 2008, the net market value of all these aforementioned
instruments exceeded their cost by $4.6 million.  MGE has also entered into a ten-year
purchased power agreement which provides MGE with firm capacity and energy
beginning June 12, 2012, and ending on May 31, 2022 (the "base term"). The
agreement also allows MGE the option to purchase power during a period of time
preceding the base term as well as an option to extend the contract after the
base term. The agreement is a derivative contract and is recognized at its fair
value on the balance sheet. The fair value of the contract at March 31, 2008, is
$0.1 million. Also, the derivative qualifies for regulatory deferral and is
recognized with a corresponding regulatory liability.  Under the PGA clause and electric
fuel rules, MGE may include in costs of fuel (natural gas or power) the costs
and benefits of the aforementioned fuel price risk management tools. Because
these costs and benefits are recoverable, the related unrealized loss/gain is
deferred on the balance sheet as a regulatory asset/liability. All of the
instruments outstanding as of March 31, 2008, will expire in 12 months or less,
except for the aforementioned ten-year purchased power agreement. Depending on
the nature of the instrument, the gain or loss associated with these
transactions will be reflected in natural gas purchased, purchased power, or
fuel used for electric generation in the delivery month applicable to the
instrument.  On September 26, 2007, MGE entered
into a non-exchange traded HDD collar. This agreement extended from January 2008
until March 2008 and had a premium of $0.2 million. Under this agreement, MGE
was subject to a floor (3,450 HDD) and a ceiling (3,600 HDD), based on
forecasted heating degree days during the indicated period. If actual heating
degree days were below the floor, MGE was entitled to receive a payment, and if
actual heating degree days exceeded the ceiling, MGE was obligated to make a
payment. Any payment or receipt was limited to $1.3 million. Actual heating
degree days during the aforementioned period were 3,971. Because this number
exceeded the ceiling, MGE recorded a $1.5 million expense (includes the $0.2
million premium) on the collar in the three months ended March 31, 2008. MGE
accounted for the HDD collar using the intrinsic value method pursuant to the
requirements of EITF 99-2, Accounting for Weather Derivatives.  Nonperformance of counterparties to
the non-exchange traded derivatives could expose MGE to credit loss. However,
MGE enters into transactions only with companies that meet or exceed strict
credit guidelines.  13. Regional Transmission
Organizations - MGE Energy and MGE.  On April 1, 2005, the MISO
implemented its bid-based energy market. MISO is a FERC approved RTO that is
required to provide a real-time market based mechanism for congestion
management. MGE is a participant in this market. On April 1, 2005, MGE began
offering substantially all of its generation on the MISO market and purchasing
much of its load requirement from the MISO market in accordance with the MISO
Tariff.  Additionally, on May 1, 2004, MGE
became a member of PJM. PJM is also an RTO. PJM is a neutral and independent
party that coordinates and directs the operation of the region's transmission
grid, administers a competitive wholesale electricity market, and plans regional
transmission expansion improvements to maintain grid reliability and relieve
congestion. MGE has two purchase power agreements, for a total of 65 MW, that
are affected by this market.  MGE reports on a net basis
transactions on the MISO and PJM markets in which it buys and sells power within
the same hour to meet electric energy delivery requirements. This treatment
resulted in $42.2 million and $40.8 million reduction to sales for resale and
purchased power expense for the three months ended March 31, 2008 and 2007,
respectively.  14. Rate Matters - MGE Energy and
MGE.  a. Rate proceedings.  On December 14, 2007, the PSCW
authorized MGE to increase 2008 electric rates by 4.8% or $16.2 million and
increase gas rates by 2.8% or $7.8 million. The electric increase will cover
costs for MGE's new wind energy projects, statewide energy efficiency and
renewable energy programs, transmission improvements by ATC, and accelerated
costs to discontinue coal use at the Blount Station. In addition to funding the
statewide energy programs, the natural gas rate increase covered costs for area
gas construction projects needed to accommodate customer growth. Authorized
return on common stock equity was set at 10.8% based on 57.4% utility common
equity. The PSCW order allows MGE to eliminate a base rate case proceeding for
2009 and request a limited reopener for certain items. The costs MGE can update
in its limited reopener include monitored fuel rules costs, Elm Road lease
payments and operation and maintenance costs as a result of Elm Road Unit 1
becoming operational, and ATC network service fees.  Pursuant to the provisions of this
rate order, the fuel rules bandwidth effective January 1, 2008, is plus or minus
2%. See description of fuel rules below.  On December 22, 2006, the PSCW
approved a limited scope rate case reopener related to MGE's current electric
rates. This order approved an update to MGE's electric fuel costs monitored
under the fuel rules, an updated estimate of the 2007 Elm Road carrying costs,
and a request for recovery of increased ATC-related transmission costs through
December 31, 2007. This order resulted in a net 0.15% decrease, on average, in
retail electric rates for 2007. The PSCW also approved the recovery of 100%
AFUDC on the Top of Iowa III wind project beginning in November 2006 and
continuing until construction on the project ceased.  b. Fuel rules.  Actual electric fuel costs are
subject to reconciliation to the amount approved by the PSCW in MGE's rate order
covering the applicable period. Known as "fuel rules," the process can produce a
fuel surcharge for MGE or require MGE to make a refund in the form of a credit,
to the extent that the actual fuel costs are outside a range higher or lower
than the level authorized by the PSCW in that rate order.  Under fuel rules effective January 1,
2008, MGE can apply for a fuel surcharge if its actual electric fuel costs
exceed 102% of the electric fuel costs allowed in its latest rate order.
Conversely, MGE can be required to provide a fuel credit to its customers if
actual electric fuel costs are less than 98% of the electric fuel costs allowed
in that order.  On March 31, 2008, MGE filed an
application with the PSCW requesting a surcharge on its electric rates to cover
increased fuel and purchased power costs. In its application to the PSCW, MGE
stated that actual January and February fuel costs exceeded the monthly fuel
rules bandwidth. Additionally, MGE reported that annual fuel costs per kWh,
computed based on actual results for January and February and revised forecasts
for the remainder of the year, exceeded the annual fuel rules bandwidth. See
Footnote 18b for an update on this filing.  On
April 26, 2007, the PSCW approved a $0.00339 per kWh interim fuel surcharge on
MGE's electric rates to cover increased fuel and purchased power expenses. On
August 31, 2007, MGE received a final decision which reduced the fuel surcharge
from $0.00339 per kWh to $0.00242 per kWh. These surcharges resulted in a gross
increase to electric rates of $6.9 million for the twelve months ended December
31, 2007. For the interim period April 26, 2007, through August 31, 2007, the
difference between the interim surcharge and the final surcharge was required to
be refunded to customers. Accordingly, on October 6, 2007, a refund of $1.3
million was applied to customers' accounts.  As a result of a decrease in electric
fuel costs during the twelve months ended December 31, 2006, a fuel credit was
approved by the PSCW. To account for this credit, MGE recorded a $19.1 million
reduction to other electric revenues. During the year ended December 31, 2006,
$16.8 million had been credited to electric customers. An additional $2.4
million (includes interest) was applied to customers' accounts in April
2007.  15. SFAS 157 Fair Value of Assets and
Liabilities - MGE Energy and MGE.  As of January 1, 2008, MGE and MGE
Energy adopted SFAS 157, Fair Value Measurements. The adoption of this
standard requires enhanced disclosures about MGE's and MGE Energy's assets and
liabilities carried at fair value.  SFAS 157 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the
measurement date. The standard clarifies that fair value should be based on the
assumptions market participants would use when pricing the asset or liability
including assumptions about risk. The standard also establishes a three level
fair value hierarchy based upon the observability of the assumptions used and
requires the use of observable market data when available. The levels are:  Level 1 - Pricing inputs are quoted
prices within active markets for identical assets or liabilities.  Level 2 - Pricing inputs are quoted
prices within active markets for similar assets or liabilities; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations that are correlated with or otherwise verifiable by
observable market data.  Level 3 - Pricing inputs are
unobservable and reflect management's best estimate of what market participants
would use in pricing the asset or liability.  In February 2008, the FASB issued FSP
FAS 157-2, Effective Date of FASB Statement No. 157, which delays the
effective date of SFAS 157 for all nonrecurring fair value measurements of
nonfinancial assets and liabilities until fiscal years beginning after November
15, 2008. MGE Energy and MGE have elected to defer the adoption of the
nonrecurring fair value measurement disclosures of nonfinancial assets and
liabilities. The adoption of FSP FAS 157-2, effective January 1, 2009, is not
expected to have any material impact on MGE Energy and MGE.  The following table presents the
balances of assets and liabilities measured at fair value on a recurring basis
for MGE Energy and MGE.  (In
thousands)
Fair Value as of March 31, 2008MGE
Energy
Total

