Environmental Responsibility Report

your community energy company Environmental Responsibility Report Madison Gas and Electric Company

Table of contents Executive summary.................................................................................... 3 Maximizing environmental performance..................................................... 4 Working with partners................................................................................ 6 Taking voluntary actions............................................................................. 8 Tapping technology.................................................................................. 10 Controlling air emissions.......................................................................... 12 Global climate change.............................................................................. 14 Power Tomorrow: Conservation tips.............................................................................. End Madison Gas and Electric (MGE) generates and distributes electricity to nearly 135,000 customers in Dane County, Wis., and purchases and distributes natural gas to more than 138,000 customers in seven south-central and western Wisconsin counties. MGE is a regulated utility and the main subsidiary of MGE Energy. MGE s roots in the state capital of Madison date back more than 150 years. Web address www.mge.com Mailing address P.O. Box 1231 Madison, WI 53701-1231 Location 133 S. Blair St. Madison, WI MGE Environmental Affairs environment@mge.com 608-252-7077 1-800-245-1125 MGE Energy Shareholder Services www.mgeenergy.com investor@mgeenergy.com 608-252-7077 1-800-356-6423 Forward-looking statements: This report includes forward-looking statements and estimates of future performance that may differ from actual results because of uncertainties and risks encountered in day-to-day business. 2

Executive summary A sustainable future is vital to all of us. Today s energy challenges require specific solutions for a cleaner tomorrow. At Madison Gas and Electric (MGE), we are developing those solutions. We are meeting today s challenge of balancing our customers increasing need for reliable, affordable energy while being responsible environmental stewards. Energy 2015 Our company is preparing for tomorrow s challenges with Energy 2015 a strategic plan to ensure a balanced, economic energy supply and reduced emissions. Under Energy 2015, we are: Increasing renewable energy sources. Three new wind farms coming online in 2007 and 2008 will increase MGE s wind capacity by nearly eight times from 11 to 86 megawatts. Replacing old coal power with new, cleaner coal generation. Challenging customers to increase their commitment to conservation. Demonstrating new technologies that help the environment. Overall emissions profile Despite growing demand by our electric customers, MGE anticipates our Energy 2015 plan will produce significantly Gary J. Wolter Chairman, President and Chief Executive Officer MGE Energy and MGE lower emission rates across the board. We expect the combination of more green energy, switching to new coal generation, greater customer conservation and new technologies to drive down emission rates for sulfur dioxide, nitrogen oxide, particulates and mercury by 2015. Global climate change Many of our customers are concerned about global climate change. We share that concern and have developed a carbon dioxide (CO2) reduction strategy. Under Energy 2015, MGE s CO2 impacts are projected to decline even though total system energy is estimated to increase. We project an 8% decrease for total CO2 emissions and a 10% decrease for CO2 rates from 2005 to 2015. In addition to MGE s carbon reduction strategy, we offer our customers tools to reduce their CO2 impacts. Through energy efficiency workshops, green Our company is preparing for tomorrow s challenges with Energy 2015 a strategic plan to ensure a balanced, economic energy supply and reduced emissions. energy programs and other MGE efforts, customers can take action. We are responsive and work with customers to improve our community s environmental footprint. Voluntary activities At MGE, we look for opportunities to challenge the status quo and pursue clean options. For example, MGE s Blount Generating Station is the first power plant in Wisconsin to receive ISO 14001 certification an internationally recognized environmental standard. We also join unique environmental partnerships such as the Dane County Clean Air Coalition. Working together MGE has stepped up efforts to reduce environmental impacts. We encourage you to do more, too. For steps you can take now, look for the Power Tomorrow conservation tips at the end of this report. Together, we can power tomorrow by being more energy efficient today. 3

