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The following is an excerpt from a 10-K SEC Filing, filed by INTERSTATE POWER & LIGHT CO on 3/11/2004.
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INTERSTATE POWER & LIGHT CO - 10-K - 20040311 - BUSINESS

ITEM 1. BUSINESS

A. GENERAL
The primary first tier subsidiaries of Alliant Energy include: IP&L, WP&L, Resources and Corporate Services. Among various other regulatory constraints, Alliant Energy is operating as a registered public utility holding company subject to the limitations imposed by PUHCA. Alliant Energy was incorporated in Wisconsin in 1981. A brief description of the primary first-tier subsidiaries of Alliant Energy is as follows:

1)     IP&L — incorporated in 1925 in Iowa as Iowa Railway and Light Corporation. IP&L is a public utility engaged principally in the generation, transmission, distribution and sale of electric energy; and the purchase, distribution, transportation and sale of natural gas in selective markets in Iowa, Minnesota and Illinois. In Iowa, non-exclusive franchises, which cover the use of streets and alleys for public utility facilities in incorporated communities, are granted for a maximum of 25 years by a majority vote of local qualified residents. At Dec. 31, 2003, IP&L supplied electric and gas service to 528,977 and 235,812 (excluding transportation and other) customers, respectively. IP&L also provides steam services to certain customers in one community in Iowa and various other energy-related products and services including construction management services for wind farms. In 2003, 2002 and 2001, IP&L had no single customer for which electric, gas, steam and/or other sales accounted for 10% or more of IP&L’s consolidated revenues.

2)     WP&L — incorporated in 1917 in Wisconsin as Eastern Wisconsin Electric Company. WP&L is a public utility engaged principally in the generation, distribution and sale of electric energy; and the purchase, distribution, transportation and sale of natural gas in selective markets. Nearly all of WP&L’s customers are located in south and central Wisconsin. WP&L operates in municipalities pursuant to permits of indefinite duration, which are regulated by Wisconsin law. At Dec. 31, 2003, WP&L supplied electric and gas service to 436,976 and 172,615 (excluding transportation and other) customers, respectively. WP&L also provides water services in select markets and various other energy-related products and services including construction management services for wind farms. In 2003, 2002 and 2001, WP&L had no single customer for which electric, gas, water and/or other sales accounted for 10% or more of WP&L’s consolidated revenues. WPL Transco LLC is a wholly-owned subsidiary of WP&L and holds WP&L’s investment in ATC. WP&L also owns all of the outstanding capital stock of South Beloit, a public utility supplying electric, gas and water service, principally in Winnebago County, Illinois, which was incorporated in 1908.

3)     RESOURCES — incorporated in 1988 in Wisconsin. The majority of Alliant Energy’s non-regulated investments are organized under Resources. Resources’ significant wholly-owned subsidiaries at Dec. 31, 2003 include AEG, International, Integrated Services, Neenah, Transportation and Synfuel. Refer to “D. Information Relating to Non-regulated Operations” for additional details.

4)     CORPORATE SERVICES — incorporated in 1997 in Iowa. Corporate Services was formed to provide administrative services to Alliant Energy and its subsidiaries as required under PUHCA.

Refer to Note 13 of the “Notes to Consolidated Financial Statements” for further discussion of business segments, which information is incorporated herein by reference.

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B. INFORMATION RELATING TO ALLIANT ENERGY ON A CONSOLIDATED BASIS

1) EMPLOYEES
As of Dec. 31, 2003, Alliant Energy’s consolidated subsidiaries had the following employees (full-time and part-time):

  Percentage
    Number of Number of of Workforce
  Number of Bargaining Unit Bargaining Covered by
  Employees Employees Agreements Agreements

IP&L 1,686  1,410  84%
WP&L 1,524  1,438  94%
Resources:
   International 3,239  --  --  -- 
   Integrated Services 652  --  --  -- 
   Other Investments 120  80  67%
   Other 29  --  --  -- 
Corporate Services 1,693  --  --  -- 
 
 
  8,943  2,928  13  33%
 
 

In September 2004, three bargaining agreements expire representing approximately 17% of employees covered under bargaining agreements and 6% of total Alliant Energy employees. WP&L’s bargaining agreement with IBEW Local 965 expired in 2003 and has not been renewed, which represents 49% of employees covered under bargaining agreements and 16% of total Alliant Energy employees. While negotiations continue on the WP&L bargaining agreement, Alliant Energy is currently unable to predict the outcome. Alliant Energy has not experienced any significant work stoppage problems in the past.

2) CAPITAL EXPENDITURE AND INVESTMENT PLANS
Refer to “Liquidity and Capital Resources — Construction and Acquisition Expenditures” in MD&A for discussion of anticipated construction and acquisition expenditures for 2004 and 2005.

3) REGULATION
PUHCA — Alliant Energy operates as a registered public utility holding company subject to regulation by the SEC under PUHCA. Regulation under PUHCA includes provisions relating to the issuance and sales of securities, acquisitions and sales of certain utility properties, acquisitions and retention of interests in non-utility businesses, including EWGs and FUCOs, and the services provided by Corporate Services to Alliant Energy and its subsidiaries. Under an SEC order, Alliant Energy has aggregate investment authority for EWGs and FUCOs equivalent to 100% of consolidated retained earnings as defined in the regulations. At Dec. 31, 2003, Alliant Energy’s remaining investment authority under this Order was approximately $267 million.

PSCW — Alliant Energy is subject to regulation by the PSCW. The PSCW regulates, among other things, the type and amount of Alliant Energy’s investments in non-utility businesses. WP&L is also subject to regulation by the PSCW regarding retail utility rates and service, accounts, issuance and use of proceeds of securities, certain additions and extensions to facilities and in other respects. WP&L is required to file a rate case with the PSCW at least every two years based on a forward-looking test year period.