Level 1

Level 2

Level 3Assets:Derivatives,
net
$4,723

$2,851

$
    -

$1,872Exchange-traded
investments
2,825

2,825

-

-Total
Assets
$7,548

$5,676

$
    -

$1,872Liabilities:Deferred
compensation
$1,023

$1,023

$
    -

$
    -Total
Liabilities
$1,023

$1,023

$
    -

$
    -MGEAssets:Derivatives,
net
$4,723

$2,851

$
    -

$1,872Exchange-traded
investments
1,459

1,459

-

-Total
Assets
$6,182

$4,310

$
    -

$1,872Liabilities:Deferred
compensation
$1,023

$1,023

$
    -

$
    -Total
Liabilities
$1,023

$1,023

$
    -

$
    -  Derivatives include exchange-traded
derivative contracts, a ten-year purchased power agreement, and Financial
Transmission Rights (FTRs). Most exchange-traded derivative contracts are valued
based on unadjusted quoted prices in active markets and are therefore classified
as level 1. A small number of exchange-traded contracts are valued using quoted
market pricing in markets with insufficient volumes and are therefore classified
as level 3. The ten-year purchased power agreement (see Footnote 12) was valued
using an internally-developed pricing model and therefore classified as level 3.
The model includes both observable and unobservable inputs. FTRs are priced
based upon monthly auction results for identical or similar instruments in a
closed market with limited data available and are therefore classified as level
3.  Investments include exchange-traded
investment securities valued using quoted prices on active exchanges and are
therefore classified as level 1.  The deferred
compensation plan allows participants to defer certain cash compensation into a
notional investment account. These amounts are included within other deferred
liabilities in the balance sheets of MGE Energy and MGE. The notional
investments earn interest based upon the semiannual rate of U.S. Treasury Bills
having a 26 week maturity increased by 1% compounded monthly, with a minimum
annual rate of 7%, compounded monthly, and are therefore based upon observable
market data and classified as level 1.  The following
table summarizes the changes in level 3 assets and liabilities measured at fair
value on a recurring basis for both MGE Energy and MGE.  (In
thousands)
Three months
ended
March 31, 2008Balance as of
January 1, 2008
$(444)Realized and
unrealized gains (losses):Included
in regulatory liabilities (assets)
2,329Included
in other comprehensive income
(13)Included
in earnings
863Included
in current assets
(7)Purchases,
sales, issuances, and settlements, net
(856)Transfers in
and/or out of level 3
-Balance as of
March 31, 2008
$1,872Total gains
(losses) included in earnings attributed to the change
in unrealized
gains (losses) related to assets and liabilities held at March 31, 2008
(a)
$
   -  The following
table presents total realized and unrealized gains (losses) included in income
for Level 3 assets and liabilities measured at fair value on a recurring basis
during the three months ended March 31, 2008, for both MGE Energy and MGE.
(a)  (In
thousands)
Purchased
Power Expense

Natural Gas
Purchased Expense

Regulated Ga
RevenuesTotal gains
(losses) included in earnings for the three months ended March 31,
2008
$957

$(47)

$(47)  (a) MGE's
exchange-traded derivative contracts, ten-year purchased power agreement, and
FTRs are subject to regulatory deferral under the provisions of SFAS 71. These
derivatives are therefore marked to fair value pursuant to SFAS 133 and are
offset with a corresponding regulatory asset or liability. A portion of MGE's
derivative contracts fall under the incentive mechanism within the PGA clause
and shareholders have the ability to receive 50% of the benefit or loss from
these deals if certain thresholds are achieved. Under these derivatives, only
50% of the gains or losses are subject to regulatory deferral under SFAS 71. The
remaining 50%, the shareholder portion, is reflected in other comprehensive
income. As a result of the above described treatment, there are no unrealized
gains or losses that flow through earnings.  16. New
Accounting Pronouncements and Legislation - MGE Energy and MGE.  a. Pension
Protection Act.  See Footnote 8
for discussion of this pronouncement.  b. FSP FIN
39-1.  In April 2007,
the FASB issued FSP 39-1, Amendment of FASB Interpretation No. 39 (FSP FIN
39-1).This pronouncement amends FIN 39, Offsetting of
Amounts Related to Certain Contracts, and allows companies to offset fair
value amounts recognized for the right to reclaim cash collateral (a receivable)
or the obligation to return cash collateral (a payable)against
fair value amounts recognized for derivative instruments executed with the same
counterparty under a master netting agreement. MGE and MGE Energy elected the
net presentation as prescribed by this pronouncement. FSP FIN 39-1 became
effective for MGE and MGE Energy as of January 1, 2008. The effects of applying
this pronouncement shall be recognized as a change in accounting principle
through retroactive application for all financial statements presented. The
adoption of this pronouncement did not have any impact on MGE or MGE Energy's
net income. At March 31, 2008, MGE Energy and MGE did not have any cash
collateral to net against the net derivative positions with counterparties.  c. FAS 160 and FAS 141(R).  In December 2007, the FASB issued FAS
160, Non-Controlling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51and FAS 141(R), Business Combinations. These
pronouncements will change the accounting and reporting for business
acquisitions and noncontrolling interest in a subsidiary. In addition, FAS 160
will change the accounting and reporting for the deconsolidation of a
subsidiary. FAS 160 and FAS 141(R) will be effective for MGE and MGE Energy as
of January 1, 2009. MGE and MGE Energy are currently assessing the impact these
pronouncements will have on their financial statements.  d. FAS 161.  In March 2008, the FASB issued FAS
161, Disclosures about Derivative Instruments and Hedging Activities. The
new standard is intended to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced disclosures to enable
investors to better understand their effects on an entity's financial position,
financial performance, and cash flows. It is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early adoption allowed. MGE and MGE Energy have elected not to early adopt
this pronouncement. Therefore, FAS 161 will be effective for MGE and MGE Energy
as of January 1, 2009. MGE and MGE Energy are currently assessing the impact
this pronouncement will have on their financial statements.  17. Segment Information - MGE Energy
and MGE.  MGE Energy operates in the following
business segments: electric utility, gas utility, nonregulated energy,
transmission investment, and all other. See MGE Energy's and MGE's Form 10-K for
additional discussion of each of these segments.   The
following tables show segment information for MGE Energy's operations for the
indicated periods:  MGE
Energy
(In
thousands)
Electric
Gas
Non-
regulated
Energy
Transmission
Investment
All
Others
Consolidation/
Elimination
Entries
Consolidated
TotalThree
months ended March 31, 2008Operating
revenues
$
82,439
$105,484
$
2,073
$
        -
$
     -
$
           -
$
189,996Interdepartmental
revenues
121
8,588
3,718
-
-
(12,427)
-Total
operating revenues (loss)
82,560
114,072
5,791
-
-
(12,427)
189,996Depreciation and
amortization
(6,482)
(2,229)
(686)
-
-
-
(9,397)Other operating
expenses
(72,002)
(96,627)
(25)
-
(64)
12,427
(156,291)Operating income
(loss)
4,076
15,216
5,080
-
(64)
-
24,308Other income
(deductions), net
484
(1,513)
-
1,606
(1)
-
576Interest
(expense) income, net
(2,699)
(807)
(637)
-
710
-
(3,433)Income before
taxes
1,861
12,896
4,443
1,606
645
-
21,451Income tax
benefit (provision)
189
(5,115)
(1,783)
(645)
(260)
-
(7,614)Net
income
$
  2,050
$
   7,781
$
2,660
$
  961
$
385
$
          -
$
  13,837Three
months ended March 31, 2007Operating
revenues
$
76,764
$
89,843
$
1,279
$
       -
$
     -
$
           -
$
167,886Interdepartmental
revenues
116
6,195
3,713
-
-
(10,024)
-Total
operating revenues (loss)
76,880
96,038
4,992
-
-
(10,024)
167,886Depreciation and
amortization
(5,243)
(2,128)
(686)
-
-
-
(8,057)Other operating
expenses
(66,147)
(81,945)
(28)
(1)
(99)
10,024
(138,196)Operating income
(loss)
5,490
11,965
4,278
(1)
(99)
-
21,633Other income
(deductions), net
167
(300)
-
1,445
3
-
1,315Interest
(expense) income, net
(2,531)
(714)
(638)
-
343
-
(3,540)Income before
taxes
3,126
10,951
3,640
1,444
247
-
19,408Income tax
provision
(691)
(4,272)
(1,461)
(580)
(102)
-
(7,106)Net
income
$
  2,435
$
  6,679
$
2,179
$
  864
$
145
$
         -
$
  12,302  The following tables show segment
information for MGE's operations for the indicated periods:  MGE
(In thousands)
Electric
Gas
Non-
regulated
Energy
Transmission
Investment
Consolidation/
Elimination
Entries
Consolidated
TotalThree
months ended March 31, 2008Operating
revenues
$
82,439
$
105,484
$
2,073
$
    -
$
          -
$
189,996Interdepartmental
revenues
121
8,588
3,718
-
(12,427)
-Total
operating revenues (loss)
82,560
114,072
5,791
-
(12,427)
189,996Depreciation and
amortization
(6,482)
(2,229)
(686)
-
-
(9,397)Other operating
expenses*
(71,721)
(102,334)
(1,808)
-
12,427
(163,436)Operating
income*
4,357
9,509
3,297
-
-
17,163Other income
(deductions), net*
392
(921)
-
961
-
432Interest
expense, net
(2,699)
(807)
(637)
-
-
(4,143)Income before
minority interest
2,050
7,781
2,660
961
-
13,452Minority
interest, net of tax
-
-
-
-
(3,146)
(3,146)Net income
(loss)
$
  2,050
$
   7,781
$
2,660
$961
$
 (3,146)
$
  10,306Three
months ended March 31, 2007Operating
revenues
$
76,764
$
89,843
$
1,279
$
   -
$
          -
$
167,886Interdepartmental
revenues
116
6,195
3,713
-
(10,024)
-Total
operating revenues (loss)
76,880
96,038
4,992
-
(10,024)
167,886Depreciation and
amortization
(5,243)
(2,128)
(686)
-
-
(8,057)Other operating
expenses*
(66,821)
(86,349)
(1,489)
(1)
10,024
(144,636)Operating income
(loss)*
4,816
7,561
2,817
(1)
-
15,193Other income
(deductions), net*
150
(168)
-
865
-
847Interest
expense, net
(2,531)
(714)
(638)
-
-
(3,883)Income before
minority interest
2,435
6,679
2,179
864
-
12,157Minority
interest, net of tax
-
-
-
-
(2,713)
(2,713)Net income
(loss)
$
   2,435
$
   6,679
$
2,179
$
864
$
 (2,713)
$
    9,444  *Amounts are shown net of the related
tax expense, consistent with the presentation on the consolidated MGE Income
Statement.  The following table shows segment
information for MGE Energy's and MGE's assets and capital expenditures:  (In
thousands)
MGE
Energy
Electric
Gas
Assets not
Allocated
Non-
regulated
Energy
Transmission
Investment
All
Others
Consolidation/
Elimination
Entries
TotalAssets:March 31,
2008
$627,095
$211,562
$
 8,800
$243,030
$41,296
$354,463
$(376,875)
$1,109,371December 31,
2007
614,949
234,002
14,876
227,415
40,808
342,491
(362,954)
1,111,587Capital
ExpendituresThree months
ended March 31, 2008
12,331
446
-
15,764
-
-
-
28,541Year ended
December 31, 2007
70,687
12,091
-
53,480
-
-
-
136,258  (In
thousands)
MGE
Electric
Gas
Assets not
Allocated
Non-
regulated
Energy
Transmission
Investment
Consolidation/
Elimination
Entries
TotalAssets:March 31,
2008
$627,095
$211,562
$
 8,800
$242,780
$41,296
$(16,294)
$1,115,239December 31,
2007
614,949
234,002
14,876
227,165
40,808
(15,908)
1,115,892Capital
Expenditures:Three months
ended March 31, 2008
12,331
446
-
15,764
-
-
28,541Year ended
December 31, 2007
70,687
12,091
-
53,480
-
-
136,258  18. Subsequent Events - MGE
Energy and MGE.  a. ATC Capital Contribution.  On April 30, 2008, MGE Transco made a
voluntary $1.3 million capital contribution to ATC.  b. Interim Fuel Surcharge.  On May 5, 2008, the PSCW approved a
$0.00239 per kWh interim fuel surcharge on MGE's electric rates to cover
increased fuel and purchased power expenses. This interim fuel surcharge will
result in an estimated $8.0 million increase in electric revenues on an annual
basis. The interim fuel surcharge was included in electric rates as of May 6,
2008. Pursuant to the provisions of this interim order, MGE's electric revenues
resulting from this interim surcharge are subject to refund with interest at
10.8% should it ultimately be determined that the interim fuel surcharge
resulted in collections greater than actual costs.   Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.  General  MGE Energy is a holding company operating through
subsidiaries in five business segments: electric utility operations, gas utility
operations, nonregulated energy operations, transmission investments, and all
other. Our principal subsidiary is MGE, which conducts our electric utility and
gas utility operations. MGE generates and distributes electricity to nearly
136,000 customers in Dane County, Wisconsin, including the city of Madison, and
purchases and distributes natural gas to nearly 140,000 customers in the
Wisconsin counties of Columbia, Crawford, Dane, Iowa, Juneau, Monroe, and
Vernon.  Our nonregulated energy operations have been formed to
lease and own new electric generating capacity. Our nonregulated energy
operations relate to the leasing of a cogeneration project on the UW-Madison
campus. Our nonregulated energy operations also include an undivided 8.33%
ownership interest in each of two 615 MW generating units being constructed in
Oak Creek, Wisconsin. All of these operations are included in MGE's consolidated
financial statements as a result of the accounting requirements of FIN 46R,
Consolidation of Variable Interest Entities - An Interpretation of ARB No.
51.  The transmission investment segment consists of our
investment in ATC. Our all other segment includes corporate operations and
services and certain construction services.  Our primary focus today and for the foreseeable future is
our core utility customers at MGE. MGE continues to face the challenge of
providing its customers with reliable power at competitive prices. MGE plans to
meet this challenge by building more efficient generation projects and
continuing its efforts to control operational costs. We believe it is critical
to maintain a strong credit standing and financial strength in MGE as well as
for the parent company in order to accomplish these goals.  Three Months
Ended March 31, 2008 and 2007  Executive Summary - MGE Energy and MGE  For the three months ended March 31, 2008, MGE Energy's
earnings were $13.8 million or $0.63 per share compared to $12.3 million or
$0.59 per share for the same period in the prior year. MGE's earnings for the
three months ended March 31, 2008, were $10.3 million compared to $9.4 million
for the same period in the prior year.  The following discussion is based on the business
segments as discussed in Footnote 17.  Electric Utility  The electric utility segment contributed $2.1 million of
net income during the first quarter of 2008, a slight decrease of $0.4 million
compared to the first quarter of 2007. The reduction is largely attributable to
higher fuel and purchased power costs not fully recovered in rates. Key
financial and operational highlights for the quarter include:   Electric revenues were $5.7 million
or 7.4% higher during the first quarter of 2008 compared to the same period last
year. The increase is a result of a 1.9% increase in retail sales and a 4.8%
rate increase approved by the PSCW. The rate increase was to cover MGE's new
wind energy projects, statewide energy efficiency and renewable energy programs,
transmission improvements by ATC, and accelerated costs associated with the
discontinued use of coal at the Blount Station.   Fuel and purchased power costs
increased $2.6 million or 7.5% during the first quarter of 2008 compared to the
same period last year. The increase is primarily attributable to higher
commodity prices for electricity and natural gas. The Company filed a fuel
surcharge application on March 31, 2008, with the PSCW to increase electric
rates to cover the higher fuel and purchased power costs for the remainder of
the year.   The Top of Iowa III construction
project was placed in service during the first quarter of 2008. As of March 31,
2008, MGE has incurred $56.1 million of costs on the 29.7 MW wind-powered
electric generating facility located in Iowa. MGE recorded $0.6 million of AFUDC
in 2008 related to the construction of the project.  Gas Utility  The gas utility segment contributed $7.8 million of net
income during the first quarter of 2008, an increase of $1.1 million or 16.5%
compared to the first quarter of 2007. The increase is largely attributable to
higher gas margins as a result of colder weather compared to the same period in
2007. Gas margin (gas revenues less purchased gas costs) increased $5.0 million
during the first quarter of 2008 compared to the same period last year. The
increase was primarily attributable to 12.9% increase in gas retail sales for
the quarter. Heating degree days were 12.2% higher for the period compared to
last year as a result of colder weather. MGE also received a 2.8% rate increase
from the PSCW to cover costs for area gas construction projects needed to
accommodate growth and funding of statewide energy efficiency and renewable
energy programs. Partially offsetting the higher margin was s $1.3 million
expense (excludes premium) in 2008 for a weather hedge (heating degree day
collar). The weather hedge obligated MGE to pay additional costs if the weather
was colder than a prescribed ceiling or would have compensated MGE if weather
was warmer than a prescribed floor.  Nonregulated Energy  The nonregulated energy segment contributed $2.7 million
of net income during the first quarter of 2008, an increase of $0.5 million or
22.1% compared to the first quarter of 2007. The increase is largely
attributable to higher carrying costs recognized for the Elm Road project.
Carrying costs during construction of the nonregulated energy projects, related
to the equity portion, are recognized over the period of time the costs are
recovered in rates.  Capital expenditures during the first quarter of 2008
totaled $15.6 million for the Elm Road project.  Transmission Investment  Earnings from our interest in ATC increased $0.1 million
for the first quarter of 2008 compared to the same period last year.  MGE Transco contributed $1.3 million for a voluntary
capital contribution to ATC in April 2008. ATC may request additional voluntary
capital contributions from the owners during 2008 and MGE Transco plans to
participate in those contributions.  All Others  MGE Energy's corporate operations contributed $0.4
million in earnings for the first quarter of 2008. These earnings are a result
of interdepartmental interest income recognized as a result of capitalized
interest on the Elm Road project.  Electric Utility Operations - MGE Energy and
MGE  Electric sales and revenues  The following table compares MGE's electric retail
revenues and electric kWh sales by customer class for each of the periods
indicated:  Revenues

