Form 10-K 12/31/06

10-K 1 form10k123106.htm FORM 10-K 12/31/06 Form 10-K 12/31/06

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, 2006

[ ]		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 Stock 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	American Stock Exchange

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 o 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 o

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, or non-accelerated filers. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Alliant Energy Corporation	Large accelerated filer x	Accelerated filer [ ]	Non-accelerated filer [ ]
Interstate Power and Light Company	Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer x
Wisconsin Power and Light Company	Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer x

Indicate by checkmark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of June 30, 2006:

Alliant Energy Corporation	$4.0 billion
Interstate Power and Light Company	$--
Wisconsin Power and Light Company	$--

Number of shares outstanding of each class of common stock as of Jan. 31, 2007:

Alliant Energy Corporation	Common stock, $0.01 par value, 116,231,264 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 2007 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
Part I	Item 1.	Business	1
	Item 1A.	Risk Factors	15
	Item 1B.	Unresolved Staff Comments	18
	Item 2.	Properties	19
	Item 3.	Legal Proceedings	21
	Item 4.	Submission of Matters to a Vote of Security Holders	21
		Executive Officers of the Registrants	21
Part II	Item 5.	Market for Registrants’ Common Equity, Related Stockholder Matters and
		Issuer Purchases of Equity Securities	22
	Item 6.	Selected Financial Data	24
	Item 7.	Management’s Discussion and Analysis of Financial Condition and
		Results of Operations	26
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	61
	Item 8.	Financial Statements and Supplementary Data	61
	Item 9.	Changes in and Disagreements With Accountants on Accounting and
		Financial Disclosure	148
	Item 9A.	Controls and Procedures	148
	Item 9B.	Other Information	148
Part III	Item 10.	Directors, Executive Officers and Corporate Governance	148
	Item 11.	Executive Compensation	149
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and
		Related Stockholder Matters	149
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	150
	Item 14.	Principal Accounting Fees and Services	150
Part IV	Item 15.	Exhibits, Financial Statement Schedules	151

FORWARD-LOOKING STATEMENTS

Refer to “Forward-Looking Statements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MDA) for information and disclaimers regarding forward-looking statements contained in this Annual Report on Form 10-K.

PART I

This Annual Report on Form 10-K includes information relating to Alliant Energy Corporation (Alliant Energy), Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL) (as well as Alliant Energy Resources, Inc. (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 and assets and liabilities held for sale for all periods presented. Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for additional information.

ITEM 1. BUSINESS

A.	GENERAL

The primary first tier subsidiaries of Alliant Energy are: IPL, WPL, Resources and Corporate Services. Alliant Energy operates as a regulated investor-owned public utility holding company. Alliant Energy was incorporated in Wisconsin in 1981. A brief description of the primary first tier subsidiaries of Alliant Energy is as follows:

1) IPL - incorporated in 1925 in Iowa as Iowa Railway and Light Corporation. IPL 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 and southern Minnesota. Refer to Notes 17 and 22 of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of IPL’s utility operations in Illinois which were sold in February 2007 and IPL’s proposed sale of its electric transmission assets, respectively. 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, 2006, IPL supplied electric and gas service to 538,409 and 239,372 retail customers, respectively. IPL also provides steam services to certain customers in Cedar Rapids, Iowa and various other energy-related products and services. In 2006, 2005 and 2004, 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) WPL - incorporated in 1917 in Wisconsin as Eastern Wisconsin Electric Company. WPL 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 in south and central Wisconsin. WPL operates in municipalities pursuant to permits of indefinite duration, which are regulated by Wisconsin law, and pursuant to state statutes authorizing utility operation in areas annexed by a municipality. At Dec. 31, 2006, WPL supplied electric and gas service to 456,425 and 182,098 retail customers, respectively. WPL also provides various other energy-related products and services. In 2006, 2005 and 2004, 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 American Transmission Company LLC (ATC). Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of WPL’s utility operations in Illinois which were sold in February 2007.

