DISTRIBUTION AGREEMENT

(a)

Upon the basis of the representations and warranties and subject to the terms and conditions set forth herein and provided the Company provides JPMS with any due diligence materials and information reasonably requested by JPMS necessary for JPMS to satisfy its due diligence obligations, on any Exchange Business Day (as defined below) selected by the Company, (A) with respect to purchases by JPMS as principal, the Company and JPMS shall enter into an agreement in accordance with Section 3 hereof regarding the number of Shares to be purchased by JPMS and the manner in which and the other terms upon which such sale is to occur (each such transaction being referred to as a “ Principal Transaction ”), and (B) with respect to sales by the Company where JPMS acts as its agent, the Company and JPMS shall enter into an agreement in accordance with Section 3 hereof regarding the number of Shares to be placed by JPMS and the manner in which and other terms upon which such placement is to occur (each such transaction being referred to as an “ Agency Transaction ”). References herein to a “ Transaction ” shall mean a Principal Transaction or an Agency Transaction, as the context may require. As used in this Agreement, (i) the “ Term ” shall be the period commencing on the date hereof and ending on the earliest of (x) December 1, 2008, (y) the date on which the Maximum Number of Shares have been issued and sold pursuant to this Agreement, and (z) the termination of this Agreement pursuant to Section 9 or 10 (the “ Termination Date ”), (ii) an “ Exchange Business Day ” means any day during the Term that is a trading day for the Exchange other than a day on which trading on the Exchange is scheduled to close prior to its regular weekday closing time, and (iii) “ Exchange ” means the NASDAQ Global Select Market.

(b)

Subject to the terms and conditions set forth below, the Company appoints JPMS as agent in connection with the offer and sale of Shares in any Agency Transactions entered into hereunder. JPMS will use commercially reasonable efforts to sell such Shares in accordance with the terms and

conditions hereof and of the applicable Transaction Notice (as defined below). Neither the Company nor JPMS shall have any obligation to enter into an Agency Transaction. The Company shall be obligated to issue and sell through JPMS, and JPMS shall be obligated to use commercially reasonable efforts, as provided herein and in the applicable Transaction Notice, to place Shares issued by the Company only if and when a Transaction Notice related to such an Agency Transaction has been delivered by JPMS and accepted by the Company as provided in Section 3 below.

(c)

Except in the case of an Agency Transaction executed pursuant to Section 1(d) below, following acceptance of a Transaction Notice by the Company, JPMS will communicate to the Company, orally (with a confirmation by electronic mail or facsimile), each offer to purchase Shares solicited by JPMS in an Agency Transaction. Notwithstanding the foregoing, JPMS shall have the right, in its sole discretion, reasonably exercised, to reject any offer to purchase Shares, as a whole or in part, by persons solicited by JPMS and any such rejection shall not be deemed a breach of JPMS’s agreement herein. The Company may accept or reject any proposed offer to purchase Shares, in whole or in part, and no such rejection shall be deemed a breach of the Company’s agreement herein.

(d)

The Company and JPMS may agree that the Shares to be sold in an Agency Transaction shall be sold in a manner constituting an “at-the-market offering” as defined in Rule 415 promulgated under the Act. In such case, JPMS will confirm in writing to the Company the number of Shares sold on any Exchange Business Day and the related Agency Transaction Gross Sales Price and Agency Net Sales Price (as each of such terms is defined in Section 3(b) below) no later than the opening of trading on the immediately following Exchange Business Day.

(e)

JPMS hereby covenants and agrees not to make any sales of the Shares on behalf of the Company, pursuant to this Agreement, other than (A) by means of ordinary brokers’ transactions between members of the Exchange that qualify for delivery of a Prospectus to the Exchange in accordance with Rule 153 under the Act (such transactions are hereinafter referred to as “ At the Market Offerings ”) and (B) such other sales of the Shares on behalf of the Company in its capacity as agent of the Company as shall be agreed by the Company and JPMS.

(f)

With respect to each Agency Transaction, JPMS shall make commercially reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Shares has been solicited by JPMS and accepted by the Company. If the Company shall default on its obligation to deliver Shares to a purchaser whose offer it has accepted, the Company shall (i) hold JPMS harmless against any loss, claim or damage arising from or as a result of such default by the Company and

2.

Purchases as Principal .

3.

Transaction Notices .

Price less JPMS’s commission is referred to herein as the “ Agency Net Sales Price ”, and together with the Principal Transaction Net Sales Price, the “ Net Sales Price ”).