SalesThree Months Ended March 31,

Three Months Ended March 31,(In
thousands)
2008

2007

%
Change

2008

2007

%
ChangeResidential
$29,672

$27,310

8.6%

214,720

208,701

2.9%Commercial
43,108

38,822

11.0%

449,879

431,090

4.4%Industrial
4,025

3,956

1.7%

59,174

65,618

(9.8)%Other -
retail/municipal
6,719

6,337

6.0%

88,298

91,298

(3.3)%Total
retail
83,524

76,425

9.3%

812,071

796,707

1.9%Sales for
resale
1,260

2,050

(38.5)%

10,944

27,296

(59.9)%Other revenues
(deductions)
(2,345)

(1,711)

(37.1)%

-

-

-Total
$82,439

$76,764

7.4%

823,015

824,003

(0.1)%  Electric operating revenues increased $5.7 million or
7.4% for the three months ended March 31, 2008, due to the following: (In
millions)
Three Months
Ended
March 31, 2008Rate
changes
$5.5Volume
1.6Sales for
resale
(0.8)Other
revenues
(0.6)Total
$5.7   Rates changes.Rates charged
to retail customers for the three months ended March 31, 2008, were 7.2% or $5.5
million higher than those charged during the same period in the prior year.  On December 14, 2007, the PSCW
authorized MGE to increase 2008 electric revenue by $16.2 million to cover costs
for MGE's new wind energy projects, statewide energy efficiency and renewable
energy programs, transmission improvements by ATC, and accelerated costs to
discontinue coal use at the Blount Station.   Volume. During the three
months ended March 31, 2008, there was a 1.9% increase in total retail sales
volumes when compared to the same period in the prior year. This increase
represents increased usage by residential and commercial customers, offset by a
decline in usage by industrial and other-retail/municipal customers.   Sales for resale. For the
three months ended March 31, 2008, sales for resale decreased $0.8 million when
compared to the same period in the prior year. Sales for resale include
transactions conducted on the PJM and MISO markets reflecting our involvement in
the PJM and MISO markets since their establishment on May 1, 2004, and April 1,
2005, respectively.