Maximizing environmental performance MGE s environmental approach Environmental responsibility is part of our core business. We have implemented many initiatives to improve environmental performance, diversify MGE s energy portfolio and minimize negative environmental impacts. Our obligation is to deliver reliable and affordable energy to customers while protecting the environment. We work to incorporate the environment into our daily decision-making and put it in the forefront when planning for our customers energy future. We believe it is important to listen to our customers. Our customers values are reflected in MGE s long-term energy planning. We recently held Community Energy Conversations with customers across our service area. It was an open exchange about energy planning and the environmental tradeoffs. Our customers told us they want dependable energy at a reasonable price. They also want us to be environmentally conscious in our energy operations. These discussions helped form our Energy 2015 plan a balanced Searching for new opportunities West Campus Cogeneration Facility As our Energy 2015 plan was being drafted, we brought the West Campus Cogeneration Facility online in 2005. This 150-MW natural gas-fired power plant serves MGE customers with electricity and the UW-Madison campus with heating and cooling capacity. Through the efficiencies of cogeneration and state-of-theart emissions controls, it is one of the cleanest power plants in the Midwest. MGE seeks opportunities such as our West Campus Cogeneration Facility where we can pursue clean options and find ways to continuously improve our operations. MGE s wind capacity will grow by nearly eight times from 11 to 86 megawatts from three new projects that will be online in late 2007 or early 2008. and strategic energy supply plan that relies on a diversified mix of fuels, puts a renewed emphasis on energy conservation and helps reduce our overall emission rates. MGE s Energy 2015 plan Increasing renewable energy sources. Our wind capacity will grow by nearly eight times from 11 to 86 megawatts (MW) from three new projects that will be online in late 2007 or early 2008. A portion of this energy will be included in our overall electric mix. The other part will be used to more than triple the amount of renewable energy in our green pricing program. This allows more customers to take direct environmental action by purchasing renewable energy and offsetting greenhouse gas emissions from their homes or businesses. We also will introduce a program to encourage the installation of solar energy systems on customers homes and businesses. Replacing old coal power with new, cleaner coal generation. By the end of 2011, we plan to retire the coal-burning facilities at our Blount Generating Station in Madison. The plant 4

will continue to operate on natural gas. Capacity will be reduced from 190 to 100 MW. We will replace that electricity with cleaner coal generation. MGE is part owner of the power plant expansion by We Energies in Oak Creek, Wis. The additional generation units will use advanced environmental control technologies to dramatically reduce air emissions compared to older coal-fired plants. The first unit is scheduled to come online in 2009, the second in 2010. Challenging customers to increase their commitment to conservation. We are in the second year of our innovative Power Tomorrow program that encourages customers to save energy and money while reducing their environmental footprints. The centerpiece of Power Tomorrow is a series of energy efficiency workshops where customers receive customized information to reduce their energy use. Putting it all together We expect the combination of significantly more wind energy, retiring old coal-burning facilities and redoubling our energy efficiency efforts to result in a balanced and affordable energy supply while reducing air emission rates. MGE owns and operates a 17-turbine wind farm that was constructed in Kewaunee County in 1999. It produces enough clean energy to power 3,300 homes. Setting high standards Environmental Management System Our company is in the forefront by voluntarily implementing an Environmental Management System (EMS). A recent survey by the Edison Electric Institute (EEI) showed about 50% of the responding utilities have a formal EMS and only 35% participate in an independent environmental audit program. Our EMS is the backbone of sound environmental practices. The EMS builds environmental accountability into our daily business operations by establishing annual goals and measuring performance with audits reviewed by senior management. The company focuses on employee training, specific procedures, checklists and communications. MGE s EMS is based primarily on the International Standards Organization s 14001 standard. ISO 14001 requires independent recertification every three years. 5