3) RESOURCES - incorporated in 1988 in Wisconsin. 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 - 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, 2006, Alliant Energy’s consolidated subsidiaries that are included in its continuing operations 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
IPL	1,280	291	1,571	81%
WPL	1,312	106	1,418	93%
Resources	76	580	656	12%
Corporate Services	--	1,506	1,506	--
	2,668	2,483	5,151	52%

At Dec. 31, 2006, Alliant Energy employees covered by collective bargaining agreements were as follows (IBEW=International Brotherhood of Electrical Workers; IUOE=International Union of Operating Engineers):

	Number of	Contract
	Employees	Expiration Date
IPL:
IBEW Local 949	256	9/30/08
IBEW Local 204 (Dubuque)	120	9/30/08
IBEW Local 204 (Mason City)	54	9/30/08
IUOE Local 275	48	12/01/08
IBEW Local 204 (Cedar Rapids)	773	8/31/10
IBEW Local 1439	22	6/30/11
IBEW Local 1455	7	6/30/11
	1,280
WPL - IBEW Local 965	1,312	5/31/07
Resources - Various	76	Various
	2,668

In May 2007, WPL’s collective bargaining agreement with IBEW Local 965 expires representing approximately 49% of employees covered under bargaining agreements and 25% of total Alliant Energy employees. While negotiations to renew the contract with IBEW Local 965 are underway, Alliant Energy and WPL are currently unable to predict the outcome. Alliant Energy, IPL and WPL have not experienced any significant work stoppages in the past.

2) CAPITAL EXPENDITURE AND INVESTMENT PLANS

Refer to “Liquidity and Capital Resources” in MDA for discussion of anticipated construction and acquisition expenditures for 2007 and 2008.

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) - In 2005, the Energy Policy Act was enacted which resulted in the repeals of the Public Utility Holding Company Act of 1935 and the Public Utility Regulatory Policy Act of 1978 and additional authority being granted to FERC under the 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 affiliate transactions, public utility mergers, acquisitions and dispositions, and books and records requirements. In addition, the Energy Policy Act requires creation of an Electric Reliability Organization (ERO) to be overseen by FERC. FERC designated the North American Electric Reliability Council (NERC) as the overarching ERO. IPL and WPL have joined the Midwest Reliability Organization (MRO), which is a regional member of NERC and has direct responsibility for mandatory electric reliability standards for IPL and WPL. FERC also has jurisdiction under the Federal Power Act over certain electric utility facilities and operations, electric wholesale rates and accounting practices of IPL and WPL, and in certain other respects. Lastly, FERC has jurisdiction under the Natural Gas Act over certain natural gas facilities and operations of IPL and WPL.

Environmental - The United States of America (U.S.) Environmental Protection Agency (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 Iowa service territory for retail utility rates and standards of service, accounting requirements, approval of the location and construction of electric generating facilities having a capacity in excess of 25,000 kilowatts (KW), and in other respects. Requests for rate relief are based on historical test periods, adjusted for certain known and measurable changes occurring up to nine months from the end of the historical test year. 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 rates granted become permanent. Interim rates can be placed in effect after 10 days of the rate application filing, subject to refund, and must be based on past precedent. In 2001, Iowa enacted HF 577, which provides Iowa companies with the necessary rate making principles - and resulting, increased regulatory and investment certainty - prior to making certain generation investments in Iowa.

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, other affiliated interest activities, and in other respects. WPL is also subject to regulation by the PSCW related to its Wisconsin service territory for 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, certain other additions and extensions to facilities, and in other respects. WPL is required to file rate cases with the PSCW using a forward-looking test year period. There is no statutory time limit for the PSCW to decide rate cases. However, the PSCW attempts to process all base rate cases in 10 months or less and the PSCW has the ability to approve interim rate relief, subject to refund, if necessary. For fuel-only rate case increases, the PSCW attempts to provide interim rate relief within 21 days of notice to customers, subject to refund. There is no statutory time limit for final fuel-only rate relief decisions. In 2005, Wisconsin enacted Act 7, which provides Wisconsin companies with the necessary rate making principles - and resulting, increased regulatory and investment certainty - prior to making certain generation investments in Wisconsin.

Minnesota Public Utilities Commission (MPUC) - IPL is subject to regulation by the MPUC related to its Minnesota service territory for retail utility rates and standards of service, accounting requirements, issuance and use of proceeds of securities, annual approval of IPL’s capital structure, and in other respects. Requests for rate relief can be based on either historical or projected data and interim rates are permitted. The MPUC must reach a final decision within 10 months of filing for rate relief.

Refer to Notes 1(b), 1(j), 2 and 12(e) of Alliant Energy’s “Notes to Consolidated Financial Statements” and “Rates and Regulatory Matters” and “Liquidity and Capital Resources - Environmental” 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 Alliant Energy has taken to strengthen its financial profile and information regarding Alliant Energy’s strategic plan.