 Other revenues. Other electric
revenues decreased $0.6 million for the three months ended March 31, 2008,
compared to the same period in the prior year.  During the three months ended March
31, 2008 and 2007, MGE recovered in electric rates carrying costs and other fees
related to WCCF and Elm Road. During the three months ended March 31, 2008 and
2007, MGE recorded a $2.7 million and $2.0 million reduction, respectively, to
other electric revenues to eliminate the recognition of revenue related to these
costs in the electric segment as revenue related to these costs is recorded by
MGE Power Elm Road and MGE Power West Campus (see discussion of these revenues
in the "nonregulated operations revenue" section).  Other miscellaneous electric revenues
for the three months ended March 31, 2008 and 2007, remained consistent between
the two periods.  Electric fuel and purchased power  The expense for fuel used for electric generation
increased $2.4 million or 17.7% during the three months ended March 31, 2008,
compared to the same period in the prior year. This increase is due to
additional internal generation ($0.4 million) and an increase in fuel costs
between the two periods ($2.0 million).  Purchased power expense increased by $0.2 million or 0.9%
during the three months ended March 31, 2008, compared to the same period in the
prior year. This increase in expense reflects a $1.0 million or 4.9% increase in
the per unit cost of purchased power, partially offset by a $0.8 million or 3.8%
decrease in the volume of power purchased.  On March 31, 2008, MGE filed an application with the PSCW
requesting a surcharge on its electric rates to cover increased fuel and
purchased power costs. In its application to the PSCW, MGE stated that actual
January and February fuel costs exceeded the monthly fuel rules bandwidth.
Additionally, MGE reported that annual fuel costs per kWh, computed based on
actual results for January and February and revised forecasts for the remainder
of the year, exceeded the annual fuel rules bandwidth. On May 5, 2008, the PSCW
approved a $0.00239 per kWh interim fuel surcharge on MGE's electric rates. This
interim fuel surcharge will result in an estimated $8.0 million increase in
electric revenues on an annual basis. The interim fuel surcharge was included in
electric rates as of May 6, 2008. Pursuant to the provisions of this interim
order, MGE's electric revenues resulting from this interim surcharge are subject
to refund with interest at 10.8% should it ultimately be determined that the
interim fuel surcharge resulted in collections greater than actual costs.  Electric operating expenses  Electric operating expenses increased $3.3 million during
the three months ended March 31, 2008, compared to the same period in 2007. The
following changes contributed to the net change for 2008:  (In millions)
Three Months
Ended
March 31, 2008Increased
production costs
$0.5Increased
transmission costs
0.7Increased
distribution expenses
0.1Increased
customer accounts expenses
0.2Increased
customer service costs
1.0Increased other
general and administrative expenses
0.8Total
$3.3  As a result of the 2005 Wisconsin Act 141, each Wisconsin
utility is required to pay 1.2% of its annual operating revenues to the
statewide energy efficiency and renewable resource programs. MGE is allowed to
recover these costs in rates through its conservation escrow. For the three
months ended March 31, 2008, costs associated with funding these programs
increased customer service expense by $1.3 million.  Electric maintenance expense  For the three months ended March 31, 2008, electric
maintenance expense decreased $0.4 million, when compared to the same period in
the prior year. This decrease is attributable to a decrease of $0.5 million in
production maintenance partially offset by an increase of $0.1 million in other
general and administrative expenses.  Electric depreciation expense  Depreciation expense at the electric segment increased by
$1.2 million for the three months ended March 31, 2008, when compared to the
same period in the prior year. This increase is related to higher levels of
electric assets, including the Top of Iowa III wind-powered electric generating
facility which was placed in service in the first quarter of 2008. Also
contributing to the increase is the accelerated depreciation of certain Blount
assets. For additional information on the Blount accelerated depreciation, see
Footnote 11.  Gas Utility Operations - MGE Energy and
MGE  Gas deliveries and revenues  The following table compares MGE's gas retail revenues
and gas therms delivered by customer class during each of the periods
indicated:  Revenues

DeliveriesThree Months Ended March 31,

Three Months Ended March 31,(In
thousands)
2008

2007

%
Change

2008

2007

%
ChangeResidential
$59,128

$50,293

17.6%

48,598

44,196

10.0%Commercial/industrial
45,178

37,935

19.1%

46,163

39,729

16.2%Total
retail
104,306

88,228

18.2%

94,761

83,925

12.9%Gas
transportation
958

830

15.4%

12,528

11,175

12.1%Other
revenues
220

785

(72.0)%

-

-Total
$105,484

$89,843

17.4%

107,289

95,100

12.8%Heating degree
days (normal 3,510)






