UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
or

[  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______

Commission
Name of Registrant, State of Incorporation,
IRS Employer
File Number
Address of Principal Executive Offices and Telephone Number
Identification Number
1-9894
ALLIANT ENERGY CORPORATION
39-1380265
 
(a Wisconsin corporation)
 
 
4902 N. Biltmore Lane
 
 
Madison, Wisconsin 53718
 
 
Telephone (608)458-3311
 
     
0-4117-1
INTERSTATE POWER AND LIGHT COMPANY
42-0331370
 
(an Iowa corporation)
 
 
Alliant Energy Tower
 
 
Cedar Rapids, Iowa 52401
 
 
Telephone (319)786-4411
 
     
0-337
WISCONSIN POWER AND LIGHT COMPANY
39-0714890
 
(a Wisconsin corporation)
 
 
4902 N. Biltmore Lane
 
 
Madison, Wisconsin 53718
 
 
Telephone (608)458-3311
 

This combined Form 10-K is separately filed by Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company.  Information contained in the Form 10-K relating to Interstate Power and Light Company and Wisconsin Power and Light Company is filed by such registrant on its own behalf.  Each of Interstate Power and Light Company and Wisconsin Power and Light Company makes no representation as to information relating to registrants other than itself.

Securities registered pursuant to Section 12 (b) of the Act:
   
Name of Each Exchange
 
Title of Class
on Which Registered
Alliant Energy Corporation
Common Stock, $0.01 Par Value
New York Stock Exchange
Alliant Energy Corporation
Common Share Purchase Rights
New York Stock Exchange
Interstate Power and Light Company
8.375% Series B Cumulative Preferred Stock,
New York Stock Exchange
 
$0.01 Par Value
 
Interstate Power and Light Company
7.10% Series C Cumulative Preferred Stock,
New York Stock Exchange
 
$0.01 Par Value
 
Wisconsin Power and Light Company
4.50% Preferred Stock, No Par Value
NYSE Amex LLC

Securities registered pursuant to Section 12 (g) of the Act:  Wisconsin Power and Light Company Preferred Stock
(Accumulation without Par Value)

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.

Alliant Energy Corporation
Yes [X]
No [  ]
Interstate Power and Light Company
Yes [  ]
No [X]
Wisconsin Power and Light Company
Yes [  ]
No [X]

Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [  ]  No [X]


Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports) and (2) have been subject to such filing requirements for the past 90 days.  Yes [X]  No [  ]

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).  Yes [  ]  No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
       
Smaller
 
Large
   
Reporting
 
Accelerated
Accelerated
Non-accelerated
Company
 
Filer
Filer
Filer
Filer
Alliant Energy Corporation
[X]
     
Interstate Power and Light Company
   
[X]
 
Wisconsin Power and Light Company
   
[X]
 

Indicate by checkmark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).
Yes [  ] No [X]

The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of June 30, 2009:
Alliant Energy Corporation
 
$2.9 billion
 
Interstate Power and Light Company
  $ --  
Wisconsin Power and Light Company
  $ --  

Number of shares outstanding of each class of common stock as of Jan. 29, 2010:

Alliant Energy Corporation
Common stock, $0.01 par value, 110,668,977 shares outstanding
Interstate Power and Light Company
Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which
 
are owned beneficially and of record by Alliant Energy Corporation)
Wisconsin Power and Light Company
Common stock, $5 par value, 13,236,601 shares outstanding (all of which
 
are owned beneficially and of record by Alliant Energy Corporation)

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statements relating to Alliant Energy Corporation’s and Wisconsin Power and Light Company’s 2010 Annual Meetings of Shareowners are, or will be upon filing with the Securities and Exchange Commission, incorporated by reference into Part III hereof.
 

TABLE OF CONTENTS
     
Page Number
1
2
Part I
Item 1.
2
   
2
   
3
   
4
   
7
   
17
   
21
   
21
 
Item 1A.
21
 
Item 1B.
27
 
Item 2.
27
 
Item 3.
29
 
Item 4.
30
   
31
Part II
Item 5.
 
   
Issuer Purchases of Equity Securities
32
 
Item 6.
33
 
Item 7.
35
   
35
   
40
   
44
   
48
   
54
   
55
   
65
   
70
   
73
   
83
   
83
   
85
   
85
   
88
 
Item 7A.
91
 
Item 8.
91
   
Alliant Energy Corporation
 
   
91
   
92
   
94
   
95
   
97
   
98
   
98
     
   
99
   
112
   
3.  Leases
112
   
113
   
115
   
118
   
127
   
8.  Debt
130
   
132
   
132
   
135
   
137
   
144
   
144
   
146
   
147
   
147
   
148
   
149
   
149
   
150
   
151
   
Interstate Power and Light Company
 
   
152
   
153
   
154
   
155
   
157
   
158
   
158
     
   
159
   
3.  Leases
159
   
160
   
161
   
166
   
166
   
167
   
Wisconsin Power and Light Company
 
   
168
   
169
   
170
   
171
   
173
   
174
   
174
     
   
175
   
3.  Leases
175
   
176
   
177
   
182
   
182
   
183
   
184
 
Item 9.
185
 
Item 9A.
185
 
Item 9B.
185
Part III
Item 10.
185
 
Item 11.
186
 
Item 12.
 
   
Related Stockholder Matters
186
 
Item 13.
187
 
Item 14.
187
Part IV
Item 15.
188
196
 

 
FORWARD-LOOKING STATEMENTS
Statements contained in this Annual Report on Form 10-K that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements.  Some, but not all, of the risks and uncertainties of Alliant Energy Corporation (Alliant Energy), Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL) include:

  · 
federal and state regulatory or governmental actions, including the impact of energy-related and tax legislation and of regulatory agency orders;
·  
IPL’s and WPL’s ability to obtain adequate and timely rate relief to allow for, among other things, the recovery of operating costs, deferred expenditures and capital expenditures, including any construction costs incurred over the predetermined level included in the advanced rate making principles for IPL’s Whispering Willow - East wind project, costs related to generating units that may be permanently closed, the earning of reasonable rates of return, and the payment of expected levels of dividends;
·  
the state of the economy in IPL’s and WPL’s service territories and resulting implications on sales, margins and ability to collect unpaid bills, in particular as a result of current economic conditions;
·  
weather effects on results of operations;
·  
developments that adversely impact their ability to implement their strategic plans including unanticipated issues in connection with construction and operation of IPL’s and WPL’s new wind generating facilities, WPL’s potential purchase of the Riverside Energy Center (Riverside), and unfavorable regulatory outcomes;
·  
issues related to the availability of generating facilities and the supply and delivery of fuel and purchased electricity and price thereof, including the ability to recover and to retain the recovery of purchased power, fuel and fuel-related costs through rates in a timely manner;
·  
the impact that fuel and fuel-related prices and other economic conditions may have on IPL’s and WPL’s customers’ demand for utility services;
·  
impacts that storms or natural disasters in IPL’s and WPL’s service territories may have on their operations and rate relief for costs associated with restoration activities;
·  
issues associated with environmental remediation efforts and with environmental compliance generally, including changing environmental laws and regulations, the ability to defend against environmental claims brought by state and federal agencies, such as the United States of America (U.S.) Environmental Protection Agency (EPA), or third parties such as the Sierra Club, and the ability to recover through rates all environmental compliance costs, including costs for projects put on hold due to uncertainty of future environmental laws and regulations;
·  
their ability to continue cost controls and operational efficiencies;
·  
potential impacts of any future laws or regulations regarding global climate change or carbon emissions reductions, including those that contain a proposed greenhouse gas (GHG) cap-and-trade program;
·  
continued access to the capital markets on competitive terms and rates;
·  
financial impacts of risk hedging strategies, including the impact of weather hedges or the absence of weather hedges on earnings;
·  
sales and project execution for RMT, Inc. (RMT), the level of growth in the wind and solar development market and the impact of the American Recovery and Reinvestment Act of 2009, and pending legislation;
·  
issues related to electric transmission, including operating in Regional Transmission Organization (RTO) energy and ancillary services markets, the impacts of potential future billing adjustments from RTOs and recovery of costs incurred;
·  
unplanned outages, transmission constraints or operational issues impacting fossil or renewable generating facilities and risks related to recovery of resulting incremental costs through rates;
·  
Alliant Energy’s ability to successfully defend against, and any liabilities arising out of, the purported shareowner derivative complaint stemming from the Exchangeable Senior Notes due 2030;
·  
Alliant Energy’s ability to successfully defend against, and any liabilities arising out of, the alleged violation of the Employee Retirement Income Security Act of 1974 by Alliant Energy’s Cash Balance Pension Plan;
·  
current or future litigation, regulatory investigations, proceedings or inquiries;
·  
Alliant Energy’s ability to sustain its dividend payout ratio goal;
·  
the direct or indirect effects resulting from terrorist incidents or responses to such incidents;
·  
employee workforce factors, including changes in key executives, collective bargaining agreements and negotiations, work stoppages or additional restructurings;
·  
access to technological developments;
·  
any material post-closing adjustments related to any of their past asset divestitures;
 
1

 
 
·  
the impact of necessary accruals for the terms of incentive compensation plans;
·  
the effect of accounting pronouncements issued periodically by standard-setting bodies;
·  
increased retirement and benefit plan costs;
·  
the ability to utilize tax capital losses and net operating losses generated to date, and those that may be generated in the future, before they expire;
·  
their ability to successfully complete ongoing tax audits and appeals with no material impact on earnings and cash flows;
·  
inflation and interest rates; and
·  
factors listed in Item 1A Risk Factors and “Other Matters - Other Future Considerations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MDA).