C.	INFORMATION RELATING TO UTILITY OPERATIONS

1) ELECTRIC UTILITY OPERATIONS

General - Electric utility operations represent the largest operating segment for Alliant Energy, IPL and WPL. In 2006, electric utility operations accounted for 73%, 76% and 79% of operating revenues and 87%, 93% and 78% of operating income for Alliant Energy, IPL and WPL, respectively. 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. Electric utility revenues by state were as follows (dollars in millions):

	2006		2005		2004
	Amount	Percent	Amount	Percent	Amount	Percent
IPL:
Iowa	$1,229.0	50%	$1,152.1	50%	$983.0	49%
Minnesota	78.2	3%	72.9	3%	65.2	3%
Illinois (a)	24.4	1%	21.7	1%	21.0	1%
Subtotal	1,331.6	54%	1,246.7	54%	1,069.2	53%
WPL:
Wisconsin	1,098.0	45%	1,061.6	45%	927.1	46%
Illinois (a)	13.4	1%	12.3	1%	12.7	1%
Subtotal	1,111.4	46%	1,073.9	46%	939.8	47%
	$2,443.0	100%	$2,320.6	100%	$2,009.0	100%

(a)	Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of IPL’s and WPL’s utility operations in Illinois which were sold in February 2007.

The percentage of electric utility revenues regulated by their respective state commissions and FERC were as follows:

	Alliant Energy			IPL			WPL
	2006	2005	2004	2006	2005	2004	2006	2005	2004
Respective state
commissions	91%	88%	91%	96%	94%	96%	85%	82%	85%
FERC	9%	12%	9%	4%	6%	4%	15%	18%	15%
	100%	100%	100%	100%	100%	100%	100%	100%	100%

The number of electric customers and communities served at Dec. 31, 2006 was as follows:

	Retail Customers	Wholesale Customers	Other Customers	Total Customers	Communities Served
IPL	538,409	6	1,293	539,708	766
WPL	456,425	26	2,066	458,517	611
	994,834	32	3,359	998,225	1,377

Wholesale customers in the above table are billed under wholesale service agreements, which 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. Refer to the “Electric Operating Information” tables for additional details regarding electric utility operations.

Seasonality - Electric sales are seasonal to some extent with the annual peak normally occurring in the summer months due to air conditioning requirements. In 2006, the maximum peak hour demands for Alliant Energy, IPL and WPL were 5,989 megawatts (MW), 3,070 MW and 2,941 MW, respectively, all on July 17, 2006.

Competition - Retail electric customers in Iowa and Wisconsin currently do not have the ability to choose their electric supplier. However, in order to increase sales, IPL and WPL attempt to attract new customers into their service territories. As a result, there is competition among utilities to keep energy rates low. Although electric service in Iowa and Wisconsin is regulated, IPL and WPL also 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).

Electric Supply - Alliant Energy has met historical customer demand of electricity and expects to continue meeting future demand through internally generated electric supply, purchased power contracts utilizing existing firm transmission rights, and additional power purchases from generating units located within and outside of Alliant Energy’s service territory. Refer to the “Electric Operating Information” tables for details on the sources of electric supply for Alliant Energy, IPL and WPL from 2002 to 2006. Alliant Energy’s mix of electric supply has experienced changes in the past couple of years as a result of the sales of its interests in its nuclear generating facilities and the addition of natural-gas fired generating facilities to its generation portfolio. Refer to “Strategic Overview - Utility Generation Plan” in MDA for discussion of Alliant Energy’s

utility generation plan. While Alliant Energy currently expects to meet utility customer demands in the future, 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, power plant outages, transmission system outages or extended periods of extreme weather conditions.

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

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

	IPL			WPL
	2006	2005	2004	2006	2005	2004
Coal	$1.25	$1.17	$1.08	$1.52	$1.32	$1.26
Natural Gas	10.45	7.86	6.65	14.28	8.49	6.65
Nuclear	0.56	0.57	0.55	--	0.53	0.46
All Fuels	2.18	1.73	1.15	1.80	1.72	1.30

Coal - Coal is the primary fuel source for Alliant Energy’s internally generated electric supply. Electric supply from coal-fired generating facilities represented 53%, 52% and 58% of IPL’s total sources of electric energy and 51%, 49% and 55% of WPL’s total sources of electric energy during 2006, 2005 and 2004, respectively. 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 and WPL for 2007 through 2012. As of Dec. 31, 2006, these contracts provide for a portfolio of coal supplies that cover approximately 95%, 74%, 51%, 27%, 14% and 5% of Alliant Energy’s estimated coal supply needs for 2007 through 2012, respectively. Management 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.

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 2006 were 49 days for generating stations with year-round deliveries and 111 days for generating stations with seasonal deliveries.