3,949

3,520

12.2%Average rate per
therm of retail customers






1.101

1.051

4.8%  Gas revenues increased $15.6 million or 17.4% for the
three months ended March 31, 2008. These changes are related to the following
factors:  (In
millions)
Three Months
Ended
March 31, 2008Gas
costs/rates
$4.1Gas
deliveries
11.9Transportation
and other effects
(0.4)Total
$15.6   Gas costs/rates. The average
retail rate per therm for the three months ended March 31, 2008, increased 4.8%
compared to the same period in 2007. The PSCW authorized a 2.8% increase in
MGE's gas rates effective January 1, 2008, to cover increased system demands and
funding statewide energy programs. Also contributing to this increase is higher
natural gas costs.   Retail gas deliveries. The
12.9% increase in retail gas deliveries for the three months ended March 31,
2008, was attributable to an increase in the heating degree days between the
periods.   Transportation and other
revenues. Transportation and other revenues decreased a total of $0.4
million due to a decrease in income realized under the GCIM partially offset by
an increase in transportation revenue.  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. The PSCW also 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. For the three months ended March 31, 2007, shareholders received the
benefit of $0.6 million from capacity release revenues and commodity savings
under the GCIM.  Natural gas purchased  For the three months ended March 31, 2008, natural gas
purchased increased by $10.6 million. The increase in the natural gas purchased
was the result of a 12.9% increase ($8.7 million) in the volume of gas purchased
and a 2.5% increase in the cost per therm of natural gas ($1.9 million).  Gas operating expenses  Gas operating expenses increased $1.4 million for the
three months ended March 31, 2008, compared to the same period a year ago. The
following changes contributed to the net change for 2008:  (In millions)
Three Months
Ended
March 31, 2008Increased
distribution costs
$0.1Increased
customer accounts costs
0.3Increased
customer service costs
0.8Increased
general and administrative costs
0.2Total
$1.4  As a result of the 2005 Wisconsin Act 141, each Wisconsin
utility is required to pay 1.2% of its annual operating revenues to the
statewide energy efficiency and renewable resource programs. MGE is allowed to
recover these costs in rates through its conservation escrow. For the three
months ended March 31, 2008, costs associated with funding these programs
increased customer service expense by $0.9 million.  Gas maintenance expense  Gas maintenance expenses increased by $0.1 million for
the three months ended March 31, 2008, compared to the same period in the prior
year. This increase relates to an increase in other general and administrative
costs.  Gas depreciation expense  Gas depreciation expense increased $0.1 million for the
three months ended March 31, 2008, compared to the same period in the prior
year.  Other Deductions, Net  During the three months ended March 31, 2008, the gas and
electric segments recognized a total of $0.5 million in AFUDC-equity and $0.3
million in gains on the sale of property. This income was offset by a $1.5
million expense for a heating degree day collar and a $0.3 million loss related
to an equity investment. See Footnote 12 for further discussion of the HDD
collar.  For the three months ended March 31, 2007, the gas and
electric segments recognized a total of $0.2 million in AFUDC-equity. This
income was offset by $0.3 million in premium expense for a heating degree day
collar. See Footnote 12 for further discussion of the HDD collar.  Interest Expense, Net  For the three months ended March 31, 2008, total interest
expense for the electric and gas segments increased $0.3 million when compared
to the same period in the prior year. For the three months ended March 31, 2008,
interest expense on long-term debt increased $0.1 million, interest expense on
commercial paper increased $0.2 million, and miscellaneous interest expense
increased $0.1 million. These increases were partially offset by an increase in
AFUDC-debt of $0.1 million.  Nonregulated Energy Operations - MGE Energy and
MGE  Nonregulated energy operating revenues  Operating revenues from nonregulated energy operations
increased $0.8 million for the three months ended March 31, 2008, when compared
to the same period in the prior year. Operating revenues from nonregulated
energy operations for both the three months ended March 31, 2008 and 2007,
include $3.7 million in interdepartmental revenues related to a leasing
arrangement between MGE and MGE Power West Campus which commenced on April 26,
2005. Upon consolidation, these interdepartmental revenues are
eliminated.  Also included in operating revenues is the recognition of
revenues related to the carrying costs for MGE Power West Campus and MGE Power
Elm Road. MGE received approval from the PSCW to collect approximately $12.1
million in carrying costs incurred by MGE Power West Campus during construction
of the WCCF facility. MGE is collecting these costs in rates over a period of
ten years. A portion of this amount is being recognized over the period
recovered in rates and a portion is being recognized over the period in which
the facility is being depreciated (40 years). For both the three months ended
March 31, 2008 and 2007, MGE Power West Campus recognized $0.3 million related
to carrying costs on the WCCF, management, demolition, and removal fees.  MGE also received approval from the PSCW to collect
carrying costs expected to be incurred by MGE Power Elm Road during construction
of the Elm Road project. MGE estimates that the total carrying costs on the Elm
Road project will be $55.9 million. A portion of this amount is being recognized
over the period recovered in rates and a portion is being deferred and will be
recognized over the period in which the facility is depreciated. For the three
months ended March 31, 2008 and 2007, MGE Power Elm Road recognized $1.8 million
and $1.0 million, respectively, related to carrying costs on the Elm Road
project.  Nonregulated energy operations and maintenance
expense  For the three months ended March 31, 2008, other
operations and maintenance expense for the nonregulated energy segment remained
consistent with that experienced in the prior year.  Nonregulated energy depreciation
expense  Depreciation expense in the nonregulated energy segment
consists of depreciation on the WCCF. Depreciation expense for both the three
months ended March 31, 2008 and 2007, was $0.7 million.  Nonregulated energy interest expense,
net  For both the three months ended March 31, 2008 and 2007,
interest expense, net at the nonregulated energy operations segment was $0.6
million. Interest expense at the nonregulated energy segment for both the three
months ended March 31, 2008 and 2007, includes $0.7 million in interest expense
incurred on $50 million of long-term, fixed-rate borrowings at MGE Power West
Campus.  Also included in the nonregulated interest expense is
interdepartmental interest expense and capitalized interest at MGE Power Elm
Road. During the three months ended March 31, 2008 and 2007, MGE Power Elm Road
was charged $1.2 million and $0.8 million, respectively, in interest expense by
Corporate on funds borrowed for the Elm Road Project. This expense is eliminated
upon consolidation for MGE Energy only. The interest expense at MGE Power Elm
Road is offset by $1.2 million and $0.8 million, respectively, in capitalized
interest. MGE Power Elm Road is capitalizing interest on the Elm Road
project.  During both the three months ended March 31, 2008 and
2007, MGE Power Elm Road recorded $0.1 million in interest income on cash
advanced to Elm Road Services, LLC for construction of transmission equipment
and work done by ATC related to the Elm Road project.  Transmission Investment Operations - MGE Energy and
MGE  Transmission investment other income  For the three months ended March 31, 2008 and 2007, other
income at the transmission investment segment was $1.6 million and $1.4 million,
respectively. The transmission investment segment holds our interest in ATC, and
its income reflects our equity in the earnings of ATC.  All Other Nonregulated Operations - MGE Energy  All other nonregulated revenues  During the three months ended March 31, 2008 and 2007,
the all other segment did not generate any revenues.  All other operations and maintenance
expense  All other operations and maintenance expense for both the
three months ended March 31, 2008 and 2007, were $0.1 million. This amount is
primarily comprised of general and administrative expenses at Corporate.  All other interest income, net  All other interest income, net for the three months ended
March 31, 2008 and 2007, was $0.7 million and $0.3 million, respectively.
Interest income for the three months ended March 31, 2008, represents $1.2
million in interdepartmental interest income from MGE Power Elm Road, partially
offset by $0.5 million in interest expense on short term debt. Interest income
for the three months ended March 31, 2007, represents $0.8 million in
interdepartmental interest income from MGE Power Elm Road, partially offset by
$0.5 million in interest expense on short-term debt. The interdepartmental
interest income is eliminated upon consolidation.  Consolidated Other General Taxes  MGE Energy and MGE's other general taxes increased $0.5
million or 12.1% for the three months ended March 31, 2008, when compared to the
same period in 2007, due to a combination of two factors affecting the MGE
license fee tax, which is a tax levied on gross sales in lieu of property tax on
utility property. First, higher sales increased the 2008 tax compared to the
2007 tax. Secondly, the license fee tax for 2007 was reduced by an audit
settlement, achieved in 2007, involving prior years' license fee tax.  Consolidated Income Taxes  MGE Energy's effective income tax rate for the three
months ended March 31, 2008, is 35.5% compared to 36.6% for the same period in
2007. This decrease is primarily attributable to an increased federal tax credit
for production of electricity from wind energy, as a result of placing the Top
of Iowa III wind project into production in February 2008. Electricity generated
from wind energy produces a two cents per kilowatt hour federal tax credit. The
Top of Iowa III wind project will substantially increase the wind energy tax
credit.  The decrease in the effective tax rate for MGE from 36.6%
in the first quarter of 2007 to 35.3% for the first quarter of 2008 is also
primarily attributable to the increased wind energy tax credit.  Minority Interest, Net of Tax  For the three months ended March 31, 2008, MGE Energy
(through its wholly owned subsidiary MGE Power) had earned $1.9 million and $1.1
million, net of tax, for its interest in MGE Power West Campus and MGE Power Elm
Road, respectively. Additionally, MGE Energy had earned $0.1 million, net of tax
for its interest in MGE Transco. These amounts are recorded as minority interest
expense, net of tax, on MGE's consolidated statement of income.  For the three months ended March 31, 2007, MGE Energy
(through its wholly owned subsidiary MGE Power) had earned $2.0 million and $0.6
million, net of tax, for its interest in MGE Power West Campus and MGE Power Elm
Road, respectively. Additionally, MGE Energy had earned $0.1 million, net of
tax, for its interest in MGE Transco. These amounts are recorded as minority
interest expense, net of tax, on MGE's consolidated statement of income.  Contractual Obligations and Commercial Commitments -
MGE Energy and MGE  Columbia Environmental Matters - MGE Energy and
MGE.  As of March 31, 2008, Columbia entered into various
contractual commitments with vendors for a small portion of the environmental
expenditures related to CAIR and CAMR as well as other Columbia environmental
projects. MGE is indirectly a party to these agreements as a result of its joint
ownership of Columbia and is also contractually obligated, under the applicable
ownership and operating agreements, with respect to any commitments made. MGE's
share of these commitments is estimated to be $0.6 million for the remainder of
2008. These costs are expected to be capitalized and included in the
consolidated balance sheet of MGE.See "Environmental Matters -
Columbia" below for additional information.  Elm Road Construction - MGE Energy and
MGE.  The operator has informed MGE Power Elm Road that adverse
weather during the 2007-2008 winter season presented difficulties for the
construction contractor. However, the contractor continues to forecast that the
units will be completed on schedule. At this time we cannot predict what impact
there will be on the project's construction costs and schedule.  Other Legal Matters - MGE Energy and
MGE.  MGE is involved in various other legal matters that are
being defended and handled in the normal course of business. MGE maintains
accruals for such costs that are probable of being incurred and subject to
reasonable estimation. At March 31, 2008, MGE has a total of $1.5 million
accrued in the financial statements for such matters. The ultimate outcome of
such matters is uncertain and may have an adverse effect on MGE's results of
operations or cash flows. See Footnote 10a for additional information related to
the Columbia air permit issue.  Venture Debt Commitment - MGE Energy.  On January 15, 2008, MGE Energy entered into a three year
agreement with a venture debt fund. As a result of this agreement, MGE Energy
has committed $0.5 million to this venture debt fund. The timing of infusions is
dependent on the needs of the venture debt fund and is therefore uncertain at
this time.  ATC Capital Commitment - MGE Energy and
MGE.  On March 18, 2008, MGE Transco elected to participate in
a voluntary capital call for ATC. As a result, MGE Transco contributed $1.3
million to ATC in April 2008. Furthermore, MGE Transco has been informed that
ATC will be requesting additional capital contributions in 2008. These
additional capital contributions are voluntary and as of March 31, 2008, MGE
Transco has not committed to participating in these additional voluntary capital
contributions. However, it is likely that MGE Transco will elect to participate
in these additional voluntary capital contributions.  There were no other material changes, other than from the
normal course of business, to MGE Energy's and MGE's contractual obligations
(representing cash obligations that are considered to be firm commitments) and
commercial commitments (representing commitments triggered by future events)
during the three months ended March 31, 2008. Further discussion of the
contractual obligations and commercial commitments is included in Footnote 10 of
this filing and Footnote 18 in MGE Energy's and MGE's annual reports on Form
10-K for the year ended December 31, 2007.  Liquidity and
Capital Resources  Cash Flows  The following summarizes cash flows during the three
months ended March 31, 2008 and 2007, respectively:  MGE
Energy

MGE(In thousands)
2008
2007

2008
2007Cash provided
by/(used for):Operating
activities
$
45,777
$
35,328

$
45,405
$
35,335Investing
activities
(28,109)
(22,530)

(28,119)
(22,407)Financing
activities
(18,252)
(11,281)