IUB — IP&L operates under the jurisdiction of the IUB. The IUB has authority to regulate rates and standards of service, to prescribe accounting requirements and to approve the location and construction of electric generating facilities having a capacity in excess of 25,000 KW. Requests for rate relief are based on historical test periods, adjusted for certain known and measurable changes. The IUB must decide on requests for rate relief within 10 months of the date of the application for which relief is filed or the interim prices granted become permanent. Interim rates, if allowed, are permitted to become effective, subject to refund, no later than 90 days after the rate increase application is filed.

MPUC — IP&L is also subject to regulation by the MPUC. Requests for rate relief can be based on either historical or projected data. The MPUC must reach a final decision within 10 months of filing for rate relief. Interim rates are permitted. The MPUC also has jurisdiction to annually approve IP&L’s capital structure.

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ICC — IP&L and South Beloit are subject to regulation by the ICC for retail utility rates and service, accounts, issuance and use of proceeds of securities, certain additions and extensions to facilities and in other respects. Requests for rate relief must be decided within 11 months of filing.

FERC — FERC has jurisdiction under the Federal Power Act over certain of the electric utility facilities and operations, wholesale rates and accounting practices of IP&L and WP&L, and in certain other respects. In addition, certain natural gas facilities and operations of IP&L and WP&L are subject to the jurisdiction of FERC under the Natural Gas Act.

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 safety, air and water quality, and waste handling standards associated with electric power generation, including the level and flow of water pertaining to hydroelectric generation. In certain cases, the state environmental agencies have delegated the administration of environmental programs to local agencies. In addition, International has investments that are subject to environmental regulations in the countries in which they operate.

Nuclear — IP&L and WP&L are directly and indirectly subject to the jurisdiction of the NRC, with respect to DAEC and Kewaunee, respectively. Among other things, the NRC regulates the disposal of nuclear fuel and other radioactive wastes.

Brazil — The electric industry in Brazil, as it relates to Alliant Energy’s unconsolidated investments, is regulated by the Brazilian federal government, acting through the Ministry of Mines and Energy, which has exclusive authority over the electric sector through its regulatory powers. Regulatory policy for the sector is implemented by an autonomous national electric energy agency (Agencia Nacional de Energia Eletrica or “ANEEL”), which delegates certain functions to agencies based in various states of Brazil. However, ANEEL cannot delegate any authority regarding tariffs to state agencies. In January 2003, a new Minister of Mines and Energy was appointed, resulting in the cessation of the ongoing comprehensive review of the regulatory process and policies that began in 2002. A new plan was announced in December 2003 (effective date as yet unspecified) which is intended to provide limited and balanced regulation of the generation and distribution of electric energy within the sectors of the Brazilian economy. Although all of the details and the precise timing of the plan are unknown at this time, Alliant Energy does not expect the plan will have a material adverse impact on Alliant Energy’s investments in Brazil.

Refer to Note 2 of Alliant Energy’s “Notes to Consolidated Financial Statements” and “Rates and Regulatory Matters” in MD&A for additional information regarding regulation and utility rate matters.

4) STRATEGIC OVERVIEW
Refer to “Strategic Overview” in MD&A for discussion of various strategic actions Alliant Energy has taken to strengthen its financial profile and information regarding Alliant Energy’s updated strategic plan.

C. INFORMATION RELATING TO DOMESTIC UTILITY OPERATIONS
Alliant Energy realized 48%, 47%, 3% and 2% of its 2003 electric utility revenues in Iowa, Wisconsin, Minnesota and Illinois, respectively. Approximately 90% was regulated by the respective state commissions while the other 10% was regulated by FERC. Alliant Energy realized 48%, 47%, 3% and 2% of its 2003 gas utility revenues in Iowa, Wisconsin, Minnesota and Illinois, respectively.

IP&L realized 92%, 6% and 2% of its 2003 electric utility revenues in Iowa, Minnesota and Illinois, respectively. Approximately 96% was regulated by the respective state commissions while the other 4% was regulated by FERC. IP&L realized 93%, 5% and 2% of its 2003 gas utility revenues in Iowa, Minnesota and Illinois, respectively. WP&L realized 99% of its 2003 electric utility revenues in Wisconsin and 1% in Illinois. Approximately 83% was regulated by the PSCW or the ICC while the other 17% was regulated by FERC. WP&L realized 97% of its 2003 gas utility revenues in Wisconsin and 3% in Illinois.

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1) DOMESTIC ELECTRIC UTILITY OPERATIONS
General — IP&L and WP&L provide electric service in Iowa, southern and central Wisconsin, southern Minnesota and northern and northwestern Illinois. The number of electric customers and communities served at Dec. 31, 2003 was as follows:

  Retail Customers Wholesale Customers Other Customers Communities Served

IP&L 527,650  1,318  760 
WP&L 434,941  30  2,005  601 

  962,591  39  3,323  1,361 

2003 electric utility operations accounted for 73% and 75% of operating revenues and 92% and 85% of operating income for IP&L and WP&L, respectively.

Electric sales are seasonal to some extent with the annual peak normally occurring in the summer months. In 2003, the maximum peak hour demands for IP&L and WP&L were 3,123 MW and 2,782 MW, respectively, both on Aug. 20, 2003. In 2003, the maximum peak hour demand for Alliant Energy was 5,887 MW on Aug. 20, 2003, which was the coincident peak of the entire Alliant Energy system.

Transmission Business — IP&L and WP&L are members of the MAIN Regional Reliability Council which is one of the 10 regional members of NERC. Each regional member of NERC is responsible for maintaining reliability in its area through coordination of planning and operations.

In 2002, IP&L filed for IUB and MPUC approval to transfer its transmission assets to TRANSLink, a proposed independent for-profit, transmission-only company. In November 2003, TRANSLink announced that upon direction of the participant utilities, formation of TRANSLink had been suspended due to continued regulatory and market uncertainty. IP&L continues to support the independent transmission company model but is not able to predict the ultimate outcome of the structure of its transmission business.