Working with partners At MGE, we believe in the power of working together. We form partnerships with government and community groups to improve our local environment. By pooling resources, we reach more people with messages of energy conservation and a cleaner tomorrow. Together, we work as a community to meet energy needs in an environmentally responsible way. For example: Offering more clean energy Solar America Cities options Madison is one of 13 U.S. cities that will share $2.5 million in federal money to advance solar power projects. MGE is working with the city to use the new grant to encourage solar photovoltaic installations on homes and businesses. MGE will introduce a new program to encourage homeowners and business owners to install solar photovoltaic systems. Our pilot program allows these customers to sell the energy from these systems back to MGE. City of Madison: Clean Energy Challenge MGE joined the City of Madison in issuing a Clean Energy Challenge to reduce overall carbon dioxide (CO2) emissions in Madison by 100,000 tons by 2011. Madison set a goal for city government to reduce its CO2 footprint by 25% and eliminate 15,000 tons of CO2. The city will work to cut energy use, purchase renewable energy and reduce emissions from its fleet of vehicles. The city also encourages residents to take action through a variety of means, including MGE s programs that give customers the tools to reduce their environmental footprints: Our green pricing program gives customers the option to purchase clean wind energy by paying a little extra on their monthly electric bills. We are expanding the program so a typical household (600 kwh/month) can offset the CO2 emissions from their home electricity use for less than $10 per month. When fully subscribed, this expanded program will eliminate 50,825 tons* of CO2 annually. MGE s Power Tomorrow program helps customers save energy and reduce emissions. This program begins with five easy steps to reduce energy use and provides in-depth information for customers who want to do even more. (See Power Tomorrow conservation tips at the end of this report.) * Based on a State of Wisconsin Focus on Energy 2004 study resulting in a statewide average system CO2 emission rate of 2.2 pounds per kilowatt-hour. MGE serves the Madison metropolitan area the seat of state government and home to the University of Wisconsin-Madison. 6

Dane County: Clean Air Coalition MGE is one of the founding members of the Dane County Clean Air Coalition, which works to address the major sources of air pollution in Dane County. This coalition consists of government groups, businesses and schools. Transportation and power plants are the largest contributors of ozone and particulates in our county. The Dane County Clean Air Coalition encourages businesses and residents to take specific steps to reduce air emissions. MGE has committed to a variety of actions including using less coal on days when ozone levels are high. We also offer an employee incentive program to encourage carpooling and alternate transportation. Creating smart solutions Protecting our groundwater MGE made an unprecedented effort to offset potential impacts to our area s watershed when planning the West Campus Cogeneration Facility. We worked with water resource experts to draw up a comprehensive community water plan to mitigate any negative impacts of this new power plant. The plant s water withdrawal is negligible on area lakes and waterways except during periods of severe drought when the lower Yahara River may be affected. Our comprehensive plan includes: Pumping groundwater from a well directly into the Yahara River to compensate for water used by plant operations during low-water periods. Collecting and infiltrating stormwater runoff to recharge the groundwater aquifer (photo below). State of Wisconsin: Global Warming MGE is a member of the Governor s Task Force on Global Warming that brings together prominent government, business and environmental leaders to examine global warming solutions in Wisconsin. Using current national and local research, the task force is analyzing possible solutions to global warming challenges. The group will create a statewide action plan. Wisconsin already established renewable energy and energy efficiency standards that by 2015 should avoid 5.5 million tons of greenhouse gas. MGE installed a groundwater recharge system near a pond at the Odana Hills Golf Course. The pond collects abundant stormwater runoff from the surrounding residential and commercial development. Pond water is filtered, pumped to higher ground and infiltrated into the soil in a specially engineered drain field. This water helps recharge the area s aquifer. MGE also has improved the pond s habitat with logs and a special nesting area for turtles, bat houses and native aquatic plants. 7