Alliant Energy, IPL and WPL assume no obligation, and disclaim any duty, to update the forward-looking statements in this Annual Report on Form 10-K.

WEBSITE ACCESS TO REPORTS
Alliant Energy makes its periodic and current reports, and amendments to those reports, available, free of charge, on its website at www.alliantenergy.com/investors on the same day as such material is electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).  Alliant Energy is not including the information contained on its website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K.

PART I

This Annual Report on Form 10-K includes information relating to Alliant Energy, IPL and WPL (as well as Alliant Energy Resources, LLC (Resources) and Alliant Energy Corporate Services, Inc. (Corporate Services)).  Where appropriate, information relating to a specific entity has been segregated and labeled as such.  Unless otherwise noted, the information herein has been revised to exclude discontinued operations for all periods presented.  Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for information on businesses reported as discontinued operations.

ITEM 1.  BUSINESS

A.  GENERAL
Alliant Energy was incorporated in Wisconsin in 1981 and maintains its principal executive offices in Madison, Wisconsin.  Alliant Energy operates as a regulated investor-owned public utility holding company.  Alliant Energy’s primary focus is to provide regulated electricity and natural gas service to approximately 1 million electric and approximately 412,000 natural gas customers in the Midwest through its two public utility subsidiaries.  The primary first tier subsidiaries of Alliant Energy are: IPL, WPL, Resources and Corporate Services.  An illustration of Alliant Energy’s first tier subsidiaries is shown below.
 
 
  Alliant Energy    
                   
                         
 IPL  
WPL
    Resources  
Corporate Services

A brief description of the primary first tier subsidiaries of Alliant Energy is as follows:

1)  IPL - was incorporated in 1925 in Iowa as Iowa Railway and Light Corporation.  IPL is a public utility engaged principally in the generation and distribution of electric energy and the distribution and transportation of natural gas in selective markets in Iowa and southern Minnesota.  In Iowa, IPL provides utility services to incorporated communities as directed by the Iowa Utilities Board (IUB) and utilizes non-exclusive franchises, which cover the use of public right-of-ways for utility facilities in incorporated communities for a maximum term of 25 years.  At Dec. 31, 2009, IPL supplied electric and gas service to 525,334 and 233,841 retail customers, respectively.  IPL also provides steam services to certain customers in Cedar Rapids, Iowa and various other energy-related products and services.  In 2009, 2008 and 2007, IPL had no single customer for which electric, gas, steam and/or other sales accounted for 10% or more of IPL’s consolidated revenues.
2


2)  WPL - was incorporated in 1917 in Wisconsin as Eastern Wisconsin Electric Company.  WPL is a public utility engaged principally in the generation and distribution of electric energy and the distribution and transportation of natural gas in selective markets in southern and central Wisconsin.  WPL operates in municipalities pursuant to permits of indefinite duration and state statutes authorizing utility operation in areas annexed by a municipality.  At Dec. 31, 2009, WPL supplied electric and gas service to 453,573 and 177,968 retail customers, respectively.  WPL also provides various other energy-related products and services.  In 2009, 2008 and 2007, WPL had no single customer for which electric, gas and/or other sales accounted for 10% or more of WPL’s consolidated revenues.  WPL Transco LLC is a wholly-owned subsidiary of WPL and holds WPL’s investment in the American Transmission Company LLC (ATC).

3)  RESOURCES - was incorporated in 1988 in Wisconsin.  In 2008, Resources was converted to a limited liability company.  Alliant Energy’s non-regulated investments are organized under Resources.  Refer to “D. Information Relating to Non-regulated Operations” for additional details.

4)  CORPORATE SERVICES - was incorporated in 1997 in Iowa.  Corporate Services provides administrative services to Alliant Energy and its subsidiaries.

Refer to Note 14 of the “Notes to Consolidated Financial Statements” for further discussion of business segments, which information is incorporated herein by reference.

B.  INFORMATION RELATING TO ALLIANT ENERGY ON A CONSOLIDATED BASIS

1)  EMPLOYEES - At Dec. 31, 2009, Alliant Energy’s consolidated subsidiaries had the following full- and part-time employees:

 
Number of
 
Number of
 
Total
 
Percentage of Employees
 
Bargaining Unit
 
Other
 
Number of
 
Covered by Collective
 
Employees
 
Employees
 
Employees
 
Bargaining Agreements
Corporate Services
--
 
1,442
 
1,442
 
--
IPL
1,167
 
268
 
1,435
 
81%
WPL
1,203
 
95
 
1,298
 
93%
Resources:
             
RMT
--
 
661
 
661
 
--
Other
84
 
37
 
121
 
69%
 
2,454
 
2,503
 
4,957
 
50%

At Dec. 31, 2009, Alliant Energy employees covered by collective bargaining agreements were as follows (International Union of Operating Engineers (IUOE); International Brotherhood of Electrical Workers (IBEW)):

 
Number of
 
Contract
 
Employees
 
Expiration Date
IPL:
     
IBEW Local 204 (Cedar Rapids)
748
 
8/31/10
IUOE Local 275
12
 
12/1/10
IBEW Local 204 (Emery)
13
 
2/12/11
IBEW Local 1439
18
 
6/30/11
IBEW Local 1455
5
 
6/30/11
IBEW Local 949
229
 
9/30/12
IBEW Local 204 (Dubuque)
100
 
9/30/12
IBEW Local 204 (Mason City)
42
 
9/30/12
 
1,167
   
WPL - IBEW Local 965
1,203
 
5/31/11
Resources - Various
84
 
Various
 
2,454
   

2)  CAPITAL EXPENDITURE AND INVESTMENT PLANS - Refer to “Liquidity and Capital Resources - Cash Flows - Investing Activities - Construction and Acquisition Expenditures” in MDA for discussion of anticipated construction and acquisition expenditures for 2010, 2011 and 2012.
 
3


3)  REGULATION - Alliant Energy, IPL and WPL are subject to regulation by various federal, state and local agencies.  The following includes the primary regulations impacting Alliant Energy’s, IPL’s and WPL’s businesses.

Federal Energy Regulatory Commission (FERC) -
Public Utility Holding Company Act of 2005 (PUHCA 2005) - Alliant Energy is registered with FERC as a public utility holding company, pursuant to PUHCA 2005, and is required to maintain certain records and to report certain transactions involving its public utilities and other entities regulated by FERC.  IPL and WPL are subject to regulation by FERC under PUHCA 2005 for various issues including, but not limited to, affiliate transactions, public utility mergers, acquisitions and dispositions, issuance of securities (IPL only) and books and records requirements.

Energy Policy Act - The Energy Policy Act requires creation of an Electric Reliability Organization (ERO) to provide oversight by FERC.  FERC designated the North American Electric Reliability Corporation (NERC) as the overarching ERO.  The Midwest Reliability Organization, which is a regional member of NERC, has direct responsibility for mandatory electric reliability standards for IPL and WPL.

Federal Power Act - FERC also has jurisdiction, under the Federal Power Act, over certain electric utility facilities and operations, electric wholesale and transmission rates, dividend payments and accounting practices of IPL and WPL.

Electric Wholesale Rates - Corporate Services, as agent for both IPL and WPL, has received wholesale electric market-based rate authority from FERC.  Market-based rate authorization allows for wholesale sales of electricity within the Midwest Independent Transmission System Operator (MISO) energy and ancillary services markets and in bilateral markets, based on the market value of the transactions.

Electric Transmission Rates - FERC regulates the rates charged for electric transmission facilities used in interstate commerce.  Neither IPL nor WPL own or operate electric transmission facilities; however, both IPL and WPL pay for the use of the interstate electric transmission system based upon FERC-regulated rates.  IPL relies primarily upon the use of the ITC Midwest LLC (ITC) transmission system.  Refer to “Other Matters - Other Future Considerations - IPL’s Electric Transmission Service Charges” in MDA for additional information regarding transmission service charges from ITC, including a FERC 206 complaint filed by IPL against ITC in 2008.  WPL relies primarily upon the use of the ATC transmission system.

National Gas Act - FERC regulates the transportation and sale for resale of natural gas in interstate commerce under the Natural Gas Act.  Under the Natural Gas Act, FERC has authority over certain natural gas facilities and operations of IPL and WPL.