(17,949)
(12,004)  Cash Provided by Operating Activities  MGE Energy  MGE Energy's consolidated net cash provided by operating
activities is derived mainly from the electric and gas operations of its
principal subsidiary, MGE.  Cash provided by operating activities for the three
months ended March 31, 2008, was $45.8 million, an increase of $10.4 million
when compared to the same period in the prior year.  MGE Energy's net income increased $1.5 million for the
three months ended March 31, 2008, when compared to the same period in the prior
year.  Depreciation for the three months ended March 31, 2008,
was $9.4 million compared to $8.1 million in the same period in the prior year.
This increase is primarily attributable to higher levels of assets, including
the Top of Iowa III wind-powered electric generating facility which was placed
in service in the first quarter of 2008 as well as accelerated depreciation of
certain Blount assets. For additional information on the Blount accelerated
depreciation, see Footnote 11.  Working capital accounts contributed to $27.2 million in
cash provided by operating activities for the three months ended March 31, 2008,
compared to $19.2 million during the same period in the prior year. This
increase of $8.0 million is primarily related to the change in accounts payable
and stored natural gas. These changes resulted in additional cash provided by
operating activities in the three months ended March 31, 2008, compared to the
three months ended March 31, 2007.  During the three months ended March 31, 2008 and 2007,
MGE Energy made $5.9 million and $4.8 million, respectively, in discretionary
contributions to the pension and other postretirement plans. See Footnote 8 for
further discussion of MGE Energy's Pension and Other Postretirement
Benefits.  MGE  Cash provided by operating activities for the three
months ended March 31, 2008, was $45.4 million, an increase of $10.1 million
when compared to the same period in the prior year.  Depreciation for the three months ended March 31, 2008,
was $9.4 million compared to $8.1 million in the same period in the prior year.
This increase is primarily attributable to higher levels of assets, including
the Top of Iowa III wind-powered electric generating facility which was placed
in service in the first quarter of 2008 as well as accelerated depreciation of
certain Blount assets. For additional information on the Blount accelerated
depreciation, see Footnote 11.  Working capital accounts contributed to $27.2 million in
cash provided by operating activities for the three months ended March 31, 2008,
compared to $19.4 million during the same period in the prior year. This
increase of $7.9 million is primarily related to the change in accounts payable
and stored natural gas. These changes resulted in additional cash provided by
operating activities in the three months ended March 31, 2008, compared to the
three months ended March 31, 2007.  During the three months ended March 31, 2008 and 2007,
MGE made $5.9 million and $4.8 million, respectively in discretionary
contributions to the pension and other postretirement plans. See Footnote 8 for
further discussion of MGE's Pension and Other Postretirement Benefits.  Cash Used for Investing Activities  MGE Energy  MGE Energy's cash used for investing activities increased
$5.6 million for the three months ended March 31, 2008, when compared to the
same period in the prior year.  Capital expenditures for the three months ended March 31,
2008, were $28.5 million. This amount represents a $4.7 million increase from
the expenditures made in the same period in the prior year. This increase is
related to increased construction activity for Elm Road of $3.0 million, $1.2
million in capital expenditures for the Top of Iowa III wind generation project,
and $0.6 million in other utility capital expenditures. These increases were
partially offset by a decrease of $0.1 million in capital expenditures related
to WCCF.  During both the three months ended March 31, 2008 and
2007, MGE Energy did not make any cash capital contributions to ATC. However,
during the three months ended March 31, 2007, MGE (through MGE Transco)
transferred $1.4 million in certain transmission assets to ATC. In exchange for
this transfer, MGE Transco received $0.7 million in cash proceeds and $0.7
million in an additional investment in ATC.  During the three months ended March 31, 2008, proceeds
from the sale of property were $0.3 million. These proceeds primarily relate to
the sale of non-utility property.  MGE  MGE's cash used for investing activities increased $5.7
million for the three months ended March 31, 2008, when compared to the same
period in the prior year.  Capital expenditures for the three months ended March 31,
2008, were $28.5 million. This amount represents a $4.7 million increase from
the expenditures made in the same period in the prior year. This increase is
related to increased construction activity for Elm Road of $3.0 million, $1.2
million in capital expenditures for the Top of Iowa III wind generation project,
and $0.6 million in other utility capital expenditures. These increases were
partially offset by a decrease of $0.1 million in capital expenditures related
to WCCF.  During both the three months ended March 31, 2008 and
2007, MGE did not make any cash capital contributions to ATC. However, during
the three months ended March 31, 2007, MGE (through MGE Transco) transferred
$1.4 million in certain transmission assets to ATC. In exchange for this
transfer, MGE Transco received $0.7 million in cash proceeds and $0.7 million in
an additional investment in ATC.  During the three months ended March 31, 2008, proceeds
from the sale of property were $0.3 million. These proceeds primarily relate to
the sale of non-utility property.  Cash Used for Financing Activities  MGE Energy  Cash used for MGE Energy's financing activities was $18.3
million for the three months ended March 31, 2008, compared to $11.3 million for
the three months ended March 31, 2007.  MGE Energy received $3.6 million and $6.0 million in cash
proceeds as the result of stock issued during the three months ended March 31,
2008 and 2007, respectively.  For the three months ended March 31, 2008, net short term
debt repayments were $14.0 million compared to $10.0 million for the same period
in the prior year.  On March 31, 2008, MGE's $20 million unsecured line of
credit expired. Aggregate commitments on bank lines of credit for MGE Energy and
its subsidiaries as of March 31, 2008, were $135.0 million. As of March 31,
2008, outstanding borrowings on such lines of credit totaled $89.5 million, and
$45.5 million was available for borrowing.  MGE  During the three months ended March 31, 2008, cash used
for MGE's financing activities was $17.9 million compared to $12.0 million in
the same period in the prior year.  No cash dividends were paid from MGE to MGE Energy for
the three months ended March 31, 2008. For the three months ended March 31,
2007, cash dividends made from MGE to MGE Energy were $6.6 million.  For the three months ended March 31, 2008, net short term
debt repayments were $27.0 million compared to $14.5 million for the same period
in the prior year.  On March 31, 2008, MGE's $20 million unsecured line of
credit expired. Aggregate commitments on bank lines of credit for MGE as of
March 31, 2008, were $55.0 million. As of March 31, 2008, outstanding borrowings
on such lines of credit totaled $34.0 million, and $21.0 million was available
for borrowing.  Capitalization Ratios  MGE Energy's capitalization ratios were as follows:  MGE
EnergyMarch 31,
2008