Taking voluntary actions The utility industry is highly regulated especially the environmental aspects. MGE meets all current, applicable environmental regulations. However, we also look for opportunities to strategically go above and beyond compliance and voluntarily pursue cleaner options. Environmental Cooperative Agreement Since 2002, MGE has participated in an innovative approach to achieve superior environmental performance and regulatory compliance at its Blount Generating Station. MGE was one of the first participants in the Wisconsin Department of Natural Resources (DNR) Environmental Cooperative Agreement program, which: Sets goals to reduce waste, improve air emissions and save natural resources. Encourages both parties to work more cooperatively on environmental issues. Solicits active input from interested members of the community. Does not relax any emission limits or environmental regulations. MGE has made numerous improvements to its Blount Generating Station in the last decade to control coal dust, including a wall around the coal yard and installing an enclosed coal conveyor system. ISO 14001 certification Blount is the first power plant in Wisconsin to receive ISO 14001 certification. ISO 14001 certification is an internationally recognized standard for environmental management systems. Earning ISO 14001 certification underscores our commitment to environmental stewardship in everyday actions. Sound environmental management is a good business practice that improves efficiencies and reduces environmental risk. Blount earned certification following an independent, third-party audit in 2004 and has been recertified following another audit in 2007. MGE s Blount Generating Station is the first power plant in Wisconsin to receive ISO 14001 certification. 8

Mercury: reduce and recycle MGE is concerned about mercury. The company is committed to reducing and minimizing mercury use and emissions throughout company operations (see page 12). We also take voluntary steps to reduce and recycle mercury from sources beyond emissions. MGE was the first utility in the country to install mercury-free encoders in the meters on customers homes and businesses. The meter manufacturer developed the mercuryfree encoders at the urging of MGE. The encoders allow MGE to read meters electronically. MGE offers customers a thermostat-recycling program. Customers can drop off mercury-containing thermostats at MGE. We then send the thermostats to a recycler to ensure the mercury does not enter the waste stream. We have recycled more than 180 thermostats and more than 1.6 pounds of mercury. MGE implemented an extensive mercury inventory and removal plan at Blount beginning in 1995. Because this is an older power plant, control equipment at Blount contained mercury. Making extra efforts Voluntary emission reductions In 2002, MGE began quantifying our voluntary emission reductions and placing them on the Wisconsin Voluntary Emission Reduction Registry. This Wisconsin Department of Natural Resources registry lists decreases that go above and beyond regulations. The reductions must be demonstrable and voluntary. This table shows MGE s reductions for nitrous oxides (NOx), sulfur dioxides (SO2), particulate matter (PM), carbon dioxide (CO2) and mercury. MGE voluntary emission reductions NOx SO2 PM CO2 Mercury (tons) (tons) (tons) (tons) (pounds) 2002 805 669 9.0 121,350 0.00 2003 1,217 612 9.0 99,396 0.22 2004 1,198 747 9.4 112,635 0.09 2005 2,226 696 12.0 121,391 0.71 Total 5,446 2,724 39.4 454,772 1.02 MGE has removed more than 1,000 pounds of mercury, the majority of which was recycled. We systematically remove devices with mercury during planned maintenance. Stormwater runoff MGE installed an innovative stormwater filtration system to trap contaminants that normally run off paved surfaces during rainstorms. The filtration system captures water runoff from a (2006 figures are not yet available) 1.4-acre parking lot on MGE property. Removing contamination from stormwater runoff helps reduce toxins that degrade water quality and nutrients that promote weed and algae growth in lakes and rivers. The DNR, the U.S. Geological Survey and others track the performance of this state-ofthe-art system. 9