WP&L transferred its transmission assets with no gain or loss to a transmission-only company, ATC, on Jan. 1, 2001, and had an ownership percentage in ATC of approximately 25% at Dec. 31, 2003. This transfer has not resulted in a significant impact on WP&L’s financial condition or results of operations since FERC allows ATC to earn a return on the contributed assets comparable to the return formerly allowed WP&L by the PSCW and FERC. During 2003, ATC returned approximately 80% of its earnings to the equity holders and, although no assurance can be given, Alliant Energy anticipates ATC will continue this dividend payout ratio in the future. ATC realizes its revenues from the provision of transmission services to both participants in ATC as well as non-participants. ATC is a transmission-owning member of the Midwest ISO and the MAIN Regional Reliability Council.

In 2002, the PSCW issued a final ruling regarding incremental electric transmission costs, such as ATC start-up costs and ongoing network transmission costs. This ruling allows Wisconsin utilities, including WP&L, to continue to defer any such costs related to retail service for five years with deferred amounts included in future base rates. Further, in December 2003, the PSCW issued a final order in WP&L’s 2004 retail rate case, which expanded the 2002 ruling allowing for the deferral of any retail transmission wheeling expenses that are different from amounts included in existing rates. During the remainder of this deferral period, changes in total retail electric transmission costs will have no material impact on WP&L’s results of operations.

IP&L and WP&L are members of the Midwest ISO, which is in the process of restructuring the bulk power market in its domain.  Such restructuring could have an impact on the costs associated with Alliant Energy serving its utility customers’ energy requirements. The Midwest ISO currently plans to implement the market restructuring effective Dec. 1, 2004. Given the anticipated regulatory treatment of any potential cost differences, Alliant Energy does not currently expect the ultimate outcome will have a material impact on its results of operations or financial condition.

The PSCW is authorized to order construction of new transmission facilities. In 2001, the PSCW approved the construction of a 345-kilovolt transmission line, which would be constructed by ATC and would improve transmission import capabilities in Wisconsin. Due to significant cost increases, the PSCW re-evaluated and re-approved the project in December 2003. Pending various other regulatory approvals, construction could begin as early as 2004 and the transmission line is expected to be in service in 2008.

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IP&L maintains and operates transmission and substation facilities connecting with its high voltage transmission systems pursuant to a non-cancelable operation agreement (the Operating Agreement) with CIPCO. The Operating Agreement, which will terminate on Dec. 31, 2035, provides for the joint use of certain transmission facilities of IP&L and CIPCO. IP&L has transmission interconnections at various locations with nine other transmission owning utilities in the Midwest and ATC also has various transmission interconnections. These interconnections enhance the overall reliability of the Alliant Energy transmission system and provide access to multiple sources of economic and emergency energy.

In 2002, FERC issued a notice of proposed rules intended to standardize the wholesale electric market, which has generated significant industry discussion. Although Alliant Energy believes that standardization of the wholesale electric market is appropriate and would benefit market participants, there may be significant changes to the proposed rules before they are adopted. Therefore, Alliant Energy cannot determine the impact the final rules will have on its results of operations or financial condition.

Refer to “Properties” for additional information regarding electric properties.

Power Supply — Alliant Energy currently anticipates meeting its 2004 power supply requirements through a variety of incremental power supply resources including purchased-power contracts utilizing existing firm transmission rights and additional power purchases from existing generating units located within and outside of Alliant Energy’s service territory. While Alliant Energy currently expects to meet utility customer demands in 2004, unanticipated reliability issues could still arise in the event of unexpected delays in the construction of new generating and/or transmission facilities, power plant outages, transmission system outages or extended periods of extremely hot weather. Refer to “Strategic Overview — Updated Strategic Plan” in MD&A for discussion of Alliant Energy’s domestic utility generation plan.

Average Fuel Costs — Refer to the Electric Operating Information tables for details on the sources of electric energy for Alliant Energy, IP&L and WP&L from 2001 to 2003. The average cost of fuel per million British Thermal Units used for electric generation was as follows:

  IP&L WP&L

  2003 2002 2001 2003 2002 2001

Gas $5.884  $3.613  $4.721  $6.823  $4.066  $5.397 
Coal 1.072  1.067  0.991  1.224  1.262  1.146 
Nuclear 0.546  0.572  0.608  0.441  0.457  0.423 
All Fuels 1.088  1.032  1.046  1.370  1.234  1.158 

Coal — Alliant Energy, through Corporate Services, IP&L and WP&L, has entered into contracts with different suppliers to ensure that a specified supply of coal is available at known prices for IP&L and WP&L for 2004 through 2008. These contracts provide for a portfolio of coal supplies that cover approximately 96%, 76%, 54%, 21% and 11% of the total utilities’ estimated coal supply needs for 2004 through 2008, respectively. Management believes this portfolio of coal supplies represents a reasonable balance between the risks of insufficient supplies and those associated with larger open positions subject to price volatility in the coal markets. Remaining coal requirements will be met from either future contracts or purchases in the spot market.

The majority of the coal utilized by IP&L and WP&L is from the Wyoming Powder River Basin. A majority of this coal is transported by rail-car directly from Wyoming to IP&L’s and WP&L’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, IP&L and WP&L maintain average coal inventories 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.

Average delivered fossil fuel costs are expected to increase in the future due to price/rate structures and adjustment provisions in existing coal and transportation contracts and recent coal market trends. Existing coal contracts with terms of greater than one year have fixed future year prices that generally reflect recent upward market trends. Other factors which may impact coal prices are changes in various associated laws and regulations. For example, sulfur dioxide and NOx emission restrictions and other environmental limitations on generating stations have increased significantly and proposed additional restrictions (including mercury emissions), if enacted, will likely limit the ability to obtain, and further increase the cost of, adequate coal supplies. Rate adjustment provisions in transportation contracts are primarily based on changes in the Rail Cost Adjustment Factor as published by the U.S. Surface Transportation Board. Refer to Note 1(i) for discussion of IP&L’s and WP&L’s rate recovery of fuel costs, Note 10(a) for information on coal derivatives and Note 11(b) for details relating to coal purchase commitments in the “Notes to Consolidated Financial Statements.”