Average delivered fossil fuel costs are expected to continue 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, expiration of 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 the existing coal contracts have provisions for price adjustments should specific indices change. 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. Other factors which 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, nitrogen oxide 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 which may impact transportation rates for future commitments upon expiration of existing contracts include: the need for railroads to enhance/expand infrastructure for demand growth, corresponding investments in locomotives and crews and the desire to improve margins on coal commensurate with margins on non-coal movements. Alliant Energy believes that, given its current coal procurement process, the specific coal market in its primary purchase region, and regulatory cost-recovery mechanisms, it is reasonably insulated against the present volatile coal price environment. Alliant Energy’s coal procurement process stresses periodic purchases, staggering of contract terms, stair-stepped levels of coverage going forward for five to six years and supplier diversity. Similarly, given the term lengths of its transportation agreements, Alliant Energy believes it is reasonably insulated against future higher base coal transportation rates from the major railroads. As of Dec. 31, 2006, existing coal transportation agreements cover approximately 91% of IPL’s and WPL’s estimated needs through 2007, approximately 66% for 2008 through 2009 and approximately 46% for 2010 through 2014.

Natural Gas - Alliant Energy owns several natural gas-fired generating facilities including IPL’s 565 MW, natural gas-fired Emery Generating Facility (Emery) that was placed in service in May 2004 and Resources’ 300 MW, natural gas-fired Sheboygan Falls Energy Facility (SFEF) that began commercial operations in June 2005. WPL has exclusive rights to the output of SFEF under an affiliated lease agreement. These facilities help meet customer demand for electricity generally during peak hour demands. Electric supply from owned natural gas-fired generating facilities represented 5%, 6% and 2% of Alliant Energy’s total sources of electric energy during 2006, 2005 and 2004, respectively. Increased electric supply from natural gas-fired generating facilities during 2006 and 2005 was primarily due to generation from Emery and SFEF.

Alliant Energy has responsibility to supply natural gas to certain generating facilities under purchased power agreements (PPAs), which include the Riverside Energy Center (Riverside) and the RockGen Energy Center (RockGen), as well as the generating facilities it owns. IPL and WPL have contracts with several companies to provide fixed-price natural gas supply for these generating facilities with the longest contracts having terms through December 2008. WPL has also contracted with ANR Pipeline to provide firm pipeline transportation of 60,000 dekatherms (Dths) per day for Riverside and 52,800 Dths per day (June to September) for SFEF. In addition to entering into fixed-price supply contracts, IPL and WPL have hedging programs reviewed by the IUB and PSCW, respectively, to help protect against the impacts of volatile natural gas prices. IPL and WPL expect these hedging programs will mitigate the impact on their electric customers of volatile natural gas costs for these generating facilities through 2008.

Nuclear - Electric supply from owned nuclear generating facilities represented 1%, 17% and 19% of IPL’s total sources of electric energy and 0%, 2% and 11% of WPL’s total sources of electric energy during 2006, 2005 and 2004, respectively. 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. Refer to Note 18 of Alliant Energy’s “Notes to Consolidated Financial Statements” for additional information regarding the DAEC sale.

Purchased Power - Alliant Energy enters into PPAs to meet a portion of its customer demand of electricity. Purchased power represented 38%, 21% and 20% of IPL’s total sources of electric energy and 47%, 46% and 32% of WPL’s total sources of electric energy during 2006, 2005 and 2004, respectively. IPL’s and WPL’s level of purchased power during these periods was impacted by the sale of IPL’s interest in DAEC in January 2006 and the sale of WPL’s interest in Kewaunee in July 2005, respectively. Refer to “Other Matters - Other Future Considerations - Calpine Bankruptcy” in MDA for discussion of WPL’s PPAs with Calpine Corporation subsidiaries related to RockGen and Riverside.

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

Electric Transmission Business -

IPL - IPL maintains and operates its own electric transmission assets, which had a book value of approximately $434 million as of Dec. 31, 2006. Refer to Note 22 of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of the proposed sale of IPL’s electric transmission assets. Refer to Item 2. Properties for additional information regarding IPL’s electric transmission properties. IPL has a non-cancelable operation agreement, which will terminate on Dec. 31, 2035, with Central Iowa Power Cooperative (CIPCO) that provides for the joint use of certain transmission facilities of IPL and CIPCO. IPL has transmission interconnections at various locations with nine other transmission owning utilities in the Midwest. These interconnections, along with the interconnections of ATC, enhance the overall reliability of the Alliant Energy transmission system and provide access to multiple sources of economic and emergency energy.