Tapping technology MGE has long supported pilot projects that demonstrate new renewable technology options. We learn about new technologies so we can find ways to offer innovative programs and services and help educate our customers. Hydrogen energy Funded by MGE, Virent Energy Systems of Madison launched the world s first demonstration project that converts corn, soybeans and other plant by-products into hydrogen and other fuels to power electric generators. The project showcased the use of renewable biomass to produce carbon-neutral fuels for a distributed power system. Energy from Virent s project fed into MGE s grid providing enough electricity to serve about five typical homes. It is a small but significant step in the development of renewable energy sources. Carbon sequestration Before heightened public interest in global warming, MGE funded a three-year project to study the potential for prairie grasses to offset carbon dioxide (CO2) emissions from power plants. Switchgrass can absorb significant amounts of CO2 from the air and add carbon to the soil. It also has potential as a renewable fuel. This study was instrumental in helping determine how land-use practices could be used as part of a carbon-credit program. Methane energy MGE, in partnership with local municipalities, tested a Stirling engine to economically produce electricity from methane gas at small-to-medium-sized landfills. The project was a first of its kind in North America. Landfills are required to control the release of methane, a potent greenhouse gas (GHG) that is produced as garbage decomposes. At smaller landfills, the gas is usually burned off due to the high cost of using a relatively small amount of impure methane in conventional generators. The Stirling engine s design may be able to more cost effectively use this poor-quality gas to produce electricity. Diesel fuel replacement MGE owns, operates and maintains a number of distributed backup generators for large businesses. These units already use ultra-low sulfur diesel fuel. We re taking one unit the next step by co-firing it with natural gas. This will reduce diesel fuel use by 80% and significantly reduce emissions. Manure digester MGE is helping to fund and participate in a study to determine the feasibility of a regional manure digester. The primary motivation is to protect our watershed by reducing phosphorus runoff. If built, the digester also would reduce the GHG footprint of area farms. MGE is checking the potential for electric generation from this concentrated methane source. MGE supports a study to determine the feasibility of a regional manure digester for the many farms surrounding Madison. The digester could produce methane to power an electric generator. 10

S o l a r p r o j e c t s Goodman Pool MGE s latest solar PV demonstration project is installed on the shade canopy for the toddlers sandbox area at Madison s Goodman Pool (photo left). The system produces enough electricity to run two ice cream freezers and an ice machine at the pool for the entire summer. This solar-produced energy will eliminate about 5,700 pounds of CO2 emissions annually that would otherwise be produced by fossil fuel-powered generation. MGE continues to invest in solar photovoltaic demonstration projects, such as this solar shade canopy at Madison s Goodman Pool. Right Now 2:17 PM Aug 07, 2007 Generating 205.0 W 205.0 W Historical Generated CO2 6.8 kwh 30,804 lbs. Average household CO2 output is 22,750 lbs./yr. Today Real-time solar energy data is available on www.mge.com from the solar photovoltaic units installed on the high schools in MGE s electric service area. Solar in schools MGE installed and operates different types of solar photovoltaic (PV) systems on the 10 high schools in our electric service area. These PV units feed data into monitoring equipment so we can study system performance and economics. Using a solar curriculum that we helped create, teachers Week Greenhouse Gases Avoided Since Installation Jul 05, 2007 kwh 2 1 0 Equivalent to: Month 4 AM 8 AM 12 PM 4 PM 8 PM The energy to power 494 homes for one day. Irradiance Cell 115 W/m 2 Temp 85 F Year System Size: 2.4 kw DC Lifetime Ambient Temp 81 F The energy to operate a TV for 107,690 hours. and students can compare and contrast their school s PV equipment to other systems. MGE s energy experts increased their knowledge about solar energy through these systems. Our staff is now sharing that information with customers interested in installing their own systems. PV on wheels MGE is designing and building a portable solar PV demonstration unit to use at local events and for interested groups or businesses. Mounted on a trailer, two types of PV systems will charge batteries to power equipment for demonstrations. Visitors will learn how PV systems are built and operate. When not in use, we will park the trailer in the sun and connect it to MGE s electric grid. Go solar locally Installing a PV system on your home or business can be expensive. MGE is helping with a pilot incentive plan for a higher electric buy-back rate. Customers will be paid for every kilowatt-hour delivered to MGE s electric grid. The power generated will be part of our green energy program. Solar water heating MGE and the City of Madison are installing a solar water-heating project at a local fire station. Madison is putting in the equipment while MGE is installing the monitoring equipment and providing expertise. 11