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Purchased-Power — During 2003, approximately 25% and 31% of IP&L’s and WP&L’s total MWh requirements, respectively, were met through purchased-power. Refer to Notes 3 and 11(b) of the “Notes to Consolidated Financial Statements” for details relating to purchased-power commitments and “Transmission Business” for discussion of proposed rules intended to standardize the wholesale electric market.

Nuclear — Summary — IP&L and WP&L own partial interests in two nuclear generating facilities, DAEC and Kewaunee, respectively, which are operated by the NMC under contract to the majority owners, which remain in effect until notice of termination is provided one year prior to such termination would be effective. Alliant Energy has a 20% ownership interest in the NMC. The NMC operates all nuclear plants owned by the NMC partners, which provides long-term safety, reliability and operational benefits for the plant owners. The NMC currently operates eight nuclear generating units at six sites but has no ownership interest in the plants it operates and bears no financial risk associated with operation of the plants. The plant owners retain all rights to the energy generated at the plants and all financial responsibility for their safe operation, maintenance and decommissioning. Certain details for DAEC and Kewaunee are as follows:

  DAEC Kewaunee

Rating, net electric capacity 583 MW (100%) 543 MW (100%)
Alliant Energy ownership IP&L - 70% WP&L - 41%
Other ownership CIPCO - 20%; Corn Belt WPSC - 59%
    Power Cooperative - 10%  
Reactor type Boiling water Pressurized water
NRC operating license expiration 2014 2013

DAEC License Renewal — IP&L has made no decision regarding license extension for DAEC. IP&L’s approach has been and continues to be to preserve the option of renewing the license and has directed that DAEC be operated and maintained in a manner that ensures license extension remains a viable option. Preserving DAEC’s license extension option will include ensuring adequate time is available for the possibility of preparing specific license renewal studies, submittal of study results for NRC review, evaluation of the results of the NRC’s review, and making a decision on whether and to what degree any license extension will be pursued.

Kewaunee Sale — Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for information on the sale of Kewaunee by WP&L and WPSC expected to be completed by fall 2004, pending various regulatory approvals.

Nuclear Operating Issues — The NRC has significant regulatory authority over the design and operation of nuclear generating facilities with regard to environmental considerations and public health and safety. Exercise of this authority by the NRC is continuous and responsive to any nuclear related issue.

In February 2002, the NRC issued an order to all licensees formalizing their requirements for additional security resulting from the Sept. 11, 2001 terrorist attacks on the U.S. Prior to this order, the additional security measures were voluntary, based on NRC guidance. The NMC, as operator of DAEC and Kewaunee, has fully implemented the immediate actions required and is in the process of completing longer term actions as required. In December 2001, the PSCW authorized WP&L to defer incremental costs for security measures and insurance premiums related to the Sept. 11, 2001 terrorist attacks. Both IP&L and WP&L are recovering the costs of the required immediate actions in their respective rates.

IP&L’s and WP&L’s share of anticipated nuclear-related construction expenditures at DAEC and Kewaunee for 2004 and 2005 are approximately $23 million and $19 million, respectively. These expenditures would be reduced for WP&L if the sale of its interest in Kewaunee is completed prior to the end of 2005.

Refueling Outages and Procurement of Nuclear Fuel — The NMC, acting on behalf of IP&L and the other DAEC owners, purchases uranium and enrichment services for DAEC using a combination of spot market and medium term contracts. This procurement is complete for the spring 2005 DAEC refueling outage. Arrangements for the fabrication of nuclear fuel are in place through the 2011 refueling of DAEC. WPSC purchases uranium concentrates and conversion, enrichment and fabrication services for nuclear fuel assemblies at Kewaunee. Sufficient fuel is in inventory for the fall 2004 refueling outage and additional fuel will be purchased in 2004 for the spring 2006 refueling outage. WPSC’s uranium inventory policy is to maintain sufficient inventory for up to two reloads of fuel. Refer to Note 1(j) of Alliant Energy’s “Notes to Consolidated Financial Statements” for information related to the timing of DAEC and Kewaunee refueling outages.

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Nuclear Liability/Insurance — Liability for nuclear accidents is governed by the Price-Anderson Act of 1988 as amended (Act), which sets a statutory limit of $10.86 billion for liability to the public for a single nuclear power plant incident and requires nuclear power plant operators to provide financial protection for this amount. Financial protection for a nuclear incident is provided through a combination of liability insurance ($300 million) and industry-wide retrospective payment plans ($10.56 billion). Under the industry-wide plan, the owners of each operating licensed nuclear reactor in the U.S. are subject to an assessment in the event of a nuclear incident at any nuclear plant in the U.S. The applicability of the Act to IP&L and WP&L, as existing nuclear power plant owners, continues for the remainder of the operating lives of the plants they own. Alliant Energy expects the U.S. Congress will consider in 2004 coverage under the Act for new nuclear generating stations and increasing the statutory limits for liability to the public for a single nuclear power plant incident and the maximum annual assessment per incident for existing nuclear generating stations.