WPL - In 2001, WPL transferred its transmission assets to ATC in exchange for an ownership interest in ATC. As of Dec. 31, 2006, WPL held an 18% ownership interest in ATC with a carrying value of $166 million. ATC is an independent for-profit, transmission-only company and is a transmission-owning member of the Midwest Independent System Operator (MISO), the MRO and Reliability First Corporation Regional Reliability Council. ATC realizes its revenues from the provision of transmission services to both participants in ATC as well as non-participants. During 2006, ATC distributed to WPL, in the form of dividends, $19 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 continuing its efforts to improve transmission reliability and import capabilities into Wisconsin, including construction of a 345-kilovolt transmission line, which is expected to be in service in 2008. As these facilities are constructed, Alliant Energy expects they will serve to enhance its operating flexibility and its access to lower-cost energy. ATC also has various transmission interconnections with four other transmission owning utilities in the Midwest. WPL anticipates no capital contributions to ATC in 2007 and $25 million of capital contributions

Regional Transmission Participation - IPL and WPL are members of the MRO, which is a regional member of NERC. Each regional member of NERC is responsible for setting policies to ensure reliability in its area through coordination of planning and operations.

MISO Wholesale Energy Market - IPL and WPL are also members of MISO, a FERC-approved Regional Transmission Organization, which is responsible for monitoring and ensuring equal access to the transmission system in its service territory. In April 2005, IPL and WPL began participation in the restructured wholesale energy market operated by MISO. The implementation of this restructured market marked a significant change in the way IPL and WPL buy and sell wholesale electricity, obtain transmission services and schedule generation. In the restructured 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 restructured 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. In areas of constrained transmission capacity, such as Wisconsin, costs could be higher due to the congestion and its impact on locational marginal prices. As part of the MISO market restructuring, physical transmission rights of IPL and WPL were replaced with Financial Transmission Rights (FTRs). FTRs provide a hedge for congestion costs that incur in the MISO day-ahead energy market. Both IPL and WPL have been awarded FTRs by MISO that are in place through May 31, 2007. Based on the FTRs awarded to IPL and WPL to date and future expected allocations, along with the 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 market.

Refer to “Rates and Regulatory Matters” in MDA for discussion of the regulatory impacts of costs related to MISO and “Other Future Considerations - MISO Wholesale Energy Market” in MDA for discussion of the ancillary services market MISO is currently developing.

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; Clean Air Act (CAA), as amended by the CAA Amendments of 1990; 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 of 1992; 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 the 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 “Liquidity and Capital Resources” in MDA and Note 12(e) of Alliant Energy’s Notes to Consolidated Financial Statements for further discussion of electric environmental matters including new environmental regulations under the Clean Air Interstate Rule and Clean Air Mercury Rule.

Alliant Energy Corporation


Electric Operating Information	2006	2005	2004	2003	2002

Operating Revenues (in millions):
Residential	$857.1	$823.4	$716.7	$684.6	$626.9
Commercial	549.8	497.4	437.8	409.7	376.4
Industrial	763.7	675.2	609.9	571.6	526.8

Retail subtotal	2,170.6	1,996.0	1,764.4	1,665.9	1,530.1
Sales for resale:
Wholesale	145.2	158.7	116.8	108.4	93.2
Bulk power and other	68.5	114.6	69.0	87.4	67.1
Other	58.7	51.3	58.8	55.4	62.1

Total	$2,443.0	$2,320.6	$2,009.0	$1,917.1	$1,752.5


Electric Sales (000s MWh):
Residential	7,670	7,881	7,354	7,565	7,616
Commercial	6,187	6,110	5,702	5,663	5,542
Industrial	12,808	12,830	12,596	12,345	12,297

Retail subtotal	26,665	26,821	25,652	25,573	25,455
Sales for resale:
Wholesale	3,064	3,161	2,943	2,835	2,636
Bulk power and other	2,632	2,933	2,159	2,660	2,169
Other	171	173	178	184	197

Total	32,532	33,088	30,932	31,252	30,457


Customers (End of Period):
Residential	855,948	849,845	839,745	830,559	822,229
Commercial	135,822	134,149	131,152	129,130	128,212
Industrial	3,064	3,044	2,916	2,902	2,905
Other	3,391	3,368	3,312	3,362	3,344

Total	998,225	990,406	977,125	965,953	956,690


Other Selected Electric Data:
Maximum peak hour demand (MW)	5,989	5,932	5,644	5,887	5,729
Cooling degree days (a):
Cedar Rapids (IPL) (normal - 379)	332	406	139	276	397
Madison (WPL) (normal - 248)	284	421	138	224	356
Sources of electric energy (000s MWh):
Coal	17,578	17,360	18,472	18,451	17,674
Purchased power:
Nuclear (b)	5,128	1,008	-	-	-
Other	8,928	9,885	8,289	9,155	8,596
Gas (c)	1,541	2,052	792	631	675
Nuclear (b)	264	3,461	5,018	4,498	5,012
Other	263	297	262	240	379

Total	33,702	34,063	32,833	32,975	32,336

Revenue per kilowatt-hour (KWh) sold to retail
customers (cents)	8.14	7.44	6.88	6.51	6.01

(a)

Cooling degree days are calculated using a 70 degree base. Normal degree days are calculated for Cedar Rapids using a fixed 30-year average and for Madison using a rolling 20-year average.