Controlling air emissions Emission rates Nitrogen oxide (lbs./mwh) 4.55 1.50 2001 2006 Sulfur dioxide (lbs./mwh) 11.99 6.58 2001 2006 Particulate matter (lbs./mwh) 0.57 0.36 2001 2006 Mercury (E-05 lbs./mwh) 5.661 4.846 2001 2006 MGE meets all current, applicable environmental regulations and looks for opportunities to go beyond regulations when possible. We work to reduce air emissions by exploring new technologies, improving equipment efficiencies and diversifying our generation mix. MGE has reduced its emission rates while generating more electricity to meet customers needs. MGE s owned generation capacity consists of approximately 345 megawatts (MW) of coal, 370 MW of natural gas, 45 MW of ultra-low sulfur diesel fuel (used primarily for backup generation) and 11 MW of wind. The company also purchases power through contracts and on the regional MISO energy market. We make strategic adjustments to our generation fleet to improve air emissions and increase efficiency. For example, burner improvements at the Blount Generating Station increase efficiencies and better control nitrogen oxides (NOx). Blount s NOx emission rates dropped more than 12% since installation in 2003. MGE owns a portion of the coalfired Columbia Energy Center where NOx emissions have been reduced by more than 60% in the last five years through a series of upgrades and improved combustion processes. To modernize our generation fleet, we brought the natural gas-fired West Campus Cogeneration Facility online in 2005. It is one of the cleanest and most efficient power plants in the Midwest. We also are retiring Blount s coal generation, which is older and less efficient, and are investing in cleaner coal generation in Oak Creek, Wis. In addition, we are increasing our wind power capacity by nearly eight times with commitments to three new wind farms in 2007 and 2008. Renewable and alternate energy Renewable and alternate energy are part of our electric mix including wind, landfill gas, solar photovoltaic and a pre-consumer waste of paper and plastic burned at Blount. Future regulations Federal and state regulations for air emissions are constantly evolving. Through prudent planning and a consistent approach, we are well positioned to respond to future regulations. These graphs show emission rates from MGE s owned generation. MGE has reduced its emission rates while generating more electricity to meet customers needs. 12

MGE is making investments in emissions controls, retiring Blount s older coal capacity and bringing cleaner coal power and additional wind and solar generation online. Production from wind (MWh) 243,477 MGE uses an environmental risk analysis to follow regulatory issues and plan for the future. An Environmental Management System database assists us in identifying and tracking regulations to ensure compliance with all measuring and reporting requirements. Another system identifies new or revised environmental requirements. Two new significant air regulations affecting the electric utility industry were finalized by the Environmental Protection Agency in 2005: The Clean Air Interstate Rule (CAIR) will reduce NOx and sulfur dioxides (SO2) in two phases the first in 2009 for NOx and 2010 for SO2, and the second in 2015 for both NOx and SO2. The 2015 Phase II requires NOx reductions from electric utilities by 61% and SO2 by 57% compared to 2003 levels. The Clean Air Mercury Rule (CAMR) will regulate mercury emissions from coal-fired power plants. CAMR Phase I begins in 2010. Phase II begins in 2018 and calls for mercury reductions of nearly 70% compared to 1999 levels. MGE is making investments in emissions controls, retiring Blount s older coal capacity and bringing cleaner coal power and additional wind and solar generation online to comply with CAIR and CAMR. 21,228 2003 2008 projected Wind power will increase with the addition of three new wind farms contributing to MGE s generation mix. Production from landfill gas (MWh) 12,766 23,295 MGE is scheduled to receive energy from the cleaner coal Oak Creek power plant expansion beginning in 2009. This facility will be equipped with the most advanced emission-control technology available. 2003 2008 projected Producing electricity from methane gas at landfills offsets coal use and reduces the impact of methane, which is about 22 times more potent as a greenhouse gas than carbon dioxide. MGE purchases electricity produced from landfill gas enough to serve over 2,600 homes in our service area annually. 13