IP&L and WP&L are members of NEIL, which provides $2.0 billion and $1.8 billion of insurance coverage for DAEC and Kewaunee, respectively, for certain property losses for property damage, decontamination and premature decommissioning. The proceeds from such insurance, however, must first be used for reactor stabilization and site decontamination before they can be used for plant repair and premature decommissioning. NEIL also provides separate coverage for additional expenses incurred during certain outages. Owners of nuclear generating stations insured through NEIL are subject to retroactive premium adjustments if losses exceed accumulated reserve funds. NEIL’s accumulated reserve funds are currently sufficient to more than cover its exposure in the event of a single incident under the primary and excess property damage or additional expense coverages. However, IP&L and WP&L could be assessed if losses exceed the accumulated reserve funds. A summary of IP&L’s and WP&L’s share of maximum possible retrospective liability, property and additional expense assessments is as follows (in millions):

  DAEC Kewaunee

Price-Anderson Act liability $70.4/incident $41.2/incident
  $7.0/incident/year $4.1/incident/year
NEIL primary property $3.3/year $1.8/year
NEIL excess property $4.4/year $3.5/year
NEIL additional expense $2.4/year $1.0/year

These limits are subject to adjustments for changes in the number of participants and inflation in future years. In the event of a catastrophic loss at DAEC or Kewaunee, the amount of insurance available may not be adequate to cover property damage, decontamination and premature decommissioning. Uninsured losses, to the extent not recovered through rates, would be borne by IP&L or WP&L, as the case may be, and could have a material adverse effect on their respective financial condition and results of operations. IP&L and WP&L are not currently aware of any losses that they believe are likely to result in an assessment.

Spent Nuclear Fuel (High Level Waste) Disposal — NWPA assigned responsibility to the DOE to provide for the permanent disposal of spent nuclear fuel in exchange for payments by contract holders and also requires generators and owners of spent nuclear fuel to provide for interim storage until the fuel is accepted by the DOE. IP&L, on behalf of the DAEC owners, and WPSC, on behalf of the Kewaunee owners, entered into contracts with the DOE for this disposal service and have made the agreed payments to the Nuclear Waste Fund held by the U.S. Treasury. The contracts provided for this service to begin in 1998, however, the DOE has experienced delays in its efforts and acceptance is now expected to occur no earlier than 2010. The DOE is currently proceeding with the licensing phase for a permanent spent fuel storage facility in the Yucca Mountain area of Nevada.

In accordance with their interim storage responsibility, IP&L and WPSC have been and will continue storing spent nuclear fuel on site at DAEC and Kewaunee, respectively, until removal by the DOE to its permanent repository occurs. Interim storage activities at reactor sites, regardless of DOE delays or acceptance schedules, will extend after final reactor shutdown. Construction of a dry cask storage facility by IP&L at DAEC has been completed and transfer of approximately 10 years worth of spent nuclear fuel was completed in November 2003. The dry storage facility provides assurance that both the operating and post-shutdown storage needs of DAEC are satisfied. Kewaunee has sufficient fuel storage capacity to meet its operating storage needs through 2009. Additional storage facilities will be needed at Kewaunee by 2010 for full offload capability for future outages.

In January 2004, IP&L filed a claim against the U.S. government for recovery of damages due to the DOE’s delay in accepting spent nuclear fuel. IP&L is one of a number of utility companies with nuclear assets that has filed similar claims against the DOE for its failure to accept spent nuclear fuel in a timely manner. Determination and adjudication of the specific claim amount depends upon resolution of related court cases involving DOE acceptance rates and acceptance orders of spent nuclear fuel. Alliant Energy does not anticipate resolution of this issue until 2006 at the earliest and cannot currently predict the ultimate outcome.

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Low-Level Radioactive Waste Disposal — The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandates that each state must take responsibility for the storage of low-level radioactive waste produced within its borders. However, disposal facilities located near Barnwell, South Carolina and Clive, Utah continue to accept the low-level waste from DAEC and Kewaunee, thereby minimizing the amount of low-level waste stored on-site and delaying the need for any action by individual states or groups of states to develop new facilities. While it is difficult to predict how long the South Carolina and Utah facilities will continue to accept low-level radioactive waste, DAEC and Kewaunee each have on-site storage capability for at least 10 years of waste generation beyond any date that both facilities might cease to accept such waste.

The costs associated with high- and low-level waste disposal and storage are currently recovered through the rates of Alliant Energy’s utility subsidiaries and therefore do not have a material impact on its results of operations or financial condition.

Additional Nuclear Discussion — Additional discussions of various other nuclear issues relating to DAEC and/or Kewaunee are included in Notes 1(g), 1(j), 3, 9, 10(c), 11(e), 11(f), 12, 17 and 18 of the “Notes to Consolidated Financial Statements.”

Electric Environmental Matters — Alliant Energy is regulated in environmental matters 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 operations include, but are not limited to, the Safe Drinking Water Act; Clean Water Act; CAA, as amended by the CAA Amendments of 1990; National Environmental Policy Act; Toxic Substances Control Act; Emergency Planning and Community Right-to-Know Act; Resource Conservation and Recovery Act; Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986; Endangered Species Act; NWPA; Occupational Safety and Health Act; and NEPA. Alliant Energy regularly obtains federal, state and local permits to assure compliance with the environmental protection laws and regulations. Costs associated with such compliance have increased in recent years and are expected to increase moderately in the future. Although Alliant Energy cannot guarantee rate recovery, it anticipates its prudently incurred utility costs will be recovered in future rates.

In February 2003, WP&L’s Columbia Energy Center (Columbia) received a Notice of Violation from the Wisconsin DNR for exceeding limits in its Wisconsin Pollutant Discharge Elimination System (WPDES) permit, which requires Columbia to sample its ash pond discharge and sanitary wastewater plant discharge for various parameters, including acute and chronic toxicity. The WPDES permit issued in 1998 required Columbia to identify what was causing the toxicity in its discharge through an evaluation and to develop a reduction plan. The evaluation was performed and Columbia developed a reduction plan that identified carbon dioxide injection as the treatment to reduce the aluminum concentrations. The Wisconsin DNR did not approve this method of treatment and directed Columbia to revise the reduction plan, at which time Columbia began evaluating a number of treatment alternatives and undertaking a physical evaluation. In November 2003, WP&L submitted a progress report to the Wisconsin DNR for the ash pond toxicity discharges along with plans for the sanitary wastewater treatment plant. In December 2003, a construction permit for the sanitary wastewater treatment plant was submitted to the Wisconsin DNR with an anticipated construction start date in spring 2004. While it is possible that the Wisconsin DNR may subsequently seek to impose a civil penalty for the discharge toxicity, WP&L believes it can resolve this issue to the Wisconsin DNR’s satisfaction in a manner that will not have a material adverse effect on its financial condition or results of operations. Refer to “Legal Proceedings” for further discussion.