(b)

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.

(c)

Includes generation from SFEF that began commercial operation in June 2005, which WPL leases from Resources' Non-regulated Generation business.

Interstate Power and Light Company


Electric Operating Information	2006	2005	2004	2003	2002

Operating Revenues (in millions):
Residential	$471.2	$453.9	$388.9	$367.7	$355.0
Commercial	337.4	300.0	257.8	239.4	229.7
Industrial	440.7	387.0	347.3	327.8	315.5

Retail subtotal	1,249.3	1,140.9	994.0	934.9	900.2
Sales for resale:
Wholesale	1.9	1.9	2.1	2.0	2.2
Bulk power and other	47.8	73.5	39.6	38.2	32.3
Other	32.6	30.4	33.5	31.9	30.1

Total	$1,331.6	$1,246.7	$1,069.2	$1,007.0	$964.8


Electric Sales (000s MWh):
Residential	4,157	4,282	3,979	4,155	4,184
Commercial	3,910	3,836	3,487	3,496	3,392
Industrial	7,860	8,005	7,827	7,750	7,843

Retail subtotal	15,927	16,123	15,293	15,401	15,419
Sales for resale:
Wholesale	35	41	53	50	66
Bulk power and other	1,550	1,682	1,252	1,249	1,085
Other	99	98	98	102	103

Total	17,611	17,944	16,696	16,802	16,673


Customers (End of Period):
Residential	455,346	454,176	450,595	448,719	446,202
Commercial	81,045	80,238	78,137	77,043	76,856
Industrial	2,018	1,996	1,915	1,888	1,898
Other	1,299	1,317	1,280	1,327	1,328

Total	539,708	537,727	531,927	528,977	526,284


Other Selected Electric Data:
Maximum peak hour demand (MW)	3,070	3,077	3,017	3,123	3,097
Cooling degree days (a):
Cedar Rapids (normal - 379)	332	406	139	276	397
Sources of electric energy (000s MWh):
Coal	9,919	9,782	10,348	10,232	9,889
Purchased power:
Nuclear (b)	3,297	-	-	-	-
Other	3,743	3,868	3,508	4,503	4,134
Gas	1,426	1,686	580	227	330
Nuclear (b)	264	3,177	3,451	2,791	3,202
Other	80	121	47	63	127

Total	18,729	18,634	17,934	17,816	17,682

Revenue per KWh sold to retail customers (cents)	7.84	7.08	6.50	6.07	5.84

(a)

Cooling degree days are calculated using a 70 degree base. Normal degree days are calculated using a fixed 30-year average.

(b)

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.

Wisconsin Power and Light Company


Electric Operating Information	2006		2005		2004	2003	2002

Operating Revenues (in millions):
Residential	$385.9		$369.5		$327.8	$316.9	$271.9
Commercial	212.4		197.4		180.0	170.3	146.7
Industrial	323.0		288.2		262.6	243.8	211.3

Retail subtotal	921.3		855.1		770.4	731.0	629.9
Sales for resale:
Wholesale	143.3		156.8		114.7	106.4	91.0
Bulk power and other	20.7		41.1		29.4	49.2	34.8
Other	26.1		20.9		25.3	23.5	32.0

Total	$1,111.	4	$1,073.	9	$939.8	$910.1	$787.7


Electric Sales (000s MWh):
Residential	3,513		3,599		3,375	3,410	3,432
Commercial	2,277		2,274		2,215	2,167	2,150
Industrial	4,948		4,825		4,769	4,595	4,454

Retail subtotal	10,738		10,698		10,359	10,172	10,036
Sales for resale:
Wholesale	3,029		3,120		2,890	2,785	2,570
Bulk power and other	1,082		1,251		907	1,411	1,084
Other	72		75		80	82	94

