MGE Energy and MGE are subject to frequently changing local, state, and federal regulations concerning air quality, water quality, land use, threatened and endangered species, hazardous materials handling, and solid waste disposal. These regulations affect how we conduct operations and may affect both operating costs and capital expenditures. Several of these environmental rules are subject to legal challenges, reconsideration and/or other uncertainties. Regulatory initiatives, proposed rules, and court challenges to adopted rules could have the potential to have a material effect on capital expenditures and operating costs. Management believes compliance costs will be recovered in future rates based on previous treatment of environmental compliance projects.

These initiatives, proposed rules, and court challenges include:

With the closure of the wet pond system in 2023, Columbia complies with ELG requirements. With the installation of additional wastewater treatment equipment completed in 2023, the Elm Road Units comply with ELG requirements.

In May 2024, the EPA finalized the Supplemental Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category (2024 ELG Rule) that further regulates the wastewater discharges associated with coal-fired power plants. The rule impacts Columbia and the Elm Road Units. The 2024 ELG Rule focuses on wastewater discharges from flue gas desulfurization, combustion residual leachate, and bottom ash transport water, building upon the prior standards of the 2020 ELG Rule. The 2024 ELG Rule includes reduced requirements for plants that have already installed pollution controls based on previous versions of the rule, and for plants that will be retiring or switching to natural gas by certain dates. The 2020 and 2024 ELG Rules, along with the subsequent 2025 Rule extending compliance deadlines, are currently being challenged in federal court. The litigation is on hold while the EPA undertakes a reconsideration process. The operator of the Elm Road Units is in compliance with the 2024 ELG Rule. The operator of Columbia is in compliance with the 2024 ELG Rule. MGE will continue to monitor the outcomes of the rule challenges and work with our co-owners on their compliance plans.

Blount received its most recent Wisconsin Pollutant Discharge Elimination System (WPDES) permit from the Wisconsin Department of Natural Resources (WDNR) in October 2023. Blount's latest WPDES permit assumes that the plant meets BTA standards for entrainment for the duration of this permit which expires in 2028. The WDNR included a requirement to conduct an optimization study to demonstrate compliance with impingement BTA standards in the latest permit which needs to be completed by January 2028. Once the WDNR determines the impingement requirements at Blount, MGE will be able to determine any compliance costs of meeting Blount's permit requirements.

Intakes at Columbia are subject to this rule. In March 2026, Columbia received an updated WPDES permit from the WDNR. The WPDES permit indicates that Columbia's existing intake structure meets BTA standards. MGE does not, based on current information, anticipate any further requirements at Columbia and thus does not expect this rule to have a material effect on Columbia.

In May 2024, the EPA published final performance standards and emission guidelines under Section 111 of the Clean Air Act for carbon dioxide emissions from new combustion turbines and existing fossil fuel-fired boilers used to produce electricity. Preliminary evaluation of the May 2024 rule showed that MGE met the requirements for the gas-fired boilers at Blount. Evaluations done by the owners of Columbia and the Elm Road Units in 2024 indicated that they have a plan for complying with the May 2024 rule.

In September 2026, the EPA published a final rule repealing the May 2024 rule's carbon dioxide emission guidelines for existing fossil fuel-fired units while retaining the efficiency-based requirements for new natural gas-fired combustion turbines. The September 2026 rule will go into effect on November 16, 2026, after which MGE's existing fossil fuel-fired generating units will no longer be subject to the GHG requirements of the May 2024 rule. Both the September 2026 final rule and the May 2024 rule are under legal challenge.

Also in September 2026, the EPA published a proposed rule that would rescind the EPA's findings supporting the regulation of GHG emissions from fossil fuel-fired power plants under Section 111 of the Clean Air Act and repeal all remaining Section 111 GHG standards for fossil fuel-fired electric generating units, including the efficiency-based requirements for new natural gas-fired combustion turbines. MGE will continue to monitor this rulemaking.

In February 2026, the EPA finalized a rule rescinding its 2009 findings of contribution and endangerment for GHG emissions under Section 202(a) of the Clean Air Act and repealing all GHG emission standards for light-duty, medium-duty, and heavy-duty vehicles and engines. EPA concluded that it lacks statutory authority to regulate GHG emissions in response to global climate change concerns under Section 202(a)(1). The scope and timing of any impacts of this decision on federal GHG regulation under the Clean Air Act remain uncertain pending litigation and potential further agency action. MGE will continue to monitor developments.

The Elm Road Units are located in Milwaukee County, Wisconsin, a nonattainment area for the 2015 Ozone NAAQS. The area was redesignated to serious nonattainment by the EPA in December 2024, effective January 2025, but remains categorized as moderate nonattainment following a stay granted by the U.S. Court of Appeals for the Seventh Circuit in September 2025. At this time, the operator of the Elm Road Units does not expect that the 2015 Ozone NAAQS or the Milwaukee County nonattainment designation will have a direct material effect on the Elm Road Units.

In March 2024, the EPA published a final rule to lower the average annual PM2.5 NAAQS from 12 ug/m3 to 9 ug/m3 effective May 2024.

Multiple states and industry groups challenged the March 2024 PM2.5 NAAQS rule in the United States Court of Appeals for the District of Columbia Circuit. In February 2025, Wisconsin's Governor Evers submitted a state-wide attainment recommendation to the EPA. In June 2026, the United States Court of Appeals for the District of Columbia Circuit denied the petitions for review. As a result, absent further judicial relief, EPA action, or other legal developments, the annual PM2.5 standard of 9 µg/m3 remains in effect.