Dec. 31,
2007Common
shareholders' equity
55.4%

53.9%Long-term
debt*
33.3%

33.1%Short-term
debt
11.3%

13.0%*Includes the
current portion of long-term debt  MGE Energy's and MGE's Capital Requirements  As of March 31, 2008, MGE and MGE Energy had a working
capital deficit (current liabilities exceeded current assets). This deficit is
in part due to MGE currently funding the majority of its capital commitments for
the Top of Iowa III wind project and the Elm Road project with short-term debt
and the reclassification of $30.0 million of long-term debt which matures in
September 2008, from a long-term to a current liability. MGE intends to
refinance the $30 million medium-term note with an additional long-term debt
facility. MGE intends to fund future capital commitments for the Elm Road
projects with funds generated from normal operations, the issuance of long-term
debt, and financing received from MGE Energy. MGE Energy intends to raise the
funds for such financing primarily through the issuance of equity securities and
short-term debt, as needed.  MGE Energy's and MGE's liquidity are primarily affected
by their capital requirements. During the three months ended March 31, 2008,
capital expenditures for MGE Energy and MGE totaled $28.5 million, which
included $15.6 million of capital expenditures for Elm Road, $0.1 million of
capital expenditures for MGE Power West Campus, $2.0 million for the Top of Iowa
III wind project, and $10.8 million of capital expenditures for other utility
operations.  The following table shows MGE's current credit ratings.
MGE Energy is not yet rated because it has not issued any debt securities.  Standard & Poor's
Moody'sFirst Mortgage
Bonds
Unsecured Medium
Term Notes
Commercial
Paper
AA-
AA-
A1+
Aa2
Aa3
P1  MGE's access to the capital markets, including the
commercial paper market and its financing costs in those markets, is dependent
on its securities' ratings. None of MGE's borrowings is subject to default or
prepayment due to downgrading of securities' ratings, although MGE's future
interest expense may be affected by a change in those ratings.  Environmental Matters  The following discussion is limited to updates or
developments in environmental matters that occurred during the three months
ended March 31, 2008. Further discussion of environmental matters is included in
MGE Energy's and MGE's annual reports on Form 10-K for the year ended December
31, 2007.  State mercury rules  In February 2008, the WDNR proposed new revisions to the
state mercury rules under NR 446. The state's proposed rule is significantly
different from the federal CAMR that was vacated in February 2008 by the U.S.
Court of Appeals for the District of Columbia Circuit. See Item 1. Business in
MGE Energy's and MGE's annual reports on Form 10-K for the year ended December
31, 2007, for additional discussion of the federal CAMR. The WDNR's proposed
rule would require large coal fired electric generating units ("EGUs" larger
than 150 MW) to either reduce mercury by 90% (or 0.008 lbs/GW-hr) by 2015, or
alternatively, achieve these same mercury reductions by 2023 while meeting
NOX and SO2 rate requirements. If this proposal becomes a
rule, it will potentially increase capital and operating costs for Columbia,
Blount and Elm Road. However, it is unknown at this time what those additional
costs would be.  Federal National Ambient Air Quality
Standards  On March 12, 2008, the U.S. EPA announced a new national
ambient air quality standard for ozone which is more stringent than the current
standard (standard lowered from 0.08 to 0.0750 parts per million). States
(including Wisconsin) must monitor and collect data on ozone levels in order to
determine attainment or nonattainment status on a county and/or area basis.
Currently available monitoring data for Dane and Columbia counties demonstrates
attainment with this new standard. However, final attainment designations will
not be made until 2010 using the monitoring data collected during the period
2007 through 2009. There is a possibility that future monitoring data for one or
both of these counties will demonstrate nonattainment for this new ozone
standard which could result in additional operating and capital expenditures at
Columbia (located in Columbia county) and Blount (located in Dane county).
Similarly, new standards for particulate emissions under 2.5 microns and
monitoring data may result in a nonattainment designation for Dane county for
particulate emissions which could also result in increased expenditures at
Blount.  Global Climate Change  On March 27, 2008, the U.S. EPA sent letters to various
environmental committees in the U.S. Senate and House of Representatives
announcing their plans to address their obligations under the Supreme Court's
ruling in Massachusetts v. EPA. The letters to congress indicated that
the EPA sees any Green House Gas regulations that they develop to be
far-reaching and likely to include both mobile and stationary sources. EPA also
announced their intent to solicit public comment on the regulation on GHG
emissions through an Advance Notice of Proposed Rulemaking later this
spring.  WPDES permit  On November 29, 2007, the Administrative Law Judge (the
"ALJ") in the proceeding related to the previously issued Wisconsin Pollution
Discharge Elimination System ("WPDES") permit determined that the two additional
coal units that are part of the Oak Creek expansion are "new facilities" under
Section 316(b) of the Federal Clean Water Act.  The ALJ did not vacate the WPDES permit or any other
permit necessary to continue construction of the two additional coal units,
pointing out that, based upon the present record, the water intake system
currently under construction as part of the Oak Creek expansion may be
permittable under the standards that apply to new facilities.  The ALJ remanded the WPDES permit to the Wisconsin
Department of Natural Resources (the "WDNR") and directed the WDNR to reissue or
modify the permit to reflect "best technology available" to comply with the
standards applicable to new facilities under Wisconsin state law. As part of the
decision, the ALJ restated his prior opinion that the water intake system
currently under construction may not be operated so long as it remains a
contested matter. The ALJ's ruling was appealed to circuit court, but the court
dismissed the appeal on February 11, 2008, on the grounds that the ALJ decision
was not a final order and further ruled that all issues decided by the ALJ may
be judicially reviewed when there is a final decision.  The plant operator has advised us that there are
alternatives under the United States Environmental Protection Agency's (the
"EPA") rule for new facilities that would permit the use of the once-through
cooling system rather than the use of cooling towers. The operator has requested
the WDNR to issue a modified permit and has submitted additional information to
the WDNR supporting the request for approval of the once-through cooling system
under this rule. The operator anticipates the WDNR will complete the WPDES
permit modification process in the first half of 2008. A reissued permit would
be subject to public comment and possible administrative and legal review. We
cannot predict the timing or results, or the effect upon construction schedule
or costs, of any decision by the WDNR or any administrative or legal process
that may follow.  While the process for modifying the WPDES permit
proceeds, construction of the additional coal units continues on the current
schedule.  Columbia  MGE and two other utilities jointly own Columbia, a
coal-fired generating facility, which accounts for 225 MW (29%) of MGE's net
generating capability. Various initiatives including, but not limited to, the
CAIR, CAMR, MACT standards, and existing and proposed state mercury emissions
limits, are expected to result in significant additional operating and capital
expenditures at Columbia. The operator's current estimates show that MGE's share
of the capital expenditures required to comply with these environmental
initiatives will be between $130 million and $200 million. According to current
estimates, compliance with these initiatives is also expected to result in an
increase to MGE's pro-rata share of Columbia's on-going operating expenses. The
operator and MGE management are continuing to explore various alternatives to
comply with these standards. Accordingly, actual capital expenditures may fall
above or below the range provided. MGE expects that the costs to comply with
these standards will be fully recoverable through rates.  On April 30, 2008, the Circuit Court in Columbia County,
Wisconsin entered judgment and approved a Stipulation and Order for Judgment
(Stipulation) entered into by the State of Wisconsin and WPL, the operating
owner of Columbia and the other Columbia owners, including MGE, to address a
failure by the plant operator to file with the WDNR a timely application to
renew an air permit for Columbia. The Stipulation was agreed to in response to a
referral of enforcement action from the WDNR to the Wisconsin Attorney General
following the previously announced notice of intent to sue alleging that the
operator did not timely file its application for renewal of an air permit for
Columbia and, thus, alleging that Columbia was operating without the necessary
air permit. The Stipulation requires the operator to pay $285,000 in penalties
and charges and to establish an environmental management system at Columbia to
address environmental compliance matters, but allows the continued operation of
Columbia in accordance with the terms and conditions of the expired air permit
until a renewed permit is issued. The Stipulation bars any further action
against the Columbia owners by the State of Wisconsin on this matter.  Restructuring Activities  On January 19, 2006, MGE announced a plan, subject to
certain conditions, that includes discontinuing coal use at the end of 2011 at
Blount. The plant will continue to run on natural gas but will be reduced from
its current approximate 190 MW capacity to 100 MW when coal burning is
discontinued. MGE has determined that certain employee positions will be
eliminated in 2011 as a result of this exit plan.  MGE has entered into severance agreements providing
severance benefits to the nonunion employees affected by the exit plan.
Additionally, MGE ratified a labor agreement with the IBEW providing those union
employees affected by the exit plan with involuntary and voluntary severance
benefits. The nonunion and union benefits are expected to be paid follows: $0.2
million in 2010 and $1.3 million in 2011.  MGE will recover in rates the costs associated with the
discontinuance of coal at Blount. As such, the severance charges for these
employees have been deferred and recognized on the consolidated balance sheet of
MGE Energy and MGE as a regulatory asset.  Other Regulatory Matters  Fuel surcharge  On March 31, 2008, MGE filed an application with the PSCW
requesting a surcharge on its electric rates to cover increased fuel and
purchased power costs. In its application to the PSCW, MGE stated that actual
January and February fuel costs exceeded the monthly fuel rules bandwidth.
Additionally, MGE reported that annual fuel costs per kWh, computed based on
actual results for January and February and revised forecasts for the remainder
of the year, exceeded the annual fuel rules bandwidth. On May 5, 2008, the PSCW
approved a $0.00239 per kWh interim fuel surcharge on MGE's electric rates. This
interim fuel surcharge will result in an estimated $8.0 million increase in
electric revenues on an annual basis. The interim fuel surcharge was included in
electric rates as of May 6, 2008. Pursuant to the provisions of this interim
order, MGE's electric revenues resulting from this interim surcharge are subject
to refund with interest at 10.8% should it ultimately be determined that the
interim fuel surcharge resulted in collections greater than actual costs.  New Accounting
Principles  Pension Protection Act  During the third quarter of 2006, President Bush signed
into law the Pension Protection Act of 2006, which will affect the manner in
which companies, including MGE and MGE Energy, administer their pension plans.
This legislation will require companies to, amongst other things, increase the
amount by which they fund their pension plans, pay higher premiums to the
Pension Benefit Guaranty Corporation if they sponsor defined benefit plans,
amend plan documents and provide additional plan disclosures in regulatory
filings and to plan participants. This legislation became effective as of
January 1, 2008. The U.S. Treasury Department's interim guidance indicates that
further guidance is forthcoming. MGE does not expect significant changes in
expected cash flows as a result of the Act. Absent changes in plan design as a
result of the Act, the Act is not expected to materially impact MGE and MGE
Energy's results of operations.  FSP FIN 39-1  In April 2007, the FASB issued FSP 39-1, Amendment of
FASB Interpretation No. 39 (FSP FIN 39-1).This pronouncement
amends FIN 39, Offsetting of Amounts Related to Certain Contracts, and
allows companies to offset fair value amounts recognized for the right to
reclaim cash collateral (a receivable) or the obligation to return cash
collateral (a payable)against fair value amounts recognized for
derivative instruments executed with the same counterparty under a master
netting agreement. MGE and MGE Energy elected the net presentation as prescribed
by this pronouncement. FSP FIN 39-1 became effective for MGE and MGE Energy as
of January 1, 2008. The effects of applying this pronouncement shall be
recognized as a change in accounting principle through retroactive application
for all financial statements presented. The adoption of this pronouncement did
not have any impact on MGE or MGE Energy's net income. At March 31, 2008, MGE
Energy and MGE did not have any cash collateral to net against the net
derivative positions with counterparties.  FAS 160 and FAS 141(R)  In December 2007, the FASB issued FAS 160,
Non-Controlling Interests in Consolidated Financial Statements, an amendment
of ARB No. 51and FAS 141(R), Business Combinations. These
pronouncements will change the accounting and reporting for business
acquisitions and noncontrolling interest in a subsidiary. In addition, FAS 160
will change the accounting and reporting for the deconsolidation of a
subsidiary. FAS 160 and FAS 141(R) will be effective for MGE and MGE Energy as
of January 1, 2009. MGE and MGE Energy are currently assessing the impact these
pronouncements will have on their financial statements.  FAS 161  In March 2008, the FASB issued FAS 161, Disclosures
about Derivative Instruments and Hedging Activities. The new standard is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance, and cash flows. It is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
adoption allowed. MGE and MGE Energy have elected not to early adopt this
pronouncement. Therefore, FAS 161 will be effective for MGE and MGE Energy as of