(c)

If specified in a Transaction Notice for a Principal Transaction, JPMS will have the option to elect, by notice to the Company delivered not later than 4:30 p.m. (New York time) on the relevant Purchase Date, to increase the number of Shares to be sold by the Company and purchased by JPMS acting as principal on such Purchase Date, provided that such number of Shares to be sold by the Company on any Purchase Date pursuant to this Section 3(c) shall not exceed two times the Specified Number of Shares; and provided further that such number of Shares to be sold by the Company, when added to the aggregate number of Shares previously purchased and to be purchased pursuant to pending Transaction Notices (if any) hereunder, shall not exceed the Maximum Number of Shares. The Specified Number of Shares to be sold by the Company on any Purchase Date, as it may be increased pursuant to this paragraph (c), is hereinafter referred to as the “ Purchased Number of Shares ” in respect of such Purchase Date.

(d)

If the Purchased Number of Shares for any Purchase Date exceeds 50% of the total number of shares of Common Stock traded on the Exchange during regular trading hours on such Purchase Date, JPMS may, at its option, elect to reduce the Purchased Number of Shares to 50% of such total number of shares traded. In the event that JPMS has elected to purchase Shares pursuant to Section 3(c) above, any reduction in Shares required by this Section 3(d) shall be first made from such Shares.

(e)

Payment of the Net Sales Price for Shares sold by the Company on any Purchase Date pursuant to a Transaction Notice shall be made to the Company by federal funds wire transfer to JP Morgan Chase Bank, ABA #021 000 021, Credit account name: MGE Energy general checking, credit account number: 627-782-006, against delivery of such Shares to: (x) the accounts specified in writing by JPMS for sales made by JPMS acting as agent, or (y) JPMS through the facilities of the Depository Trust Company for purchase from the Company by JPMS acting as principal. Such payment and delivery shall be made at or about 10:00 a.m., local time in New York, New York, on the third Exchange Business Day (or such other day as may, from time to time, become standard industry practice for settlement of such a securities issuance) following each Purchase Date (the “ Closing Date ”). If the Company fails for any reason to make timely delivery of such Shares, the Company shall indemnify JPMS and its successors and assigns and hold them harmless from and against any loss, damage, expense, liability or claim that JPMS may incur as a result of such failure.

4.

Representations and Warranties of the Company .

not misleading; as of each Acceptance Time and each Closing Date, the Prospectus, as then amended or supplemented, together with all of the then issued Permitted Free Writing Prospectuses, if any, will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representation or warranty with respect to any statement in or omission from the Registration Statement, any Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus made in reliance upon and in conformity with information relating to JPMS furnished in writing by or on behalf of JPMS expressly for use in the Registration Statement, such Basic Prospectus, the Prospectus or such Permitted Free Writing Prospectus.

(b)

Prior to the execution of this Agreement, the Company has not, directly or indirectly, offered or sold any Shares by means of any “prospectus” (within the meaning of the Act) or used any “prospectus” (within the meaning of the Act) in connection with the offer or sale of the Shares, in each case other than the Prospectus; the Company has not, directly or indirectly, prepared, used or referred to any Permitted Free Writing Prospectus except in compliance with Rules 164 and 433 under the Act; assuming that such Permitted Free Writing Prospectus is so sent or given after the Registration Statement was filed with the Commission (and after such Permitted Free Writing Prospectus was, if required pursuant to Rule 433(d) under the Act, filed with the Commission), the sending or giving, by JPMS, of any Permitted Free Writing Prospectus will satisfy the provisions of Rule 164 or Rule 433; the conditions set forth in one or more of subclauses (i) through (iv), inclusive, of Rule 433(b)(1) under the Act are satisfied, and the registration statement relating to the offering of the Shares contemplated hereby, as initially filed with the Commission, includes a prospectus that, other than by reason of Rule 433 or Rule 431 under the Act, satisfies the requirements of Section 10 of the Act; the Company is not an “ ineligible issuer ” (as defined in Rule 405 under the Act) as of the eligibility determination date for purposes of Rules 164 and 433 under the Act with respect to the offering of the Shares contemplated by the Registration Statement.

(c)

The Company has, and as of each Acceptance Time and each Closing Date, the Company will have, an authorized capitalization as set forth in the Prospectus (and any similar information, if any, contained in any Permitted Free Writing Prospectus); all of the issued and outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non assessable (except to the extent that they are assessable as provided in Section 180.0622 of the Wisconsin Business Corporation Law), and have been issued in compliance with all applicable federal and state securities laws.

any pledge of the equity interests of any Subsidiary that has been made or may be made to one or more financial institutions to secure the financing for the development, construction and/or operation of power facilities owned or leased by such Subsidiary.

(i)

Except as disclosed in the Registration Statement, any Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus, the Company and each of the Subsidiaries are in compliance in all respects with all applicable laws, orders, rules, regulations, directives, decrees and judgments, except where the failure to so qualify, individually or in the aggregate, would not have, or reasonably be expected to have, a Material Adverse Effect.

(j)

Neither the Company nor any of the Significant Subsidiaries is in breach of, or in default (nor has any event occurred which with notice, lapse of time, or both would result in any breach of, or constitute a default under), under (a) its respective certificate of incorporation, charter, formation documents or by-laws or (b) in the performance or observance of any obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any lease, contract or other agreement or instrument to which the Company or any of the Significant Subsidiaries is a party or by which any of them or any of their properties is bound, except in the case of clause (b), for such breaches or defaults as would not have, or reasonably be expected to have, a Material Adverse Effect, and the execution, delivery and performance of this Agreement, the issuance and sale of the Shares and the consummation of the transactions contemplated hereby will not conflict with, or result in any breach of or constitute a default under (nor constitute any event which with notice, lapse of time, or both would result in any breach of, or constitute a default under) (i) any provision of the articles of incorporation, charter, formation documents or by-laws of the Company or any of the Significant Subsidiaries, or (ii) any provision of any license, indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any lease, contract or other material agreement or instrument to which the Company or any of the Significant Subsidiaries is a party or by which any of them or their respective properties may be bound or affected, or (iii) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or any of the Significant Subsidiaries, except in the case of clauses (ii) and (iii) for such conflicts, breaches, or defaults, individually or in the aggregate, as would not have, or reasonably be expected to have, a Material Adverse Effect.

(k)

The Company has full legal right, power and authority to enter into and perform this Agreement and to consummate the transactions contemplated herein; this Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the

Company enforceable in accordance with its terms, except (i) as may be limited by the bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, or (ii) as any rights to indemnity or contribution hereunder may be limited by federal and state securities laws and public policy considerations.

(l)

The Shares have been duly authorized and, when issued, delivered and paid for as provided in this Agreement, will be validly issued and fully paid and non assessable (except to the extent that they are assessable as provided in Section 180.0622 of the Wisconsin Business Corporation Law), free and clear of any Encumbrance (other than any Encumbrance that may be created by the purchaser of such Shares); the capital stock of the Company, including the Shares, conforms in all material respects to the description thereof contained in the Registration Statement, any Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus and the Shares will conform in all material respects to the description thereof contained in any Permitted Free Writing Prospectus and the Prospectus as amended or supplemented; no person or entity has a right of participation or first refusal with respect to the sale of the Shares by the Company.

(m)

There are no contracts, agreements or understandings between the Company or its Subsidiaries and any person or entity granting such person or entity the right, contractual or otherwise, to cause the Company to issue to it, or register pursuant to the Act, any securities or shares of capital stock of the Company upon the issue and sale of the Shares to JPMS hereunder, or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement, nor does any person have preemptive rights, co-sale rights, rights of first refusal or other rights to purchase any of the Shares other than those that have been expressly waived before the date hereof.

(n)

The form of certificates evidencing the Shares (to the extent such Shares are certificated) complies with all applicable legal requirements and, in all material respects, with all applicable requirements of the charter and bylaws of the Company and the requirements of the Exchange (if any).

(o)

No consent, approval, authorization or order of or filing with any federal, state or local governmental or regulatory commission, board, body, authority or agency is required in connection with (i) the execution, delivery and performance by the Company of this Agreement and the consummation of the transactions contemplated hereby or (ii) the sale and delivery of the Shares, other than (x) such as have been obtained, or will have been obtained on the relevant Closing Date under the Act or the Exchange Act, (y) such approvals as have been obtained in connection with the approval of the listing of the Shares on the Exchange and (z) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by JPMS.

equity, or before or by any federal, state, local or foreign governmental or regulatory commission, which, if determined adversely to the Company or any of its Subsidiaries, could result in a judgment, decree or order which could reasonably be expected to have a Material Adverse Effect or prevent consummation of the transactions contemplated hereby.

(u)

The consolidated financial statements of the Company and the Subsidiaries and the schedules thereto included or incorporated in the Registration Statement, any Basic Prospectus, the Prospectus or any Permitted Free Writing Prospectus present fairly in all material respects the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and the Subsidiaries for the per