The new annual PM2.5 NAAQS could impact Milwaukee County, where the Elm Road Units are located, if the county is determined to be in nonattainment. A nonattainment designation would require the State of Wisconsin to develop a plan to get into attainment, which would likely include additional limitations for new and modified plants in the county.

In October 2026, the EPA notified the State of Wisconsin of its intended approach for area designations under the revised PM2.5 NAAQS. The EPA indicated that Milwaukee County is being considered for designation as a nonattainment area and provided the State an opportunity to submit additional information before final designations are issued. Final area designations are expected by February 2027, unless modified through ongoing administrative or judicial proceedings.

The final impact of this rule will not be known until the EPA determines the attainment status of Wisconsin counties and the State of Wisconsin develops an attainment implementation plan. MGE will continue to follow the rule's developments.

The EPA's Good Neighbor Plan and its progeny are a suite of interstate air pollution transport rules designed to reduce ozone and PM2.5 ambient air levels in areas that the EPA has determined as being significantly impacted by pollution from upwind states. This is accomplished through a reduction in NOx and SO2 from qualifying fossil fuel-fired power plants and industrial boilers in upwind "contributing" states. NOx and SO2 contribute to fine particulate pollution, and NOx contributes to ozone formation in downwind areas. Reductions are generally achieved through a cap-and-trade system. Individual plants can meet their caps through reducing emissions and/or buying allowances on the market.

In March 2023 (published June 2023), the EPA finalized its Federal Implementation Plan to address state obligations under the Clean Air Act "good neighbor" provisions for the 2015 Ozone NAAQS (Good Neighbor Plan). The Good Neighbor Plan impacts 23 states, including Wisconsin. For Wisconsin, the Good Neighbor Plan includes revisions to the current obligations for fossil-fuel power generation, which includes Blount, Columbia, the Elm Road Units, WCCF, West Riverside, and West Marinette. Initial obligations under the Federal Implementation Plan were scheduled to begin during the 2023 ozone season. In 2026, additional obligations would have gone into effect if not for a judicial stay, including a further reduction in emissions budgets. Wisconsin would need to submit a State Implementation Plan to meet its obligations or accept the EPA's Good Neighbor Plan.

Multiple legal challenges to the Good Neighbor Plan and related state implementation plan disapprovals are pending, including in the United States Court of Appeals for the District of Columbia Circuit. In June 2024, the Supreme Court of the United States granted a request to stay the Good Neighbor Plan and block its enforcement pending judicial review by the U.S. Court of Appeals for the District of Columbia Circuit on the merits of petitioner's challenges to implementation of the rule. The EPA has temporarily halted the enforcement of the Good Neighbor Plan's requirements for all pollution sources in states affected by the plan, including Wisconsin. While the EPA addresses these concerns, interim rules have been implemented in Wisconsin to address interstate pollution. Based on MGE's current evaluation, if the Good Neighbor Plan goes into effect as-is, the additional emission reductions may impact the Elm Road Units. However, the final impact of the rules will not be known until judicial reviews are completed and/or the EPA takes further action regarding the rule.

The CCR Rule regulates the disposal of solid waste coal ash and defines what ash use activities would be considered generally exempt beneficial reuse of coal ash. The CCR Rule also regulates landfills, ash ponds, and other surface impoundments used for coal combustion residuals by regulating their design, location, monitoring, and operation. The CCR Rule requires owners and operators of coal-fired power plants to stop transporting CCR and non-CCR wastewater to unlined surface impoundments. At Columbia, the coal combustion residuals system completed in 2023 replaced the unlined surface impoundment, and Columbia complies with this rule.

Review of the Elm Road Units has indicated that the costs to comply with the CCR Rule are not expected to be significant.

In May 2024, the EPA published its final CCR Legacy Rule. The CCR Legacy Rule applies to previously closed disposal sites. In 2024, MGE recorded an asset retirement obligation for its estimated share of the legal liability associated with the effect of the CCR Legacy Rule for remediation and groundwater compliance monitoring at Columbia. Actual costs of compliance may be different than the amount recorded due to potential changes in compliance strategies that will be used, as well as other potential changes in cost estimate.

In February 2026, the EPA finalized the CCR Management Unit Deadline Extension Rule, which provides a one-year extension for the submission of Facility Evaluation Reports and extends the deadline for the implementation of groundwater monitoring systems at legacy CCR management units to February 2031. Columbia continues to evaluate the impact of this extension on its compliance timeline. This update is not expected to materially affect anticipated compliance costs. In April 2026, the EPA published a proposed rule that would amend the CCR regulations by eliminating certain closure requirements that previously applied to legacy surface impoundments and CCR management units. MGE will continue to monitor legal developments and any future updates to this rule.

MGE is involved in various legal matters that are being defended and handled in the normal course of business. MGE accrues for costs that are probable of being incurred and subject to reasonable estimation. The accrued amount for these matters is not material to the financial statements. MGE does not expect the resolution of these matters to have a material adverse effect on its consolidated results of operations, financial condition, or cash flows.

MGE Energy and MGE have entered into various commodity supply, transportation, and storage contracts to meet their obligations to deliver electricity and natural gas to customers. Management expects to recover these costs in future

customer rates. The following table shows future minimum commitments related to purchase contracts as of September 30, 2026: