MGE Energy (MGEE)

Interest Expense

For the year-ended December 31, 2006, total interest expense for the electric and gas segments increased $1.2 million when compared to the same period in the prior year. For the year ended December 31, 2006, there was a $1.3 million increase in interest expense on short-term debt at the electric and gas segments as a result of increased interest rates and higher levels of short-term debt for much of the year. These increases were offset by a $0.1 million increase in AFUDC-debt income at the electric and gas segments.

Interest
Expense

For the
year-ended December 31, 2006, total interest expense for the electric and
gas segments increased $1.2 million when compared to the same period in the
prior year. For the year ended December 31, 2006, there was a
$1.3 million increase in interest expense on short-term debt at the
electric and gas segments as a result of increased interest rates and higher
levels of short-term debt for much of the year. These increases were offset by a
$0.1 million increase in AFUDC-debt income at the electric and gas
segments.

Interest Expense

For the nine months ended September 30, 2007, total interest expense for the electric and gas segments decreased $0.1 million when compared to the same period in the prior year. This change includes an increase in interest income and a shift in the composition of debt. Namely, during the nine months ended September 30, 2007, there was a $0.3 million increase in AFUDC-debt, a $0.2 million increase in other interest income, and a $0.8 million decrease in interest expense on short-term debt, when compared to the same period in the prior year. These decreases in interest expense were partially offset by a $1.2 million increase in interest expense on long-term debt. This increase relates primarily to interest incurred on the 5.25% Medium Term Notes, issued on December 29, 2006 ($1.2 million).

Interest Expense

For the six months ended June 30, 2007, total interest expense for the electric and gas segments decreased $0.2 million when compared to the same period in the prior year. This change includes an increase in interest income and a shift in the composition of debt. Namely, during the six months ended June 30, 2007, there was a $0.1 million increase in AFUDC-debt, a $0.2 million increase in other interest income, and a $0.7 million decrease in interest expense on short-term debt, when compared to the same period in the prior year. These decreases in interest expense were partially offset by a $0.8 million increase in interest expense on long-term debt.

Interest Expense

For the three months ended March 31, 2007, total interest expense for the electric and gas segments decreased $0.1 million when compared to the same period in the prior year. This change includes an increase in interest income and a shift in the composition of debt. Namely, during the three months ended March 31, 2007, there was a $0.1 million increase in AFUDC-Debt, a $0.1 million increase in other interest income, and a $0.3 million decrease in interest expense on short-term debt, when compared to the same period in the prior year. These decreases in interest expense were partially offset by a $0.4 million increase in interest expense on long-term debt.

Interest Expense

For the year-ended December 31, 2005, total interest expense for the electric and gas segments increased $0.7 million when compared to the same period in the prior year. For the year ended December 31, 2005, there was a $0.9 million increase in interest expense on short-term debt at the electric and gas segments as a result of increased levels of short-term debt. These increases were offset by a $0.2 million decrease in interest expense on long-term debt at the electric and gas segments.

Interest Expense

For the nine months ended September 30, 2006, total interest expense for the electric and gas segments increased $1.2 million when compared to the same period in the prior year. This increase represents an increase in interest expense on short-term debt at the electric and gas segments as a result of increased levels of short-term debt.

Interest Expense

For the six months ended June 30, 2006, total interest expense for the electric and gas segments increased $0.9 million when compared to the same period in the prior year. For the six months ended June 30, 2006, there was a $0.7 million increase in interest expense on short-term debt at the electric and gas segments as a result of increased levels of short-term debt and a $0.2 million increase in interest expense on long-term debt at the electric and gas segments.

Interest Expense

For the three months ended March 31, 2006, total interest expense for the electric and gas segments increased $0.5 million when compared to the same period in the prior year. For the three months ended March 31, 2006, there was a $0.3 million increase in interest expense on short-term debt at the electric and gas segments as a result of increased levels of short-term debt and a $0.2 million increase in interest expense on long-term debt at the electric and gas segments.

Interest Expense

For the year ended December 31, 2004, interest expense at the electric and gas segments decreased $0.9 million, compared to the same period in the prior year. This decrease is due to a $0.7 million decrease on interest expense incurred by the gas and electric segments on long-term debt. This is a result of lower levels of long-term debt outstanding during the third and fourth quarters. Additionally, there was a $0.2 million decrease in interest expense on short-term debt expense incurred by the gas and electric segments. During the latter portion of 2004, there were lower levels of short-term debt as a result of the proceeds raised in the equity offering.