Environmental - The EPA administers certain federal regulatory programs and has delegated the administration of other environmental regulatory programs to the applicable state environmental agencies.  In general, the state agencies have jurisdiction over air and water quality, hazardous substances management and transportation, and solid waste management requirements.  In certain cases, the state environmental agencies have delegated the administration of environmental programs to local agencies.  Alliant Energy, IPL and WPL are subject to these environmental regulations as a result of their current and past operations.

IUB - IPL is subject to regulation by the IUB related to its operations in Iowa for various issues including, but not limited to, retail utility rates and standards of service, accounting requirements and approval of the location and construction of electric generating facilities.

Retail Utility Base Rates - IPL files periodic requests with the IUB for retail rate relief.  These filings are based on historical test periods.  The historical test periods may be adjusted for certain known and measurable capital additions placed in service by IPL within nine months from the end of the historical test period and certain known and measurable operating and maintenance expenses incurred by IPL within 12 months of the commencement of the proceeding.  The IUB must decide on requests for retail rate relief within 10 months of the date of the application for which relief is filed, or the interim rates granted become permanent.  Interim retail rates can be placed in effect 10 days after the rate application filing, subject to refund, and must be based on past precedent.
 
4


Retail Commodity Cost Recovery Mechanisms - IPL’s retail electric and natural gas tariffs contain an automatic adjustment clause for changes in prudently incurred commodity costs required to serve its retail customers.  Any over/under collection of commodity costs for each given month are automatically reflected in future billings to retail customers.

New Electric Generating Facilities - A Certificate of Public Convenience, Use and Necessity (GCU Certificate) application is required to be filed with the IUB for construction approval of any new electric generating facility located in Iowa with 25 megawatts (MW) or more of capacity.

Advance Rate Making Principles - Iowa Code §476.53 (formerly referred to as HF 577) provides Iowa utilities with rate making principles prior to making certain generation investments in Iowa.  Under Iowa Code §476.53, IPL must file for, and the IUB must provide, rate making principles for electric generating facilities located in Iowa that have received construction approval including new base-load (primarily defined as nuclear or coal-fired generation) facilities with a capacity of 300 MW or more, combined-cycle natural gas-fired facilities of any size and renewable generating resources, such as wind facilities, of any size.  Upon approval of rate making principles by the IUB, IPL must either build the facility under the approved rate making principles, or not at all.

Public Service Commission of Wisconsin (PSCW) - Alliant Energy is subject to regulation by the PSCW for the type and amount of Alliant Energy’s investments in non-utility businesses and other affiliated interest activities, among other issues.  WPL is also subject to regulation by the PSCW related to its operations in Wisconsin for various issues including, but not limited to, retail utility rates and standards of service, accounting requirements, issuance and use of proceeds of securities, approval of the location and construction of electric generating facilities and certain other additions and extensions to facilities.

Retail Utility Base Rates - WPL files periodic requests with the PSCW for retail rate relief.  These filings are required to be based on forward-looking test periods.  There is no statutory time limit for the PSCW to decide retail rate requests.  However, the PSCW attempts to process base retail rate cases in approximately 10 months and has the ability to approve interim retail rate relief, subject to refund, if necessary.

Retail Commodity Cost Recovery Mechanisms -
Electric - WPL’s retail electric rates are based on estimates of annual fuel-related costs (includes fuel and purchased power energy costs) anticipated during the test period.  During each electric retail rate proceeding, the PSCW sets fuel monitoring ranges based on the forecasted fuel-related costs used to determine rates in such proceeding.  If WPL’s actual fuel-related costs fall outside these fuel monitoring ranges, the PSCW can authorize an adjustment to future retail electric rates.

The fuel monitoring ranges set by the PSCW consist of unit cost variances between monitoring levels and actual unit costs and include three different ranges based on monthly costs, cumulative costs and revised forecasted annual costs during the test-year period.  In order for WPL, or others, to initiate a proceeding to change rates related to fuel-related costs during the test period, WPL, or others, must demonstrate: a) that either 1) any actual monthly costs during the test period exceeded the monthly ranges or 2) the actual cumulative costs to date during the test period exceeded the cumulative ranges; and b) that the annual projected costs (that include cumulative actual costs) for the test period also exceed the annual ranges.  In December 2009, the PSCW approved an order continuing WPL’s fuel monitoring ranges of plus or minus 8% for the monthly range; for the cumulative range, plus or minus 8% for the first month, plus or minus 5% for the second month, and plus or minus 2% for the remaining months of the monitoring period; and plus or minus 2% for the annual range.  For fuel-only retail rate changes, the PSCW attempts to provide interim changes effective within 21 days of notice to customers.  There is no statutory time limit for final fuel-only retail rate change decisions.

Natural Gas - WPL’s retail natural gas tariffs contain an automatic adjustment clause for changes in prudently incurred natural gas costs required to serve its retail gas customers.  Any over/under collection of natural gas costs for each given month are automatically reflected in future billings to retail customers.

New Electric Generating Facilities - A Certificate of Authority (CA) application is required to be filed with the PSCW for construction approval of any new electric generating facility with a capacity of less than 100 MW.  A Certificate of Public Convenience and Necessity (CPCN) application is required to be filed with the PSCW for construction approval of any new electric generating facility with a capacity of 100 MW or more.  In addition, WPL’s ownership and operation of electric generating facilities (including those located in Minnesota) to serve Wisconsin customers is subject to retail utility rate regulation by the PSCW.
 
5


In June 2008, WPL filed a CPCN application with the PSCW to construct WPL’s Bent Tree - Phase I wind project, which proposed the installation of a 200 MW wind generating facility in Minnesota.  In a November 2008 interim order, the PSCW interpreted the CA and CPCN statutes in relationship to constructing more than 100 MW of capacity outside of Wisconsin, an issue that is not specifically addressed in either the CA or the CPCN statute.  The PSCW determined that WPL’s Bent Tree - Phase I application must be reviewed under the CA statute and not the CPCN statute, and processed WPL’s application as a CA application.

In August 2009, Wisconsin Industrial Energy Group, Inc. and Citizens Utility Board filed a Petition for Review with the Circuit Court of Dane County, Wisconsin seeking judicial review of: 1) the PSCW’s November 2008 interim order that determined WPL’s application for the Bent Tree - Phase I wind project must be reviewed under the CA statute and not the CPCN statute; and 2) the PSCW’s July 2009 final order that granted WPL a CA to construct the Bent Tree - Phase I wind project.  In October 2009, the PSCW filed a motion to dismiss the petition.

Advance Rate Making Principles - Wisconsin Statutes §196.371 (formerly referred to as Act 7) provides Wisconsin utilities with the opportunity to request rate making principles prior to the purchase or construction of any nuclear or fossil-fueled electric generating facility or renewable generating resource, such as a wind facility, utilized to serve Wisconsin customers.  WPL is not obligated to file for or accept authorized rate making principles under Wisconsin Statutes §196.371.  WPL can proceed with an approved project under traditional rate making terms.

Minnesota Public Utilities Commission (MPUC) - IPL is subject to regulation by the MPUC related to its operations in Minnesota for various issues including, but not limited to, retail utility rates and standards of service, accounting requirements, issuance and use of proceeds of securities, periodic approval of IPL’s capital structure, and approval of the location and construction of electric generating facilities located in Minnesota with a capacity in excess of 50 MW.

Retail Utility Rates - Requests for retail rate relief can be based on either historical or projected data and interim retail rates are permitted.  Unless otherwise ordered, the MPUC must reach a final decision within 10 months of filing for retail rate relief.  In February 2010, legislation (H.R. 2798 and S. 2519) was introduced in the Minnesota legislature that would allow a utility to implement interim retail rates only when the MPUC finds an immediate and compelling necessity exists for interim rate relief.  If the MPUC finds that interim rate relief is necessary, the MPUC may authorize an interim rate schedule under which the utility’s revenues would be increased by an amount deemed necessary to prevent harm to the public or utility.  Alliant Energy and IPL are currently unable to determine the ultimate impact of this proposed legislation on their financial condition and results of operations.

Refer to Notes 1(b), 1(h), 2 and 12(e) of Alliant Energy’s “Notes to Consolidated Financial Statements;” and “Rate Matters,” “Environmental Matters” and “Legislative Matters” in MDA for additional information regarding regulation and utility rate matters.

4)  STRATEGIC OVERVIEW - Refer to “Strategic Overview” in MDA for discussion of various strategic actions by Alliant Energy, IPL and WPL.

C.  INFORMATION RELATING TO UTILITY OPERATIONS

Alliant Energy’s utility business (IPL and WPL) has three segments: a) electric operations; b) gas operations; and c) other, which includes IPL’s steam operations, various other energy-related products and services and the unallocated portions of the utility business.  In 2009, IPL’s and WPL’s operating revenues and operating income (loss) by these three utility business segments were as follows:

 
IPL
 
WPL
 
Operating
 
Operating
 
Operating
 
Operating
 
Revenues
 
Income (Loss)
 
Revenues
 
Income (Loss)
Electric
77%
 
89%
 
84%
 
87%
Gas
18%
 
12%
 
16%
 
15%
Other
5%
 
(1%)
 
--
 
(2%)
 
100%
 
100%
 
100%
 
100%
 
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1)  ELECTRIC UTILITY OPERATIONS
General - Electric utility operations represent the largest operating segment for Alliant Energy, IPL and WPL.  Alliant Energy’s electric utility operations are located in the Midwest with IPL and WPL providing electric service in Iowa, southern and central Wisconsin and southern Minnesota.  Refer to the “Electric Operating Information” tables for additional details regarding electric utility operations.

Jurisdictions - Electric utility revenues by state were as follows (dollars in millions):

   
2009
   
2008
   
2007
 
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
IPL:
                                   
Iowa
  $ 1,242.3       50 %   $ 1,184.3       49 %   $ 1,173.0       49 %
Minnesota
    73.3       3 %     74.0       3 %     75.1       3 %
Illinois (a)
    --       --       --       --       22.0       1 %
Subtotal
    1,315.6       53 %     1,258.3       52 %     1,270.1       53 %
WPL:
                                               
Wisconsin
    1,160.3       47 %     1,153.0       48 %     1,139.4       47 %
Illinois (a)
    --       --       --       --       1.3       --  
Subtotal
    1,160.3       47 %     1,153.0       48 %     1,140.7       47 %
    $ 2,475.9       100 %   $ 2,411.3       100 %   $ 2,410.8       100 %
(a) IPL’s and WPL’s utility operations in Illinois were sold in February 2007.

The percentage of electric utility revenues regulated by IPL’s and WPL’s respective state commissions and FERC were as follows:

 
IPL
 
WPL
 
2009
 
2008
 
2007
 
2009
 
2008
 
2007
Respective state commissions
95%
 
96%
 
95%
 
80%
 
84%
 
85%
FERC
5%
 
4%
 
5%
 
20%
 
16%
 
15%
 
100%
 
100%
 
100%
 
100%
 
100%
 
100%

Customers - The number of electric customers and communities served at Dec. 31, 2009 was as follows:

 
Retail Customers
 
Wholesale Customers
 
Other Customers
 
Total Customers
 
Communities Served
IPL
525,334
 
9
 
1,367
 
526,710
 
752
WPL
453,573
 
21
 
   2,158
 
455,752
 
608
 
978,907
 
30
 
3,525
 
982,462
 
1,360  

IPL and WPL provide electric utility service to a diversified base of retail customers in several industries, with the largest concentrations in the food manufacturing, chemical (including ethanol) and paper industries.  IPL’s retail customers in the above table are billed under base rates established by the IUB or MPUC that include recovery of purchased electric capacity costs, electric transmission service costs and other costs required to serve customers.  IPL’s electric production fuel and energy purchases costs are recovered pursuant to fuel adjustment clauses.  WPL’s retail customers in the above table are billed under base rates established by the PSCW that include recovery of electric production fuel and purchased energy costs, purchased electric capacity costs, electric transmission service costs and other costs required to serve customers.  The electric fuel rules in Wisconsin allow the PSCW to authorize rate increases/decreases if electric production fuel and energy purchases costs exceed or fall below established fuel monitoring ranges.

Wholesale customers in the above table, which primarily consist of municipalities and rural electric cooperatives, are billed under wholesale service agreements.  These agreements include standardized pricing mechanisms that are detailed in tariffs approved by FERC through wholesale rate case proceedings.

In addition, IPL and WPL have bulk power customers, included in “Other customers” in the above table, that are billed according to negotiated, long-term customer-specific contracts, pursuant to FERC-approved tariffs.
 
7


Seasonality - Electric sales are seasonal to some extent with the annual peak normally occurring in the summer months due to air conditioning requirements.  In 2009, the maximum peak hour demands for Alliant Energy, IPL and WPL were 5,491 MW, 2,981 MW and 2,558 MW, respectively, all on June 23, 2009.

Competition - Retail electric customers in Iowa, Wisconsin and Minnesota currently do not have the ability to choose their electric supplier.  However, IPL and WPL attempt to attract new customers into their service territories in an effort to keep energy rates low for all.  Although electric service in Iowa, Wisconsin and Minnesota is regulated, IPL and WPL still face competition from self-generation by large industrial customers, alternative energy sources, and petitions to municipalize (Iowa) as well as service territory expansions by municipal utilities through annexations (Wisconsin).  Refer to “Other Matters - Other Future Considerations - Electric Sales Projections - Customer Owned Generation” in MDA for information on the recent construction of cogeneration facilities by two of IPL’s industrial customers.

In November 2009, WPL filed a request with the PSCW for approval of a proposed economic development program to attract and retain industrial customers in WPL’s service territory.  If approved, the proposed program would permit WPL to provide eligible industrial customers a discounted energy rate based upon specifically-defined conditions.  To be eligible for the proposed program, each customer would need to demonstrate that they were also eligible for direct governmental assistance through a local, state or federal economic development program, in addition to other criteria.  The discount amounts would be limited to ensure recovery of marginal costs and would be continually decreased until a customer was paying the full tariff rate.  WPL currently anticipates receiving a decision from the PSCW regarding this filing in the first half of 2010.

Renewable Energy Standards
Iowa - Electric utilities in Iowa are required to purchase or own their proportionate share of 105 MW of capacity and associated energy from alternate energy or small hydro facilities located in the utilities’ service area.  IPL’s proportionate share is approximately 50 MW.  As of Dec. 31, 2009, IPL had met the requirements of this renewable energy standard.

Wisconsin - A Wisconsin Renewable Portfolio Standard (RPS) was established in 2006 that requires electric utilities in Wisconsin, including WPL, to increase the portion of their total Wisconsin retail electric sales supplied by renewable energy sources above a benchmark of average retail sales from renewables in 2001, 2002 and 2003.  The RPS requires a 2% increase above the benchmark by 2010 and a 6% increase above the benchmark by 2015.  Based on this RPS, WPL is required to supply a minimum of 6% and 10% of its total Wisconsin retail electric sales with renewable energy sources by 2010 and 2015, respectively.  Wisconsin utilities may reach the RPS with renewable energy generated by the utility, acquired under purchased power agreements (PPAs), or through the use of renewable resource credits.

Minnesota - A Minnesota Renewable Energy Standard (RES) was established in 2007 that requires electric utilities operating in Minnesota, including IPL, to supply a minimum level of their total Minnesota retail electric sales with renewable energy sources by certain future dates.  Based on this RES, IPL’s total Minnesota retail electric sales supplied with renewable energy sources must be at least 12% by 2012; 17% by 2016; 20% by 2020; and 25% by 2025.  Utilities in Minnesota may meet the requirements of the RES with renewable energy generated by the utility, renewable energy acquired under PPAs or the use of renewable resource credits.

Refer to “Strategic Overview - Utility Generation Plans” in MDA for discussion of Alliant Energy’s utility generation plan, which includes additional supply from wind generation that is expected to contribute towards meeting renewable energy requirements discussed above.

Energy Conservation - With increased emphasis on energy conservation as a matter of public policy, IPL and WPL are continuing and, where appropriate, expanding initiatives to promote energy conservation and enhance customers’ ability to manage their energy use more efficiently.  Refer to “Strategic Overview - Energy Efficiency Programs” in MDA for discussion of current energy efficiency programs at IPL and WPL.
 
8

Electric Supply - Alliant Energy has met historical customer demand of electricity and expects to continue meeting future demand through internally generated electric supply, electric supply from long-term PPAs and additional electric supply purchases from wholesale energy markets.  Alliant Energy’s mix of electric supply experienced changes in 2009 with WPL’s purchase of the Neenah Energy Facility and the completion of IPL’s Whispering Willow - East wind project.  Alliant Energy expects its mix of electric supply to change further in the next few years with plans for the construction of additional wind generating facilities and the purchase of Riverside in Beloit, Wisconsin.  IPL and WPL are currently updating their generation plans to identify longer term generation needs for both utilities.  These long-term generation plans are intended to meet customer demand, reduce reliance on PPAs and mitigate the impacts of future plant retirements while maintaining compliance with long-term electric demand planning reserve margins established by regulators.  Alliant Energy currently expects to meet utility customer demands in the future.  However, unanticipated regional or local reliability issues could still arise in the event of unexpected delays in the construction of new generating and/or transmission facilities, retirement of generating facilities, generating facility outages, transmission system outages or extended periods of extreme weather conditions.  Refer to the “Electric Operating Information” tables for a profile of the sources of electric supply used to meet customer demand for Alliant Energy, IPL and WPL from 2005 to 2009.  Refer to “Strategic Overview - Utility Generation Plans” in MDA for details of Alliant Energy’s future utility generation plan.

Electric Demand Planning Reserve Margin (PRM) - IPL and WPL are required to maintain a PRM above their projected annual peak demand forecast to help ensure reliability of electric service to their customers.  WPL is required to maintain a 14.5% PRM for long-term planning (planning years two through 10) and a PRM established by MISO for short-term planning.  PRM requirements for IPL follow MISO’s reserve requirements.  IPL and WPL currently have adequate capacity to meet the MISO PRM requirements.

Generation - IPL and WPL own a portfolio of electric generating facilities located in Iowa, Wisconsin and Minnesota with a diversified fuel mix including coal, natural gas and renewable resources.  Refer to Item 2. Properties for details of IPL’s and WPL’s electric generating stations.

Generating Capacity - The generating capacity of IPL’s and WPL’s electric generating facilities is based upon MISO’s resource adequacy process, which uses the unforced capacity of the generating facilities.  The generating capacity for the June 2009 to May 2010 planning period by fuel type in MWs was as follows:

 
IPL
 
WPL
 
Total
Coal
1,590
 
1,231
 
2,821
Natural gas
822
 
628
 
1,450
Oil
292
 
--
 
292
Wind (a)
40
 
14
 
54
Hydro
--
 
27
 
27
Total
2,744
 
1,900
 
4,644
(a)  Represents 20% of the capacity of wind projects owned by IPL and WPL based upon the MISO resource adequacy process for wind projects for the planning period from June 2009 to May 2010.  As of Dec. 31, 2009, wind projects owned by Alliant Energy included IPL’s 200 MW Whispering Willow - East wind project in Franklin County, Iowa and WPL’s 68 MW Cedar Ridge wind project in Fond du Lac County, Wisconsin.

Fuel Costs - The average cost of delivered fuel per million British Thermal Units used for electric generation was as follows:

   
IPL
   
WPL
 
   
2009
   
2008
   
2007
   
2009
   
2008
   
2007
 
All fuels
  $ 2.29     $ 2.09     $ 2.35     $ 2.13     $ 2.06     $ 1.97  
Coal
    1.56       1.58       1.35       2.02       1.93       1.69  
Natural gas (a)
    13.31       8.18       9.21       18.53       8.64       13.86  
(a) The average cost of natural gas is impacted by gains and losses from swap contracts used to hedge the price of natural gas volumes expected to be used by Alliant Energy’s natural gas-fired electric generating facilities.
 
9


Coal - Coal is the primary fuel source for Alliant Energy’s, IPL’s and WPL’s internally generated electric supply and generally represents approximately 50% of their total sources of electric energy.  Alliant Energy, through Corporate Services as agent for IPL and WPL, has entered into contracts with different suppliers to help ensure that a specified supply of coal is available at known prices for IPL’s and WPL’s coal-fired generating facilities for 2010 through 2012.  As of Dec. 31, 2009, existing contracts provide for a portfolio of coal supplies that cover approximately 91%, 62%, and 6% of Alliant Energy’s estimated coal supply needs for 2010, 2011 and 2012, respectively.  Alliant Energy believes this portfolio of coal supplies represents a reasonable balance between the risks of insufficient supplies and those associated with being unable to respond to future coal market changes.  Alliant Energy expects to meet remaining coal requirements from either future contracts or purchases in the spot market.  Alliant Energy, through its subsidiaries Corporate Services, IPL and WPL, also enters into various coal transportation contracts to meet its coal supply agreements.  As of Dec. 31, 2009, existing coal transportation agreements cover approximately 80%, 67%, 67%, 47%, and 47% of Alliant Energy’s estimated coal transportation needs for 2010 through 2014, respectively.

The majority of the coal utilized by IPL and WPL is from the Wyoming Powder River Basin.  A majority of this coal is transported by rail-car directly from Wyoming to IPL’s and WPL’s generating stations, with the remainder transported from Wyoming to the Mississippi River by rail-car and then via barges to the final destination.  As protection against interruptions in coal deliveries, IPL and WPL strive to maintain average coal inventory supply targets of 25 to 50 days for generating stations with year-round deliveries and 30 to 150 days (depending upon the time of year) for generating stations with seasonal deliveries.  Actual inventory averages for 2009 were 82 days for generating stations with year-round deliveries and 210 days for generating stations with seasonal deliveries.  The average days on hand were computed based on actual tons of inventory divided by average daily tons burned in 2009.  Average days on hand increased in 2009 primarily due to lower coal volumes burned as a result of reduced generation needed to serve the lower sales volumes in 2009.  Alliant Energy periodically tests coal from sources other than the Wyoming Powder River Basin to determine which alternative sources of coal are most compatible with its generating stations.  Access to alternative sources of coal is expected to provide Alliant Energy with further protection against interruptions and lessen its dependence on its primary coal source.

Average delivered fossil fuel costs are expected to increase in the future due to price structures and adjustment provisions in existing coal contracts, rate structures and adjustment provisions in existing transportation contracts, fuel-related surcharges incorporated by transportation carriers and recent coal and transportation market trends.  Existing coal commodity contracts with terms of greater than one year have fixed future year prices that generally reflect recent market trends.  A few of Alliant Energy’s existing coal contracts have provisions for price adjustments should specific indices change.  Rate adjustment provisions in older transportation contracts are primarily based on changes in the Rail Cost Adjustment Factor as published by the U.S. Surface Transportation Board.  Rate adjustment provisions in more recent transportation contracts are based on changes in the All Inclusive Index Less Fuel as published by the Association of American Railroads.  These more recent transportation contracts also contain fuel surcharges that are subject to change monthly based on changes in diesel fuel prices.  Other factors that may impact coal prices for future commitments are increasing costs for supplier mineral rights, increasing costs to mine the coal and changes in various associated laws and regulations.  For example, emission restrictions related to sulfur dioxide (SO2), nitrogen oxide (NOx) and mercury, along with other environmental limitations on generating stations, continue to increase and will likely limit the ability to obtain, and further increase the cost of, adequate coal supplies.  Factors that may impact future transportation rates include, but are not limited to: the need for railroads to enhance/expand infrastructure for demand growth, corresponding investments in locomotives and the desire to improve margins on coal movements commensurate with margins on non-coal movements.

Given its current coal procurement process, the specific coal market in its primary purchase region and regulatory cost-recovery mechanisms, Alliant Energy believes it is reasonably insulated against coal price volatility. Alliant Energy’s coal procurement process stresses periodic purchases, staggering of contract terms, stair-stepped levels of supply going forward for multiple years and supplier diversity. Similarly, given the term lengths of its transportation agreements, Alliant Energy believes it is reasonably insulated against future higher coal transportation rates from the major railroads.

Natural Gas - Alliant Energy owns several natural gas-fired generating facilities including IPL’s 565 MW Emery Generating Station, WPL’s 300 MW Neenah Energy Facility and Resources’ 300 MW Sheboygan Falls Energy Facility.  WPL has exclusive rights to the output of the Sheboygan Falls Energy Facility under an affiliated lease agreement.  These facilities help meet customer demand for electricity generally during peak hour demands.  Internally generated electric supply from natural gas-fired generating facilities generally represent less than 5% of Alliant Energy’s, IPL’s and WPL’s total sources of electric energy.  Refer to Note 1(e) of Alliant Energy’s “Notes to Consolidated Financial Statements” for additional information on WPL’s purchase of the Neenah Energy Facility from Resources in June 2009.
 
10


Alliant Energy has responsibility to supply natural gas to the generating facilities it owns as well as Riverside, which WPL has rights to under a PPA.  WPL has contracts with several companies to provide fixed-price natural gas supply for these generating facilities with the longest contracts having terms through August 2010.  WPL has also contracted with ANR Pipeline to provide firm pipeline transportation of 60,000 dekatherms (Dths) per day for Riverside and 2 million Dths of storage capacity for WPL’s natural gas-fired generating facilities.  IPL has also contracted with Northern Border Pipeline to provide firm pipeline transportation of 50,000 Dths per day for the Emery Generating Station through March 2010.

Nuclear - In January 2006, IPL sold its interest in the Duane Arnold Energy Center (DAEC) to a subsidiary of FPL Group, Inc. (FPL) and upon closing of the sale entered into a PPA with FPL to purchase energy and capacity from DAEC through February 2014.  In July 2005, WPL sold its interest in the Kewaunee Nuclear Power Plant (Kewaunee) to a subsidiary of Dominion Resources, Inc. (Dominion) and upon closing of the sale entered into a long-term PPA with Dominion to purchase energy and capacity from Kewaunee through December 2013.  As a result of these transactions, Alliant Energy no longer has an ownership interest in any nuclear generating facilities.  Alliant Energy entered into these transactions to reduce the financial and operational uncertainty associated with nuclear generating facility ownership and operations while still retaining the benefit of the output from such nuclear generating facilities.

Wind - IPL’s 200 MW Whispering Willow - East wind project in Franklin County, Iowa began commercial operation in the fourth quarter of 2009.  WPL’s 68 MW Cedar Ridge wind project in Fond du Lac County, Wisconsin began commercial operation in the fourth quarter of 2008.  Whispering Willow - East and Cedar Ridge are the first fully owned and operated wind projects for IPL and WPL, respectively.  Refer to “Strategic Overview - Utility Generation Plans” in MDA for discussion of additional wind projects included in the Utility Generation Plans.