Total	14,921		15,144		14,236	14,450	13,784


Customers (End of Period):
Residential	400,602		395,669		389,150	381,840	376,027
Commercial	54,777		53,911		53,015	52,087	51,356
Industrial	1,046		1,048		1,001	1,014	1,007
Other	2,092		2,051		2,032	2,035	2,016

Total	458,517		452,679		445,198	436,976	430,406


Other Selected Electric Data:
Maximum peak hour demand (MW)	2,941		2,854		2,627	2,782	2,674
Cooling degree days (a):
Madison (normal - 248)	284		421		138	224	356
Sources of electric energy (000s MWh):
Coal	7,659		7,578		8,124	8,219	7,785
Purchased power:
Nuclear (b)	1,831		1,008		-	-	-
Other	5,185		6,017		4,781	4,652	4,462
Gas (c)	115		366		212	404	345
Nuclear (b)	-		284		1,567	1,707	1,810
Other	183		176		215	177	252

Total	14,973		15,429		14,899	15,159	14,654

Revenue per KWh sold to retail customers (cents)	8.58		7.99		7.44	7.19	6.28

(a)

Cooling degree days are calculated using a 70 degree base. Normal degree days are calculated using a rolling 20-year average.

(b)

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.

(c)

Includes generation from SFEF that began commercial operation in June 2005, which WPL leases from Resources' Non-regulated Generation business.

2) GAS UTILITY OPERATIONS

General - Gas utility operations represents the second largest operating segment for Alliant Energy, IPL and WPL. In 2006, gas utility operations accounted for 19%, 20% and 20% of operating revenues and 12%, 7% and 22% of operating income for Alliant Energy, IPL and WPL, respectively. 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. Gas utility revenues by state were as follows (dollars in millions):

	2006		2005		2004
	Amount	Percent	Amount	Percent	Amount	Percent
IPL:
Iowa	$335.2	53%	$337.2	49%	$293.3	51%
Minnesota	17.7	3%	18.4	3%	16.7	3%
Illinois (a)	6.5	1%	7.2	1%	6.0	1%
Subtotal	359.4	57%	362.8	53%	316.0	55%
WPL:
Wisconsin	265.6	42%	310.5	45%	246.9	44%
Illinois (a)	8.3	1%	11.8	2%	6.9	1%
Subtotal	273.9	43%	322.3	47%	253.8	45%
	$633.3	100%	$685.1	100%	$569.8	100%

(a)	Refer to Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of IPL’s and WPL’s utility operations in Illinois which were sold in February 2007.

The number of gas customers and communities served at Dec. 31, 2006 were as follows:

	Retail	Transportation and	Total	Communities
	Customers	Other Customers	Customers	Served
IPL	239,372	240	239,612	251
WPL	182,098	251	182,349	246
	421,470	491	421,961	497

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. Refer to the “Gas Operating Information” tables for additional details regarding gas utility operations.

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. Gas storage met approximately 30% of both IPL’s and WPL’s annual gas requirements in 2006.

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 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 2007. IPL’s and WPL’s gas supply commitments are primarily market-based.

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), 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 IPL and WPL with gas delivered directly to their service territories. In 2006, the maximum daily delivery capacity for IPL and WPL was as follows (in Dths):

	NNG	NGPL	ANR	FCS	Total
IPL	200,891	89,932	55,680	21,000	367,503
WPL	79,986	--	157,967	31,000	268,953

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

Gas Environmental Matters - Refer to Note 12(e) of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of gas environmental matters.

Alliant Energy Corporation


Gas Operating Information	2006	2005	2004	2003	2002

Operating Revenues (in millions):
Residential	$342.8	$358.1	$315.6	$310.7	$218.7
Commercial	198.8	202.0	172.3	162.7	111.3
Industrial	38.7	43.8	38.4	34.2	25.2

Retail subtotal	580.3	603.9	526.3	507.6	355.2
Interdepartmental	19.2	55.9	22.3	48.5	25.5
Transportation and other	33.8	25.3	21.2	10.8	13.3

Total	$633.3	$685.1	$569.8	$566.9	$394.0


Gas Sales (000s Dths):
Residential	26,406	28,554	29,338	31,871	30,931
Commercial	18,707	18,763	19,199	19,947	19,348
Industrial	4,498	4,406	5,127	5,093	5,373

Retail subtotal	49,611	51,723	53,664	56,911	55,652
Interdepartmental	2,468	6,959	3,501	7,191	6,271
Transportation and other	53,436	55,891	46,125	41,787	41,115

Total	105,515	114,573	103,290	105,889	103,038


Retail Customers at End of Period:
Residential	374,494	371,443	366,493	361,835	358,384
Commercial	46,319	46,153	45,630	45,826	45,793
Industrial	657	692	730	766	799