Global climate change Public concern over global climate change has led to a push for laws and rules to regulate greenhouse gas (GHG) emissions. Some states and regions have enacted GHG regulations. Bills have been proposed at the federal level and in the Wisconsin State Legislature. MGE developed a carbon dioxide (CO2) reduction strategy in anticipation of possible future GHG regulations. MGE s Energy 2015 plan emphasizes renewable energy, energy efficiency and cleaner coal three strategies that reduce GHG emissions. Under Energy 2015, MGE s CO2 impacts are projected to decline even though total system energy is estimated to increase. We project an 8% decrease for total CO2 emissions and a 10% decrease for CO2 rates from 2005 to 2015. We project an 8% decrease for total CO2 emissions and a 10% decrease for CO2 rates from 2005 to 2015. Planning and analysis MGE applies the same careful approach and environmental risk analysis to possible future GHG emissions that the company uses for other emissions. When making generation decisions, MGE s economic analysis already includes a possible projected carbon tax to help ensure its decisions are financially sound whether or not CO2 is regulated in the future. Wisconsin has a strong regulatory system that helps protect customers and utility investors. The Public Service Commission of Wisconsin makes a thorough, independent review of all investments and decisions by the state s utilities. MGE s response to any future GHG regulations will fall under the purview of the commission. Should MGE incur additional costs to comply with GHG regulations, we would work with the commission to meet those regulations and set costs to be in full compliance. Projected CO2 emission rate (lbs. per kilowatt-hour) Projected CO2 emissions (in million tons) 2.01 1.80 3.6 3.3 2005 2015 2005 2015 CO2 emissions are calculated from generating units owned by MGE, purchase power agreements and all power projected to be purchased on the regional Midwest ISO market from unspecified sources. The market purchase emission rate is based on a seven-state regional average CO2 emission profile from all power produced in Wisconsin and the surrounding Midwest states. 14

MGE is increasing its wind capacity by nearly eight times from 11 to 86 megawatts with three new wind farms coming online in 2007 and 2008. Developing technologies In the United States, power plants account for about one-third of CO2 emissions. Transportation accounts for approximately another third and the remaining third comes from commercial, industrial and residential sources. MGE supports the development of new technologies and greater fuel efficiencies to help reduce GHGs across all sectors. There are no commercially proven technologies to capture CO2 emissions from existing coal-fired power plants. One developing technology that allows for CO2 capture or sequestration is the Integrated Gasification Combined Cycle (IGCC) power plant. It extracts the CO2 from gasified coal prior to combustion. In 2006, MGE participated in a State of Wisconsin IGCC study group. The MGE Foundation funded UW-Madison research examining the potential of planting switchgrass to sequester CO2. Landfills are the largest source of U.S. methane emissions accounting for 34%, according to the Environmental Protection Agency. Methane is the secondbiggest contributor to climate change behind carbon dioxide from human activities. MGE has developed a pilot landfill gas generation project and steadily increased the amount of electricity generated from methane produced at local landfills. (See page 13.) MGE is already addressing GHG emissions through voluntary actions. We will continue to monitor our environmental footprint and proposed GHG regulations so we are prepared to take additional, appropriate actions. We recognize our responsibility to aggressively control pollution, minimize waste and improve our environment. We support the development of new technologies and greater fuel efficiencies to help reduce GHGs across all sectors. 15