Refer to “Liquidity and Capital Resources — Environmental” in MD&A and Note 11(e) of the “Notes to Consolidated Financial Statements” for further discussion of electric environmental matters.

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Alliant Energy Corporation


Electric Operating Information
  (Domestic Utility Only) 2003 2002 2001 2000 1999

Operating Revenues (000s):
     Residential   $684,574   $626,947   $599,074   $567,283   $541,714  
     Commercial   409,704   376,365   373,145   349,019   329,487  
     Industrial   571,608   526,804   543,471   501,155   476,140  

       Total from retail customers   1,665,886   1,530,116   1,515,690   1,417,457   1,347,341  
     Sales for resale   195,822   160,335   184,507   173,148   155,801  
     Other   55,360   62,083   56,359   57,431   45,796  

       Total   $1,917,068   $1,752,534   $1,756,556   $1,648,036   $1,548,938  


Electric Sales (000s MWh):  
     Residential   7,565   7,616   7,344   7,161   7,024  
     Commercial   5,663   5,542   5,464   5,364   5,260  
     Industrial   12,345   12,297   12,469   13,092   13,036  

       Total from retail customers   25,573   25,455   25,277   25,617   25,320  
     Sales for resale   5,495   4,805   4,936   4,906   5,566  
     Other   184   197   168   174   162  

       Total   31,252   30,457   30,381   30,697   31,048  


Customers (End of Period):  
     Residential   830,559   822,229   807,754   799,603   790,669  
     Commercial   129,130   128,212   125,539   123,833   122,509  
     Industrial   2,902   2,905   2,826   2,773   2,730  
     Other   3,362   3,344   3,324   3,316   3,282  

       Total   965,953   956,690   939,443   929,525   919,190  


Other Selected Electric Data:  
     Maximum peak hour demand (MW)   5,887   5,729   5,677   5,397   5,233  
     Sources of electric energy (000s MWh):  
          Coal   18,451   17,674   18,190   18,669   18,585  
          Purchased power   9,155   8,596   8,727   8,058   8,619  
          Nuclear   4,498   5,012   4,116   4,675   4,362  
          Gas   631   675   472   470   493  
          Other   240   379   452   427   528  

            Total   32,975   32,336   31,957   32,299   32,587  

     Revenue per KWh from retail customers (cents)   6.51   6.01   6.00   5.53   5.32  

11

Interstate Power and Light Company


Electric Operating Information 2003 2002 2001 2000 1999

Operating Revenues (000s):
     Residential   $367,681   $355,072   $350,946   $337,615   $328,218  
     Commercial   239,362   229,639   234,876   221,820   212,540  
     Industrial   327,838   315,494   335,680   311,070   305,022  

       Total from retail customers   934,881   900,205   921,502   870,505   845,780  
     Sales for resale   40,249   34,513   53,320   57,433   53,050  
     Other   31,852   30,136   28,284   27,907   23,501  

       Total   $1,006,982   $964,854   $1,003,106   $955,845   $922,331  


Electric Sales (000s MWh):  
     Residential   4,155   4,184   4,026   4,010   3,913  
     Commercial   3,496   3,392   3,342   3,333   3,280  
     Industrial   7,750   7,843   7,931   8,404   8,466  

       Total from retail customers   15,401   15,419   15,299   15,747   15,659  
     Sales for resale   1,299   1,151   1,412   1,678   2,314  
     Other   102   103   107   111   108  

       Total   16,802   16,673   16,818   17,536   18,081  


Customers (End of Period):  
     Residential   448,719   446,202   439,508   437,425   434,978  
     Commercial   77,043   76,856   75,132   74,483   73,813  
     Industrial   1,888   1,898   1,836   1,799   1,783  
     Other   1,327   1,328   1,359   1,393   1,389  

       Total   528,977   526,284   517,835   515,100   511,963  


Other Selected Electric Data:  
     Maximum peak hour demand (MW)   3,123   3,097   3,104   3,021   2,930  
     Sources of electric energy (000s MWh):  
          Coal   10,232   9,889   9,997   10,701   10,460  
          Purchased power   4,503   4,134   4,595   4,041   5,183  
          Nuclear   2,791   3,202   2,697   3,117   2,548  
          Gas   227   330   346   364   432  
          Other   63   127   171   179   240  

            Total   17,816   17,682   17,806   18,402   18,863  

     Revenue per KWh from retail customers (cents)   6.07   5.84   6.02   5.53   5.40  

12

Wisconsin Power and Light Company


Electric Operating Information 2003 2002 2001 2000 1999

Operating Revenues (000s):
     Residential   $316,893   $271,875   $248,128   $229,668   $213,496  
     Commercial   170,342   146,726   138,269   127,199   116,947  
     Industrial   243,770   211,310   207,791   190,085   171,118  

       Total from retail customers   731,005   629,911   594,188   546,952   501,561  
     Sales for resale   155,573   125,822   131,187   115,715   102,751  
     Other   23,508   31,947   28,075   29,524   22,295  

       Total   $910,086   $787,680   $753,450   $692,191   $626,607  


Electric Sales (000s MWh):  
     Residential   3,410   3,432   3,318   3,151   3,111  
     Commercial   2,167   2,150   2,122   2,031   1,980  
     Industrial   4,595   4,454   4,538   4,688   4,570  

       Total from retail customers   10,172   10,036   9,978   9,870   9,661  
     Sales for resale   4,196   3,654   3,524   3,228   3,252  
     Other   82   94   61   63   54  