January 1, 2009. MGE and MGE Energy are currently assessing the impact this
pronouncement will have on their financial statements.   Item 3.
Quantitative and Qualitative Disclosures About Market Risk.  MGE Energy and MGE are potentially exposed to market risk
associated with interest rates, commodity prices, weather, and equity returns.
MGE currently has no exposure to foreign currency risk. MGE manages some risk
exposure through risk management policies and uses derivative instruments. MGE's
market risk has not changed between 2007 and 2008. MGE does not enter into
speculative trading transactions.  Weather Risk  MGE's sales forecasts, used to establish rates, are set
by the PSCW based upon estimated temperatures, which approximate 20-year
averages. MGE's electric revenues are sensitive to the summer cooling season
and, to some extent, to the winter heating season. A significant portion of
MGE's gas system demand is driven by heating. MGE's gas margin (revenues less
gas purchased) is collected under a combination of fixed and volumetric rates
set by the PSCW based on "normal weather." As a result of weather-sensitive
demand and volumetric rates, a portion of MGE's gas margin is at risk for
warmer-than-normal weather. MGE may use weather derivatives, pursuant to its
risk management program, to reduce the impact of weather volatility on its gas
margin.  MGE may also be impacted by extreme weather conditions
such as hurricanes or tornados. Such conditions may damage critical operating
assets or may negatively impact the price of commodity and other costs.  A summary of actual weather information in the utility
segment's service territory during the three months ended March 31, 2008, as
measured by degree days, may be found in results of operations.  Commodity Price Risk  MGE has commodity price risk exposure with respect to the
price of natural gas, electricity, coal, emission credits, and oil. MGE employs
established policies and procedures to reduce the market risks associated with
changing commodity prices. MGE's commodity risks are somewhat mitigated by the
current ratemaking process in place for recovering electric fuel cost, purchased
energy costs, and the cost of natural gas. MGE's electric fuel costs are subject
to fuel rules established by the PSCW.  MGE's electric operations burn natural gas in several of
its peak power plants or as a supplemental fuel at several coal-fired plants
and, in many cases, the cost of purchased power is tied to the cost of natural
gas. MGE bears significant regulatory risk for the recovery of such fuel and
purchased power costs when they are higher than the base rate established in its
current rate structure. Under the electric fuel rules, MGE may be required to
refund to customers if its actual fuel costs fall outside the lower end of the
range and would be allowed to request a surcharge if those actual fuel costs
exceed the upper end of the range. The range is defined by the PSCW and has been
modified throughout the years based on market conditions and other relevant
factors. Pursuant to the PSCW order issued on December 14, 2007, MGE's electric
fuel rules monitored range is a plus or minus 2% range. MGE assumes the risks
and benefits of variances that are within the 2% bandwidth. For 2008, fuel and
purchased power costs included in MGE's base fuel rates are $119.1 million. See
Footnote 14.b. for additional information. MGE's gas segment is governed by the
purchased gas adjustment clause (PGA). Under the PGA, MGE is able to pass
through to customers the cost of gas, subject to certain limited incentives.
Under both the electric fuel rules and PGA clause, MGE may include in the cost
of fuel (natural gas or power) the costs and benefits of fuel price risk
management tools implemented under the risk management plan approved by the
PSCW.  MGE also reduces price risk caused by market fluctuations
via physical contracts and financial contracts, including futures, swaps,
options, and forwards. Under MGE's risk management plan, the maximum length of
time over which cash flows related to energy commodities, except for the
ten-year purchased power agreement described below, are currently being
cash-flow hedged is one year.  At March 31, 2008, MGE has financial gas and electric
commodity contracts to hedge commodity price risk in the gas and electric
segments. These contracts are primarily comprised of exchange-traded option and
future contracts to manage the cost of gas. MGE also holds FTRs which are used
to hedge the risk of increased electric transmission congestion charges. At
March 31, 2008, the net market value of all these aforementioned instruments
exceeded their costs by $4.6 million.  MGE has also entered into a ten-year purchased power
agreement which provides MGE with firm capacity and energy beginning June 12,
2012, and ending on May 31, 2022 (the "base term"). The agreement also allows
MGE the option to purchase power during a period of time preceding the base term
as well as an option to extend the contract after the base term. The agreement
is a derivative contract and is recognized at its fair value on the balance
sheet. The fair value of the contract at March 31, 2008, is $0.1 million.  Interest Rate Risk  Both MGE and MGE Energy have short term borrowings at
varying interest rates. MGE issues commercial paper for its short-term
borrowings, while MGE Energy draws from its current credit facility to meet its
short term borrowing needs. Borrowing levels vary from period to period
depending upon capital investments and other factors. Future short-term interest
expense and payments will reflect both future short-term interest rates and
borrowing levels. MGE Energy and MGE manage interest rate risk by limiting their
variable rate exposure and continually monitoring the effects of market changes
on interest rates. MGE is not exposed to changes in interest rates on a
substantial portion of its long-term debt until that debt matures and is
refinanced at market rates.  Equity Price Risk - Pension-Related Assets  MGE currently funds its liabilities related to employee
benefits through trust funds. These funds, which include investments in debt and
equity securities, are managed by various investment managers. Changes in market
value of these investments can have an impact on the future pension and
postretirement expenses.  Credit Risk - Counterparty  Credit risk is the loss that may result from counterparty
nonperformance. MGE is exposed to credit risk primarily through its merchant
energy business. MGE uses credit policies to manage its credit risk, which
includes utilizing an established credit approval process, monitoring
counterparty limits, employing credit mitigation measures such as collateral or
prepayment arrangements, and using netting agreements.  Due to the possibility of extreme volatility in the
prices of energy commodities and derivatives, the market value of contractual
positions with individual counterparties could exceed established credit limits
or collateral provided by those counterparties. If such a counterparty were then
to fail to perform its obligations under its contract (for example, fail to
deliver the electricity MGE originally contracted for), MGE could sustain a loss
that could have a material impact on its financial results.  Additionally, if a counterparty were to default and MGE
were to liquidate all contracts with that entity, MGE's credit loss would
include the loss in value of mark-to-market contracts; the amount owed for
settled transactions; and additional payments, if any, to settle unrealized
losses on accrual contracts.  MGE is obligated to provide service to all electric and
gas customers within its respective franchised territories. MGE's franchised
electric territory includes a 315 square-mile area in Dane County, Wisconsin,
and MGE's franchised gas territory includes a service area covering 1,625 square
miles in Wisconsin. Based on results for the year ended December 31, 2007, no
one customer constituted more than 7% of total operating revenues for MGE and
MGE Energy. Credit risk for electric and gas is managed by MGE's credit and
collection policies, which are consistent with state regulatory
requirements.  Cash, cash equivalents, and customer accounts receivable
are the financial instruments that potentially subject MGE Energy and MGE to
concentrations of credit risk. MGE Energy and MGE place their cash and cash
equivalents with high credit-quality financial institutions. MGE has limited
concentrations of credit risk from customer accounts receivable because of the
large number of customers and strong economy in its service territory.   Item 4. Controls
and Procedures.  During the first quarter of 2008, MGE Energy's
management, including the principal executive officer and principal financial
officer, evaluated its disclosure controls and procedures related to the
recording, processing, summarization, and reporting of information in its
periodic reports that it files with the SEC. These disclosure controls and
procedures have been designed to ensure that material information relating to
MGE Energy, including its subsidiaries, is accumulated and made known to MGE
Energy's management, including these officers, by other employees of MGE Energy
and its subsidiaries as appropriate to allow timely decisions regarding required
disclosure, and that this information is recorded, processed, summarized,
evaluated, and reported, as applicable, within the time periods specified in the
SEC's rules and forms. Due to the inherent limitations of control systems, not
all misstatements may be detected. These inherent limitations include the
realities that judgments in decision making can be faulty and breakdowns can
occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. Also, MGE Energy does not
control or manage certain of its unconsolidated entities and thus, its access
and ability to apply its procedures to those entities is more limited than is
the case for its consolidated subsidiaries.  As of March 31, 2008, the principal executive officer and
the principal financial officer concluded that MGE Energy's disclosure controls
and procedures were effective to accomplish their objectives. MGE Energy intends
to continually strive to improve its disclosure controls and procedures to
enhance the quality of its financial reporting.  During the quarter ended March 31, 2008, there were no
changes in MGE Energy's internal controls over financial reporting that
materially affected, or are reasonably likely to materially affect, MGE Energy's
internal control over financial reporting.   Item 4T. Controls
and Procedures.  During the first quarter of 2008, MGE's management,
including the principal executive officer and principal financial officer,
evaluated its disclosure controls and procedures related to the recording,
processing, summarization, and reporting of information in its periodic reports
that it files with the SEC. These disclosure controls and procedures have been
designed to ensure that material information relating to MGE, including its
subsidiaries, is accumulated and made known to MGE's management, including these
officers, by other employees of MGE and its subsidiaries as appropriate to allow
timely decisions regarding required disclosure, and that this information is
recorded, processed, summarized, evaluated, and reported, as applicable, within
the time periods specified in the SEC's rules and forms. Due to the inherent
limitations of control systems, not all misstatements may be detected. These
inherent limitations include the realities that judgments in decision making can
be faulty and breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
control. Also, MGE does not control or manage certain of its unconsolidated
entities and thus, its access and ability to apply its procedures to those
entities is more limited than is the case for its consolidated subsidiaries.  As of March 31, 2008, the principal executive officer and
the principal financial officer concluded that MGE's disclosure controls and
procedures were effective to accomplish their objectives. MGE intends to
continually strive to improve its disclosure controls and procedures to enhance
the quality of its financial reporting.  During the quarter ended March 31, 2008, there were no
changes in MGE's internal control over financial reporting that materially
affected, or are reasonable likely to materially affect, MGE's internal control
over financial reporting.   PART II. OTHER
INFORMATION.   Item 1. Legal
Proceedings.  MGE Energy and MGE MGE Energy and MGE from time to time are involved in
various legal proceedings that are handled and defended in the ordinary course
of business. While MGE Energy and MGE are unable to predict the outcome of these
matters, management does not believe, based upon currently available facts, that
the ultimate resolution of any of such proceedings would have a material adverse
effect on their overall financial condition or results of operations except as
disclosed in MGE Energy's and MGE's annual report on Form 10-K for the year
ended December 31, 2007. See Note 10 of Notes to Consolidated Financial
Statements in this report for further information regarding lawsuits and
proceedings.   Item 6.
Exhibits.  12 Statement regarding computation of
ratio of earnings to fixed charges for Madison Gas and Electric Company  Certifications Pursuant to Rule 13a-14(a) and 15d-14(a)
of the Securities and Exchange Act of 1934 as to the Quarterly Report on Form
10-Q for the quarter ended March 31, 2008, filed by the following officers for
the following companies:  31.1 Filed by Gary J. Wolter for MGE
Energy, Inc. 31.2 Filed by Terry A. Hanson for MGE
Energy, Inc. 31.3 Filed by Gary J. Wolter for Madison
Gas and Electric Company 31.4 Filed by Terry A. Hanson for Madison
Gas and Electric Company  Certifications Pursuant to Section 1350 of Chapter 63 of
Title 18 United States Code (Sarbanes-Oxley Act of 2002) as to the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2008, filed by the following
officers for the following companies:  32.1 Filed by Gary J. Wolter for MGE
Energy, Inc. 32.2 Filed by Terry A. Hanson for MGE
Energy, Inc. 32.3 Filed by Gary J. Wolter for Madison
Gas and Electric Company 32.4 Filed by Terry A. Hanson for Madison
Gas and Electric Company  Signatures - MGE Energy, Inc.  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 hereunto duly authorized.  MGE ENERGY, INC.Date: May 7, 2008
/s/ Gary J. WolterGary J. Wolter
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)Date: May 7, 2008
/s/ Terry A. HansonTerry A. Hanson
Vice President, Chief Financial Officer and
Secretary
(Chief Financial and Accounting
Officer)  Signatures - Madison Gas and Electric
Company  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 hereunto duly authorized.  MADISON GAS AND ELECTRIC COMPANYDate: May 7, 2008
/s/ Gary J. WolterGary J. Wolter
Chairman, President and Chief Executive Officer
(Duly Authorized Officer)Date: May 7, 2008
/s/ Terry A. HansonTerry A. Hanson
Vice President, Chief Financial Officer and
Secretary
(Chief Financial and Accounting
Officer)