MGE s Green Team At MGE, every employee is a member of the MGE Green Team and has a responsibility to the environment while at work. Employees understand that their individual actions in day-to-day operations can improve our environment. MGE s Green Team Leaders represent departments across the company. Working with our Environmental Affairs department, the Green Team Leaders meet regularly and work together to ensure compliance with regulations and our Environmental Management System. Our Green Team Leaders help MGE incorporate environmental principles across the company, such as using this compressed natural gas truck that reduces emissions compared to gasoline. The Green Team Leaders include (left to right) Song Ge, Internal Audit; C. Ray Phillips, Energy Production; Jean Stephens, Electric Transmission and Distribution; Dave Crary, Materials Management; Jeanne Burns-Frank, Environmental Affairs; Tim Gleiter, Substations; Steve Beversdorf, Gas Operations; Dave Hastings, Service and Metering; Laura Coleman, Environmental Affairs; and Mike Ricciardi, Environmental Affairs. MGE s Environmental Policy Reduce impacts Exceed compliance Educate employees Improve continuously Communicate and work with others Madison Gas and Electric Company P.O. Box 1231 Madison, WI 53701-1231 www.mge.com This report is printed on recycled paper manufactured with wind power.

Conservation tips Help our environment by conserving energy Many of our customers practice conservation. Over the past two decades, MGE has helped customers save more than 100 megawatts of electricity the equivalent of a small power plant. Still, energy use is growing in our service area. Our economy is healthy. More homes and businesses are springing up here. Energy use per customer is growing as well. MGE s Energy 2015 plan to meet customers energy needs counts on a greater customer commitment to conservation. Through our Power Tomorrow initiative, MGE is educating and encouraging customers to become more energy efficient. Customers concerned about global climate change can take action through their energy use. If all MGE customers took the following steps, we could save significant carbon dioxide (CO2) emissions and power. Take the first steps What can you do? Begin with the easy things. Take these Starting 5 Steps. 1. Take control of your thermostat. For every degree of change for eight hours, you can reduce energy use and save on your heating and cooling costs by 1%. Save even more with greater or longer temperature changes. Annual savings all customers 35 million pounds of CO2. Power for 2,400 homes. 2. Switch to compact fluorescent bulbs. Switching five frequently used lights from standard incandescent bulbs to compact fluorescent bulbs saves two-thirds or more of the electricity needed to power these lights. If they are used at least four hours each day, this is a savings of about $40 in the first year. Annual savings all customers 130 million pounds of CO2. Power for 8,800 homes. the power of working together

3. Wash your laundry in cold water. Using cold water for washing eliminates the energy used to heat the 7 to 10 gallons of hot water needed per load and saves you money between 10 and 20 cents per load. On average, customers launder about 7.5 loads per week. Annual savings all customers 123 million pounds of CO2. Power for 3,300 homes. 4. Turn off the juice when not in use. One of the easiest ways to reduce energy consumption is to get in the habit of turning things off when you finish using them. If no one is watching that TV, turn it off. If no one is in a room, shut off the lights. Unplug that second refrigerator or freezer when not needed and save $5 to $15 per month. Annual savings all customers 39 million pounds of CO2. Power for 2,600 homes. 5. Look for the ENERGY STAR label. When shopping for new appliances and equipment, choose those with an ENERGY STAR label. Depending on the type of equipment, ENERGY STAR models can save 10% to 50% of the power used by a standard model. If, over the next few years, you replace all your appliances with ENERGY STAR appliances, your individual savings could be about $320 in annual energy costs. Annual savings all customers 550 million pounds of CO2. Power for 30,800 homes. Take the next step If you have already taken the Starting 5 Steps, thank you. Please visit MGE s Web site or contact our energy experts to learn more steps you can take. www.mge.com/saveenergy AskExperts@mge.com (608) 252-7117 or 1-800-245-1125 Work with your neighbors It may be easier and more effective to take a comprehensive look at your lifestyle and energy choices with help from your friends. MGE cosponsors a neighborhood program called EnAct. It teaches participants how to save energy and improve their environmental footprint through changes in water, food and transportation use. EnAct teams have saved the amount of CO2 nearly 13,000 trees would absorb in a year. Visit enactwi.org. Madison Gas and Electric Co. www.mge.com printed on recycled paper manufactured with wind power