Purchased Power - IPL and WPL enter into PPAs and purchase electricity from wholesale energy markets to meet a portion of their customer demand for electricity.  Purchased power represented almost 50% of Alliant Energy’s, IPL’s and WPL’s total sources of electric energy in 2009.  IPL’s most significant PPA is with FPL for the purchase of energy and capacity from DAEC through February 2014.  WPL’s most significant PPAs are with Dominion for the purchase of energy and capacity from Kewaunee through December 2013 and with a subsidiary of Calpine Corporation for the purchase of energy and capacity from Riverside through May 2013.

Refer to Note 1(h) for discussion of IPL’s and WPL’s rate recovery of electric production fuel and purchased energy costs, Note 3(a) for details regarding PPAs accounted for as operating leases and Note 12(b) for details on IPL’s and WPL’s coal, natural gas and other purchased power commitments in Alliant Energy’s “Notes to Consolidated Financial Statements.”

Electric Transmission -
IPL - IPL completed the sale of its electric transmission assets located in Iowa, Minnesota and Illinois to ITC in 2007.  IPL sold its electric transmission assets in order to monetize the value of the assets to help fund future capital expenditures, to capture tax benefits under federal tax policy that allows deferral of gains on sales of qualifying electric transmission assets completed prior to Jan. 1, 2008 (based on regulations at the time of the sale) and to promote regional transmission expansion that is expected to improve transmission reliability and access for its customers in Iowa and Minnesota.  ITC is an independent for-profit, transmission-only company and is a transmission-owning member of the MISO RTO, Midwest Reliability Organization and Reliability First Corporation Regional Entities.  ITC has transmission interconnections at various locations with other transmission owning utilities in the Midwest.  These interconnections enhance the overall reliability of the IPL delivery system and provide access to multiple sources of economic and emergency energy.  IPL currently receives substantially all its transmission services from ITC.  The annual transmission service rates that ITC charge its customers is calculated each calendar year using a FERC-approved cost of service formula rate template referred to as Attachment O.  Refer to “Other Matters - Other Future Considerations - IPL’s Electric Transmission Service Charges” in MDA for additional information regarding transmission services charges from ITC including a FERC 206 complaint filed by IPL against ITC in 2008.
 
11


WPL - WPL transferred its transmission assets to ATC in 2001 in exchange for an ownership interest in ATC.  As of Dec. 31, 2009, WPL held a 16% ownership interest in ATC with a carrying value of $219 million.  WPL currently anticipates making capital contributions of $3 million, $4 million and $3 million to ATC in 2010, 2011 and 2012, respectively, to maintain its current ownership percentage.  During 2009, ATC distributed to WPL, in the form of dividends, $29 million or approximately 80% of WPL’s equity earnings from ATC.  Although no assurance can be given, WPL anticipates ATC will continue this dividend payout ratio in the future.  ATC is an independent for-profit, transmission-only company and is a transmission-owning member of the MISO RTO, Midwest Reliability Organization and Reliability First Corporation Regional Entities.  ATC has transmission interconnections with various other transmission owning utilities in the Midwest.  These interconnections enhance the overall reliability of the WPL delivery system and provide access to multiple sources of economic and emergency energy.  WPL currently receives substantially all its transmission services from ATC.  Refer to Note 20 of Alliant Energy’s “Notes to Consolidated Financial Statements” for details of agreements between ATC and WPL.

MISO Markets - IPL and WPL are members of MISO, a FERC-approved RTO, which is responsible for monitoring and ensuring equal access to the transmission system in their service territories.  IPL and WPL participate in the wholesale energy market and ancillary services markets operated by MISO, which are discussed in more detail below.

Wholesale Energy Market - IPL and WPL began participation in the wholesale energy market operated by MISO in 2005.  The market impacts the way IPL and WPL buy and sell wholesale electricity, obtain transmission services, schedule generation and ensure resource adequacy to reliably serve load.  In the market, IPL and WPL submit day-ahead and/or real-time bids and offers for energy at locations across the MISO region.  MISO evaluates IPL’s, WPL’s and other market participants’ energy injections into, and withdrawals from, the system to economically dispatch the entire MISO system on an hourly basis.  MISO settles these hourly offers and bids based on locational marginal prices, which are market-driven values based on the specific time and location of the purchase and/or sale of energy.  The market is intended to send price signals to stakeholders where generation or transmission system expansion is needed.  This market-based approach is expected to result in lower overall costs in areas with abundant transmission capacity.  In addition, MISO may dispatch generators that support reliability needs, but which would not have operated based on economic needs.  In these cases, MISO’s settlement assures that these generators are made whole financially for variable costs.

Financial Transmission Rights (FTRs) and Auction Revenue Rights (ARRs) - In areas of constrained transmission capacity, such as Wisconsin, costs could be higher due to congestion and its impact on locational marginal prices.  As part of the MISO market restructuring in 2005, physical transmission rights of IPL and WPL were replaced with FTRs.  FTRs provide a hedge for congestion costs that occur in the MISO day-ahead energy market.  Both IPL and WPL are allocated ARRs from MISO each year based on historical use of the transmission system.  The revenues from these ARRs are used by IPL and WPL to acquire FTRs through the FTR auctions operated by MISO.  IPL’s and WPL’s current FTRs acquired from ARRs extend through May 31, 2010.  MISO re-allocates ARRs annually based on a fiscal year from June 1 through May 31.  Based on the FTRs awarded to IPL and WPL to-date and future expected allocations of ARRs, along with the expected regulatory recovery treatment of MISO costs, the financial impacts associated with FTRs have not differed significantly from the financial impacts associated with physical transmission rights that existed prior to the MISO wholesale energy market.

Ancillary Services Market - In January 2009, MISO launched an ancillary services market, which integrates the procurement and use of regulation and contingency reserves with the existing wholesale energy market implemented in 2005.  Regulation refers to the moment-to-moment changes in generation that are necessary to meet changes in electricity demand.  Contingency reserves refer to additional generation or demand response resources, either on-line or that can be brought on-line within 10 minutes, to meet certain major events such as the loss of a large generating unit or transmission line.  MISO plans to address in 2011 refinements to its ancillary services market requested by market participants.

MISO Revenue Sufficiency Guarantee (RSG) Settlements - In 2008, FERC issued two orders requiring MISO to resettle two separate amounts of historical RSG charges from its wholesale energy market.  These resettlements involve MISO collecting RSG charges from some market participants and refunding the collected amounts to other market participants.  In May and June 2009, FERC issued two orders reversing portions of its 2008 orders that reduced the amount of anticipated RSG resettlements compared to initial estimates.  Various FERC orders related to RSG settlements and resettlements are subject to FERC rehearing or have been appealed to the U.S. Court of Appeals for the D.C. Circuit.  In 2009, IPL and WPL received $2 million and $1 million, respectively, of net benefits from the two resettlements, including interest.
 
12


MISO and PJM Interconnection, LLC (PJM) Market Flow Corrections - In August 2009, MISO and PJM disclosed an error in the calculation of market flow data between the two independent system operators that began in 2005.  The error resulted in incorrect payments between MISO and PJM during 2005 through 2009.  Because IPL and WPL participated in both the MISO and PJM markets during the period of the error, IPL and WPL may be entitled to refunds or may be required to make additional payments to the two independent system operators.  MISO and PJM are currently in settlement discussions regarding this matter.  IPL and WPL are currently unable to predict the ultimate resolution of this matter.  However, the net impact of payments to or refunds from these two independent system operations to resolve this matter is not expected to have a material adverse impact on IPL’s or WPL’s financial condition and results of operation.

Electric Environmental Matters - Alliant Energy is subject to environmental regulations issued by federal, state and local agencies.  Such regulations are the result of a number of environmental laws passed by the U.S. Congress, state legislatures and local governments and enforced by federal, state and local regulatory agencies.  The laws impacting Alliant Energy’s electric operations include, but are not limited to, the Safe Drinking Water Act; Clean Water Act; Clean Air Act (CAA); National Environmental Policy Act of 1969; Toxic Substances Control Act; Resource Conservation and Recovery Act; Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act and Emergency Planning and Community Right-to-Know Act of 1986; Endangered Species Act; Occupational Safety and Health Act; National Energy Policy Act, as amended; Federal Insecticide, Fungicide and Rodenticide Act; Hazardous Materials Transportation Act; Pollution Prevention Act; and Department of Homeland Security Appropriations Act.  Alliant Energy regularly obtains federal, state and local permits to assure compliance with environmental protection laws and regulations.  Costs associated with such compliance have increased in recent years and are expected to continue to increase in the future.  Alliant Energy anticipates these prudently incurred costs for IPL and WPL will be recoverable through future rate case proceedings.  Refer to “Environmental Matters” and “Legislative Matters” in MDA and Note 12(e) of Alliant Energy’s “Notes to Consolidated Financial Statements” for further discussion of electric environmental matters including current or proposed environmental regulations under the Clean Air Interstate Rule, Clean Air Visibility Rule, Utility Maximum Available Control Technology (MACT) Rule, Wisconsin State Mercury Rule, Wisconsin Reasonably Available Control Technology Rule, Ozone National Ambient Air Quality Standards (NAAQS) Rule, Fine Particle NAAQS Rule, Nitrogen Dioxide NAAQS Rule, SO2 NAAQS Rule, Industrial Boiler and Process Heater MACT Rule, Federal Clean Water Act including Section 316(b), Wisconsin State Thermal Rule, Coal Combustion By-products and various legislation and EPA regulations to monitor and regulate the emission of GHG including the EPA Mandatory GHG Reporting Rule, GHG Endangerment and Cause or Contribute Finding and GHG Tailoring Rule.  Refer to “Strategic Overview - Environmental Compliance Plans” in MDA for details of Alliant Energy’s, IPL’s and WPL’s future environmental compliance plans to adhere to environmental regulations.
 