       Total   14,450   13,784   13,563   13,161   12,967  


Customers (End of Period):  
     Residential   381,840   376,027   368,246   362,178   355,691  
     Commercial   52,087   51,356   50,407   49,350   48,696  
     Industrial   1,014   1,007   990   974   947  
     Other   2,035   2,016   1,965   1,923   1,893  

       Total   436,976   430,406   421,608   414,425   407,227  


Other Selected Electric Data:  
     Maximum peak hour demand (MW)   2,782   2,674   2,696   2,508   2,397  
     Sources of electric energy (000s MWh):  
          Coal   8,219   7,785   8,193   7,968   8,125  
          Purchased power   4,652   4,462   4,132   4,017   3,436  
          Nuclear   1,707   1,810   1,419   1,558   1,814  
          Gas   404   345   126   106   61  
          Other   177   252   281   248   288  

            Total   15,159   14,654   14,151   13,897   13,724  

     Revenue per KWh from retail customers (cents)   7.19   6.28   5.95   5.54   5.19  

13

2) DOMESTIC GAS UTILITY OPERATIONS
IP&L and WP&L provide gas service in Iowa, southern and central Wisconsin, southern Minnesota and northern and northwestern Illinois. The number of gas customers and communities served at Dec. 31, 2003 were as follows:

    Transportation and  
  Retail Customers Other Customers Communities Served

IP&L 235,812  214  253 
WP&L 172,615  266  232 

  408,427  480  485 

2003 gas utility operations accounted for 21% and 22% of operating revenues and 8% and 13% of operating income for IP&L and WP&L, respectively, which include providing gas services to retail and transportation customers.

In providing gas commodity service to retail customers, Corporate Services administers a diversified portfolio of transportation and storage contracts on behalf of IP&L and WP&L. Transportation contracts with Northern Natural Gas Company (NNG), Natural Gas Pipeline Co. of America (NGPL) and ANR Pipeline (ANR) allow access to gas supplies located in the U.S. and Canada. Arrangements with Firm Citygate Supplies (FCS) provide IP&L and WP&L with gas delivered directly to their service territories. The maximum daily delivery capacity of the individual utilities for 2003 was as follows (in Dths):

  NNG NGPL ANR FCS Total

IP&L 198,641  89,932  56,680  22,000  367,253 
WP&L 100,056  --  146,467  39,000  285,523 

IP&L and WP&L maintain purchase agreements with over 30 suppliers of natural gas from all 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 2004. IP&L’s and WP&L’s gas supply commitments are index-based.

In addition to sales of natural gas to retail customers, IP&L and WP&L provide transportation service to commercial and industrial customers by moving customer-owned gas through their distribution systems to the customers’ meters. Revenues are collected for this service pursuant to transportation tariffs.

The gas sales of IP&L and WP&L follow a seasonal pattern. There is an annual base load of gas used for cooking, heating and other purposes, with 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 IP&L and WP&L to purchase gas in the summer, store the gas in underground storage fields and deliver it in the winter. Gas storage met approximately 23% and 24% of IP&L’s and WP&L’s annual gas requirements in 2003, respectively.

Refer to Note 1(i) for information relating to utility natural gas cost recovery, Note 10(a) for information on natural gas derivatives and Note 11(b) for discussion of natural gas commitments in the “Notes to Consolidated Financial Statements.”

Gas Environmental Matters — Refer to Note 11(e) of the “Notes to Consolidated Financial Statements” for discussion of gas environmental matters.

14

Alliant Energy Corporation


Gas Operating Information (Domestic Utility Only) 2003 2002 2001 2000 1999

Operating Revenues (000s):
     Residential   $310,658   $218,746   $270,248   $245,697   $185,090  
     Commercial   162,651   111,343   141,121   127,104   89,118  
     Industrial   34,201   25,177   31,262   27,752   21,855  
     Transportation/other   59,416   38,720   45,246   14,395   18,256  

       Total   $566,926   $393,986   $487,877   $414,948   $314,319  


Gas Sales (000s Dths):  
     Residential   31,871   30,931   29,580   32,026   30,309  
     Commercial   19,947   19,348   18,055   19,696   18,349  
     Industrial   5,093   5,373   5,344   5,350   5,963  
     Transportation/other   48,978   47,386   48,539   43,931   46,954  

       Total   105,889   103,038   101,518   101,003   101,575  


Customers at End of Period (Excluding Transportation/Other):
     Residential   361,835   358,384   353,430   351,990   347,533  
     Commercial   45,826   45,793   45,480   44,654   44,289  
     Industrial   766   799   951   953   1,037  

       Total   408,427   404,976   399,861   397,597   392,859  


Other Selected Gas Data:  
     Revenue per Dth sold
       (excluding transportation/other)   $8.92   $6.38   $8.35   $7.02   $5.42  
     Purchased gas costs per Dth sold
       (excluding transportation/other)   $6.11   $4.02   $6.31   $4.88   $3.30  

15

Interstate Power and Light Company


Gas Operating Information 2003 2002 2001 2000 1999

Operating Revenues (000s):
     Residential   $173,598   $124,237   $162,575   $149,493   $115,428  
     Commercial   88,057   61,222   82,463   72,592   53,548  
     Industrial   24,595   18,197   22,355   19,171   15,778  
     Transportation/other   8,299   11,239   13,621   8,540   8,795  

       Total   $294,549   $214,895   $281,014   $249,796   $193,549  


Gas Sales (000s Dths):  
     Residential   19,074   18,068   17,826   19,257   18,239  
     Commercial   11,408   10,774   10,483   11,101   10,578  
     Industrial   3,911   4,070   4,147   3,874   4,443  
     Transportation/other   29,182   28,814   31,673   30,251   33,717  

       Total   63,575   61,726   64,129   64,483   66,977  


Customers at End of Period (Excluding Transportation/Other):
     Residential   207,921   206,808   205,065   205,300   203,518  
     Commercial   27,465   27,607   27,649   27,071   26,909  
     Industrial   426   438   441   440   461  

