1161728--2/26/2007--MGE_ENERGY

related topics

{condition, economic, financial}

{cost, contract, operation}

{gas, price, oil}

{cost, regulation, environmental}

{operation, natural, condition}

{debt, indebtedness, cash}

We are subject to extensive government regulation in our business, which affects our costs and responsiveness to changing events and circumstances. We face risk for the recovery of fuel and purchased power costs when they exceed the base rate established in MGE's current rate structure. We are subject to environmental laws and regulations which affects our costs and business plans. Our business may be negatively affected by the restructuring of the energy industry. We are affected by weather, which affects customer demand and can affect the operation of our facilities. We are affected by economic activity within our service area. Our ability to manage our purchased power costs is influenced by a number of uncontrollable factors. Our financial performance depends on the equipment and facilities in our distribution system being operational. We face construction risk in connection with the completion of several generating units. We are exposed to commodity price risk relating to our purchases of natural gas, electricity, coal and oil. We are exposed to interest rate risk. Market performance affects our employee benefit plan asset values. We are exposed to credit risk primarily through our regulated energy business. As a holding company, we are dependent on upstream cash flows from our subsidiaries for the payment of dividends on our common stock.

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1161728--2/26/2007--MGE_ENERGY_INC