13

 
Alliant Energy Corporation
                             
                               
Electric Operating Information
 
2009
   
2008
   
2007
   
2006
   
2005
 
Operating Revenues (in millions) (a):
                             
     Residential
  $ 868.6     $ 844.7     $ 847.5     $ 857.1     $ 823.4  
     Commercial
    556.8       537.5       535.2       549.8       497.4  
     Industrial
    710.7       734.7       731.9       763.7       675.2  
       Retail subtotal
    2,136.1       2,116.9       2,114.6       2,170.6       1,996.0  
     Sales for resale:
                                       
       Wholesale
    190.1       201.9       179.8       145.2       158.7  
       Bulk power and other
    98.3       31.1       56.7       68.5       114.6  
     Other (includes wheeling)
    51.4       61.4       59.7       58.7       51.3  
          Total
  $ 2,475.9     $ 2,411.3     $ 2,410.8     $ 2,443.0     $ 2,320.6  
                                         
Electric Sales (000s megawatt-hours (MWh)) (a):
                                 
     Residential
    7,532       7,664       7,753       7,670       7,881  
     Commercial
    6,108       6,181       6,222       6,187       6,110  
     Industrial
    10,948       12,490       12,692       12,808       12,830  
       Retail subtotal
    24,588       26,335       26,667       26,665       26,821  
     Sales for resale:
                                       
       Wholesale
    3,251       3,813       3,547       3,064       3,161  
       Bulk power and other
    2,583       983       2,550       2,632       2,933  
     Other
    155       164       167       171       173  
          Total
    30,577       31,295       32,931       32,532       33,088  
                                         
Customers (End of Period) (a):
                                       
     Residential
    840,927       840,644       840,122       855,948       849,845  
     Commercial
    135,099       134,536       134,235       135,822       134,149  
     Industrial
    2,881       2,934       2,964       3,064       3,044  
     Other
    3,555       3,534       3,529       3,391       3,368  
          Total
    982,462       981,648       980,850       998,225       990,406  
                                         
Other Selected Electric Data:
                                       
     Maximum peak hour demand (MW)
    5,491       5,491       5,751       5,989       5,932  
     Cooling degree days (b):
                                       
          Cedar Rapids, Iowa (IPL) (normal - 779)
    406       583       846       765       891  
          Madison, Wisconsin (WPL) (normal - 642)
    368       538       781       637       847  
Sources of electric energy (000s MWh):
                                 
          Coal
    15,321       17,495       18,643       17,578       17,360  
          Purchased power:
                                       
               Nuclear (c)
    5,428       5,465       5,103       5,128       1,008  
               Wind
    957       853       872       840       823  
               Other
    8,585       7,013       7,426       8,088       9,062  
          Gas
    661       1,037       1,894       1,541       2,052  
          Wind
    222       30       -       -       -  
          Nuclear (c)
    -       -       -       264       3,461  
          Other
    180       215       309       263       297  
               Total
    31,354       32,108       34,247       33,702       34,063  
 
                                 
Revenue per kilowatt-hour (KWh) sold to retail
  customers (cents)
    8.69       8.04       7.93       8.14       7.44  
                                         
(a) In February 2007, Alliant Energy sold its electric distribution properties in Illinois. At the date of the sale, Alliant
 
Energy had approximately 22,000 electric retail customers in Illinois. Prior to the asset sales, the electric sales to
 
retail customers in Illinois are included in residential, commercial and industrial sales in the tables above. Following
 
the asset sales, any electric sales associated with these customers are included in wholesale electric sales.
 
(b) Cooling degree days are calculated using a simple average of the high and low temperatures each day compared to a
 
65 degree base. Normal degree days are calculated using a rolling 20-year average of historical cooling degree days.
 
(c) In January 2006 and July 2005, IPL and WPL sold their respective interests in DAEC and Kewaunee and upon closing
 
of the sales entered into long-term purchased power agreements to purchase energy and capacity from DAEC and
 
Kewaunee, respectively.
 
14

 
Interstate Power and Light Company
                             
                               
Electric Operating Information
 
2009
   
2008
   
2007
   
2006
   
2005
 
Operating Revenues (in millions) (a):
                             
     Residential
  $ 478.9     $ 455.2     $ 451.2     $ 471.2     $ 453.9  
     Commercial
    336.8       319.4       316.2       337.4       300.0  
     Industrial
    412.5       407.0       402.0       440.7       387.0  
       Retail subtotal
    1,228.2       1,181.6       1,169.4       1,249.3       1,140.9  
     Sales for resale:
                                       
       Wholesale
    23.5       23.4       21.3       1.9       1.9  
       Bulk power and other
    37.3       21.1       42.2       47.8       73.5  
     Other (includes wheeling)
    26.6       32.2       37.2       32.6       30.4  
          Total
  $ 1,315.6     $ 1,258.3     $ 1,270.1     $ 1,331.6     $ 1,246.7  
 
Electric Sales (000s MWh) (a):
                                       
     Residential
    4,113       4,218       4,204       4,157       4,282  
     Commercial
    3,851       3,911       3,912       3,910       3,836  
     Industrial
    6,829       7,742       7,750       7,860       8,005  
       Retail subtotal
    14,793       15,871       15,866       15,927       16,123  
     Sales for resale:
                                       
       Wholesale
    403       449       406       35       41  
       Bulk power and other
    901       682       1,581       1,550       1,682  
     Other
    84       90       93       99       98  
          Total
    16,181       17,092       17,946       17,611       17,944  
 
Customers (End of Period) (a):
                                       
     Residential
    443,615       443,589       444,974       455,346       454,176  
     Commercial
    79,805       79,508       79,473       81,045       80,238  
     Industrial
    1,914       1,939       1,954       2,018       1,996  
     Other
    1,376       1,381       1,398       1,299       1,317  
          Total
    526,710       526,417       527,799       539,708       537,727  
 
Other Selected Electric Data:
                                       
     Maximum peak hour demand (MW)
    2,981       2,943       3,085       3,070       3,077  
     Cooling degree days (b):
                                       
          Cedar Rapids, Iowa (normal - 779)
    406       583       846       765       891  
     Sources of electric energy (000s MWh):
                                       
          Coal
    8,162       9,517       10,547       9,919       9,782  
          Purchased power:
                                       
               Nuclear (c)
    3,577       3,619       3,066       3,297       -  
               Wind
    571       616       656       644       632  
               Other
    3,744       2,538       2,445       3,099       3,236  
          Gas
    636       983       1,778       1,426       1,686  
          Wind
    42       -       -       -       -  
          Nuclear (c)
    -       -       -       264       3,177  
          Other
    16       23       127       80       121  
               Total
    16,748       17,296       18,619       18,729       18,634  
                                         
     Revenue per KWh sold to retail customers (cents)
    8.30       7.45       7.37       7.84       7.08  
                                         
(a) In February 2007, IPL sold its electric distribution properties in Illinois. At the date of the sale, IPL had approximately
 
13,000 electric retail customers in Illinois. Prior to the asset sale, the electric sales to retail customers in Illinois are
 
included in residential, commercial and industrial sales in the tables above. Following the asset sale, any electric sales
 
associated with these customers are included in wholesale electric sales.
         
(b) Cooling degree days are calculated using a simple average of the high and low temperatures each day compared to a
 
65 degree base. Normal degree days are calculated using a rolling 20-year average of historical cooling degree days.
 
(c) In January 2006, IPL sold its interest in DAEC and upon closing of the sale entered into a long-term purchased power
 
agreement to purchase energy and capacity from DAEC.
 