       Total   235,812   234,853   233,155   232,811   230,888  


Other Selected Gas Data:  
     Revenue per Dth sold
       (excluding transportation/other)   $8.32   $6.19   $8.24   $7.05   $5.55  
     Purchased gas cost per Dth sold
       (excluding transportation/other)   $5.99   $4.11   $6.20   $4.89   $3.41  

Wisconsin Power and Light Company


Gas Operating Information 2003 2002 2001 2000 1999

Operating Revenues (000s):
     Residential   $137,060   $94,509   $107,673   $96,204   $69,662  
     Commercial   74,594   50,121   58,658   54,512   35,570  
     Industrial   9,606   6,980   8,907   8,581   6,077  
     Transportation/other   51,117   27,481   31,625   5,855   9,461  

       Total   $272,377   $179,091   $206,863   $165,152   $120,770  


Gas Sales (000s Dths):  
     Residential   12,797   12,863   11,754   12,769   12,070  
     Commercial   8,539   8,574   7,572   8,595   7,771  
     Industrial   1,182   1,303   1,197   1,476   1,520  
     Transportation/other   19,796   18,572   16,866   13,680   13,237  

       Total   42,314   41,312   37,389   36,520   34,598  


Customers at End of Period (Excluding Transportation/Other):
     Residential   153,914   151,576   148,365   146,690   144,015  
     Commercial   18,361   18,186   17,831   17,583   17,380  
     Industrial   340   361   510   513   576  

       Total   172,615   170,123   166,706   164,786   161,971  


Other Selected Gas Data:  
     Revenue per Dth sold
       (excluding transportation/other)   $9.83   $6.67   $8.54   $6.97   $5.21  
     Purchased gas cost per Dth sold
       (excluding transportation/other)   $6.29   $3.89   $6.47   $4.69   $3.00  

16

D. INFORMATION RELATING TO NON-REGULATED OPERATIONS

Resources manages a portfolio of wholly-owned subsidiaries and additional investments through distinct platforms: Non-regulated Generation, International, Integrated Services and Other Investments. Resources intends to concentrate its strategic focus on the profitability and cash flow of these platforms and does not currently plan to invest significant capital in the growth of these platforms in the near term other than investments in Non-regulated Generation to support Alliant Energy’s domestic utility business. Refer to “Strategic Overview — Updated Strategic Plan” in MD&A for further discussion.

Non-regulated Generation — was originally formed to acquire, develop and operate a portfolio of competitive power generating assets across the U.S., focusing primarily on the Upper Midwest. In February 2003, Resources purchased a 309- MW, non-regulated, tolled, natural gas-fired power plant in Neenah, Wisconsin for $109 million, which Resources financed with a $73 million 8-year secured credit agreement ($55 million of borrowings were outstanding at Dec. 31, 2003), which is non-recourse to Alliant Energy. The entire power output of the facility is sold under contract to Milwaukee-based We Energies through June 2008. In December 2003, Alliant Energy announced that Non-regulated Generation will refine its focus to support the development, financing and construction of generation to meet the needs of Alliant Energy’s domestic utility business and will defer pursuit of other new non-regulated generation projects, other than potential projects to utilize existing equipment held by Non-regulated Generation, or further acquisitions of existing tolled generation in the near term.

International — has invested in energy generation and distribution companies and projects in select growing markets. Currently, International has investments in Brazil, China and New Zealand. International has developed local partnerships to obtain knowledge of each local market’s business trends and customs. Refer to Note 9 of Alliant Energy’s “Notes to Consolidated Financial Statements” for additional information related to Alliant Energy’s investments in foreign entities.

Integrated Services — provides a wide range of energy and environmental services for commercial, industrial, institutional, educational and governmental customers. It offers large energy users an array of services to maximize customers’ productivity, profitability and energy efficiency, and provides solutions for waste remediation and other environmental engineering and consulting services. Integrated Services includes: Cogenex Corporation (Cogenex), Industrial Energy Applications, Inc. (IEA), Heartland Energy Group, Inc. (HEG), RMT, Inc. (RMT) and Alliant Energy Integrated Services Company — Energy Solutions L.L.C. (Energy Solutions). Cogenex installs energy efficient equipment for business customers. IEA provides on-site energy services with small standby generators. HEG owns an interest in NG Energy, a gas marketing business, and owns several natural gas and oil gathering systems in Texas. RMT is an environmental and engineering consulting company that serves clients nationwide in a variety of industrial market segments and specializes in consulting on solid and hazardous waste management, site remediation, ground water quality monitoring and detection, and air quality control. RMT is marketing SmartBurn™, which is a large-scale emissions-reducing program for coal-burning facilities, to other U.S. companies. Energy Solutions provides energy consulting services.

Other Investments — represents various additional investments of Resources. Transportation is a holding company whose wholly-owned subsidiaries include the Cedar Rapids and Iowa City Railway Company (CRANDIC), which is a short-line railway that provides freight service between Cedar Rapids and Iowa City; IEI Barge Services, Inc., which provides barge terminal and hauling services on the Mississippi River; and Williams Bulk Transfer Inc. and Transfer Services, Inc., which provide transfer and storage services. Synfuel has an equity interest in a synthetic fuel processing facility. The synthetic fuel project generates operating losses at its fuel processing facility, which are more than offset by tax credits and the tax benefit of the losses generated. Investments is a holding company with direct and indirect interests in various small real estate and economic development ventures, primarily concentrated in Cedar Rapids, Iowa, and holds other passive investments, including an equity interest in McLeod, an integrated telecommunications and services provider. Resources also has a loan to a development project in Mexico, several modest investments in emerging energy technology businesses and approximately 6% of the outstanding shares of WPC that it intends to sell in 2004.

E. DISCLOSURE CONCERNING 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 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.

17

BROKERAGE PARTNERS