15

 
Wisconsin Power and Light Company
                             
 
Electric Operating Information
 
2009
   
2008
   
2007
   
2006
   
2005
 
Operating Revenues (in millions) (a):
                             
     Residential
  $ 389.7     $ 389.5     $ 396.3     $ 385.9     $ 369.5  
     Commercial
    220.0       218.1       219.0       212.4       197.4  
     Industrial
    298.2       327.7       329.9       323.0       288.2  
       Retail subtotal
    907.9       935.3       945.2       921.3       855.1  
     Sales for resale:
                                       
       Wholesale
    166.6       178.5       158.5       143.3       156.8  
       Bulk power and other
    61.0       10.0       14.5       20.7       41.1  
     Other
    24.8       29.2       22.5       26.1       20.9  
          Total
  $ 1,160.3     $ 1,153.0     $ 1,140.7     $ 1,111.4     $ 1,073.9  
 
Electric Sales (000s MWh) (a):
                                       
     Residential
    3,419       3,446       3,549       3,513       3,599  
     Commercial
    2,257       2,270       2,310       2,277       2,274  
     Industrial
    4,119       4,748       4,942       4,948       4,825  
       Retail subtotal
    9,795       10,464       10,801       10,738       10,698  
     Sales for resale:
                                       
       Wholesale
    2,848       3,364       3,141       3,029       3,120  
       Bulk power and other
    1,682       301       969       1,082       1,251  
     Other
    71       74       74       72       75  
          Total
    14,396       14,203       14,985       14,921       15,144  
 
Customers (End of Period) (a):
                                       
     Residential
    397,312       397,055       395,148       400,602       395,669  
     Commercial
    55,294       55,028       54,762       54,777       53,911  
     Industrial
    967       995       1,010       1,046       1,048  
     Other
    2,179       2,153       2,131       2,092       2,051  
          Total
    455,752       455,231       453,051       458,517       452,679  
 
Other Selected Electric Data:
                                       
     Maximum peak hour demand (MW)
    2,558       2,583       2,816       2,941       2,854  
     Cooling degree days (b):
                                       
          Madison, Wisconsin (normal - 642)
    368       538       781       637       847  
Sources of electric energy (000s MWh):
                                 
          Coal
    7,159       7,978       8,096       7,659       7,578  
          Purchased power:
                                       
               Nuclear (c)
    1,851       1,846       2,037       1,831       1,008  
               Wind
    386       237       216       196       191  
               Other
    4,841       4,475       4,981       4,989       5,826  
          Gas
    25       54       116       115       366  
          Wind
    180       30       -       -       -  
          Nuclear (c)
    -       -       -       -       284  
          Other
    164       192       182       183       176  
               Total
    14,606       14,812       15,628       14,973       15,429  
                                         
     Revenue per KWh sold to retail customers (cents)
    9.27       8.94       8.75       8.58       7.99  
                                         
(a) In February 2007, WPL sold its electric distribution properties in Illinois. At the date of the sale, WPL had
 
approximately 9,000 electric retail customers in Illinois. Prior to the asset sale, the electric sales to retail
 
customers in Illinois are included in residential, commercial and industrial sales in the tables above. Following
 
the asset sale, any electric sales associated with these customers are included in wholesale electric sales.
         
(b) Cooling degree days are calculated using a simple average of the high and low temperatures each day compared to a
 
65 degree base. Normal degree days are calculated using a rolling 20-year average of historical cooling degree days.
 
(c) In July 2005, WPL sold its interest in Kewaunee and upon closing of the sale entered into a long-term purchased
 
power agreement to purchase energy and capacity from Kewaunee.
 
16


2)  GAS UTILITY OPERATIONS
General - Gas utility operations represent the second largest operating segment for Alliant Energy, IPL and WPL.  Alliant Energy’s gas utility operations are located in the Midwest with IPL and WPL providing gas service in Iowa, southern and central Wisconsin and southern Minnesota.  Refer to the “Gas Operating Information” tables for additional details regarding gas utility operations.

Jurisdictions - Gas utility revenues by state were as follows (dollars in millions):

   
2009
   
2008
   
2007
 
   
Amount
   
Percent
   
Amount
   
Percent
   
Amount
   
Percent
 
IPL:
                                   
Iowa
  $ 295.2       56 %   $ 390.4       55 %   $ 345.6       55 %
Minnesota
    13.6       3 %     20.0       3 %     17.4       3 %
Illinois (a)
    --       --       --       --       1.5       --  
Subtotal
    308.8       59 %     410.4       58 %     364.5       58 %
WPL:
                                               
Wisconsin
    216.5       41 %     300.0       42 %     263.7       42 %
Illinois (a)
    --       --       --       --       2.0       --  
Subtotal
    216.5       41 %     300.0       42 %     265.7       42 %
    $ 525.3       100 %   $ 710.4       100 %   $ 630.2       100 %
(a) IPL’s and WPL’s utility operations in Illinois were sold in February 2007.

Customers - The number of gas customers and communities served at Dec. 31, 2009 were as follows:

 
Retail
 
Transportation /
 
Total
 
Communities
 
Customers
 
Other Customers
 
Customers
 
Served
IPL
233,841
 
242
 
234,083
 
243
WPL
177,968
 
221
 
178,189
 
236
 
411,809
 
463
 
412,272
 
479

In addition to sales of natural gas to retail customers, IPL and WPL provide transportation service to commercial and industrial customers by moving customer-owned gas through Alliant Energy’s distribution systems to the customers’ meters.  Revenues are collected for this service pursuant to transportation tariffs.

Seasonality - Gas sales follow a seasonal pattern with an annual base-load of gas and a large heating peak occurring during the winter season.  Natural gas obtained from producers, marketers and brokers, as well as gas in storage, is utilized to meet the peak heating season requirements.  Storage contracts allow IPL and WPL to purchase gas in the summer, store the gas in underground storage fields and deliver it in the winter.

Competition - Federal and state regulatory policies are in place to bring more competition to the gas industry.  While the gas utility distribution function is expected to remain a regulated function, sales of the natural gas commodity and related services are subject to competition from third parties.  It remains uncertain if, and when, the current economic disincentives for smaller consumption customers to choose an alternative gas commodity supplier may be removed such that the utility business begins to face competition for the sale of gas to those customers.

Gas Supply - IPL and WPL maintain purchase agreements with over 40 suppliers of natural gas from various gas producing regions of the U.S. and Canada.  The majority of the gas supply contracts are for terms of six months or less, with the remaining supply contracts having terms through March 2011.  IPL’s and WPL’s gas supply commitments are primarily market-based.
 
17


In providing gas commodity service to retail customers, Corporate Services administers a diversified portfolio of transportation and storage contracts on behalf of IPL and WPL.  Transportation contracts with Northern Natural Gas Company (NNG), ANR Pipeline (ANR), Natural Gas Pipeline Co. of America (NGPL), Northern Border Pipeline (NBPL) and Guardian Pipeline (Guardian) allow access to gas supplies located in the U.S. and Canada.  Arrangements with Firm Citygate Supplies (FCS) provide IPL with gas delivered directly to its service territory.  In 2009, the maximum daily delivery capacity for IPL and WPL was as follows (in Dths):

 
NNG
 
ANR
 
NGPL
 
FCS
 
NBPL
 
Guardian
 
Total
IPL
186,469
 
53,180
 
42,618
 
15,000
 
14,085
 
--
 
311,352
WPL
83,056
 
177,467
 
--
 
--
 
--
 
10,000
 
270,523

FERC Investigation of Pipeline Tariffs - In November 2009, FERC initiated proceedings to investigate the rates of return that NNG, Great Lakes Pipeline and NGPL earned in 2008.  FERC used data from annual filings made by interstate pipelines to estimate the rate of return that all U.S. pipelines earned in 2008 and concluded that these three pipelines may have earned rates of return exceeding 20%.  The purpose of the proceeding is to determine whether the tariff rates charged by these pipelines are set too high.  By law, there will be no retroactive refunds as a result of these proceedings.  However, the proceedings may result in changes to tariff rates charged by these pipelines in the future.  Any change in tariff rates charged by these pipelines in the future is expected to be passed on to IPL’s and WPL’s gas customers through their respective natural gas cost recovery mechanisms.  FERC anticipates issuing a ruling regarding these proceedings in late 2010.

Refer to Note 1(h) for information relating to utility natural gas cost recovery mechanisms and Note 12(b) for discussion of natural gas commitments in Alliant Energy’s “Notes to Consolidated Financial Statements.”

Gas Environmental Matters - Alliant Energy is subject to environmental regulations by federal, state and local agencies.  Such regulations are the result of a number of environmental laws passed by the U.S. Congress, state legislatures and local governments and enforced by federal, state and local regulatory agencies.  The laws impacting Alliant Energy’s gas operations include, but are not limited to, the Safe Drinking Water Act; Clean Water Act; National Environmental Policy Act of 1969; Toxic Substances Control Act; Resource Conservation and Recovery Act; Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act and Emergency Planning and Community Right-to-Know Act of 1986; Endangered Species Act; Occupational Safety and Health Act; National Energy Policy Act, as amended; Federal Insecticide, Fungicide and Rodenticide Act; Hazardous Materials Transportation Act; and Pollution Prevention Act.  Alliant Energy regularly obtains federal, state and local permits to assure compliance with environmental protection laws and regulations.  Costs associated with such compliance have increased in recent years and are expected to continue to increase in the future.  Alliant Energy anticipates these prudently incurred costs for IPL and WPL will be recoverable through future rate case proceedings.  Refer to Note 12(e) of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of gas environmental matters.
 
18

 
Alliant Energy Corporation
                             
   
Gas Operating Information
 
2009
   
2008
   
2007
   
2006
   
2005
 
Operating Revenues (in millions) (a):
                             
     Residential
  $ 290.8     $ 385.0     $ 348.6     $ 342.8     $ 358.1  
     Commercial
    174.7       240.5       199.0