Total	421,470	418,288	412,853	408,427	404,976


Other Selected Gas Data:
Heating degree days (a):
Cedar Rapids (IPL) (normal - 6,896)	6,211	6,534	6,463	6,883	6,577
Madison (WPL) (normal - 7,197)	6,499	6,796	6,831	7,337	6,929
Revenue per Dth sold to retail customers	$11.70	$11.68	$9.81	$8.92	$6.38
Purchased gas costs per Dth sold to retail customers	$8.32	$8.68	$6.98	$6.11	$4.02

(a)

Heating degree days are calculated using a 65 degree base. Normal degree days are calculated for Cedar Rapids using a fixed 30-year average and for Madison using a rolling 20-year average.

Interstate Power and Light Company


Gas Operating Information	2006	2005	2004	2003	2002

Operating Revenues (in millions):
Residential	$197.9	$201.7	$179.2	$173.6	$124.2
Commercial	114.4	112.7	95.5	88.1	61.2
Industrial	30.4	33.8	30.3	24.6	18.2

Retail subtotal	342.7	348.2	305.0	286.3	203.6
Interdepartmental	2.2	5.1	1.9	3.8	4.0
Transportation and other	14.5	9.5	9.1	4.4	7.3

Total	$359.4	$362.8	$316.0	$294.5	$214.9


Gas Sales (000s Dths):
Residential	15,136	16,486	16,882	19,074	18,068
Commercial	10,552	10,576	10,614	11,408	10,774
Industrial	3,622	3,428	4,029	3,911	4,070

Retail subtotal	29,310	30,490	31,525	34,393	32,912
Interdepartmental	352	511	289	631	1,027
Transportation and other	32,342	30,691	28,653	28,551	27,787

Total	62,004	61,692	60,467	63,575	61,726


Retail Customers at End of Period:
Residential	211,768	211,217	209,280	207,921	206,808
Commercial	27,222	27,384	27,094	27,465	27,607
Industrial	382	398	434	426	438

Total	239,372	238,999	236,808	235,812	234,853


Other Selected Gas Data:
Heating degree days (a):
Cedar Rapids (normal - 6,896)	6,211	6,534	6,463	6,883	6,577
Revenue per Dth sold to retail customers	$11.69	$11.42	$9.67	$8.32	$6.19
Purchased gas cost per Dth sold to retail customers	$8.69	$8.78	$7.27	$5.99	$4.11


Wisconsin Power and Light Company


Gas Operating Information	2006	2005	2004	2003	2002

Operating Revenues (in millions):
Residential	$144.9	$156.4	$136.4	$137.1	$94.5
Commercial	84.4	89.3	76.8	74.6	50.1
Industrial	8.3	10.0	8.1	9.6	7.0

Retail subtotal	237.6	255.7	221.3	221.3	151.6
Interdepartmental	17.0	50.8	20.4	44.7	21.5
Transportation and other	19.3	15.8	12.1	6.4	6.0

Total	$273.9	$322.3	$253.8	$272.4	$179.1


Gas Sales (000s Dths):
Residential	11,270	12,068	12,456	12,797	12,863
Commercial	8,155	8,187	8,585	8,539	8,574
Industrial	876	978	1,098	1,182	1,303

Retail subtotal	20,301	21,233	22,139	22,518	22,740
Interdepartmental	2,116	6,448	3,212	6,560	5,244
Transportation and other	21,094	25,200	17,472	13,236	13,328

Total	43,511	52,881	42,823	42,314	41,312


Retail Customers at End of Period:
Residential	162,726	160,226	157,213	153,914	151,576
Commercial	19,097	18,769	18,536	18,361	18,186
Industrial	275	294	296	340	361

Total	182,098	179,289	176,045	172,615	170,123


Other Selected Gas Data:
Heating degree days (a):
Madison (normal - 7,197)	6,499	6,796	6,831	7,337	6,929
Revenue per Dth sold to retail customers	$11.70	$12.04	$10.00	$9.83	$6.67
Purchased gas cost per Dth sold to retail customers	$7.77	$8.53	$6.57	$6.29	$3.89

(a)

Heating degree days are calculated using a 65 degree base. Normal degree days are calculated for Cedar Rapids using a fixed 30-year average and for Madison using a rolling 20-year average.

D.	INFORMATION RELATING TO NON-REGULATED OPERATIONS

Resources manages a relatively small portfolio of wholly-owned subsidiaries and additional investments through two distinct platforms: Non-regulated Generation and other non-regulated investments.

Non-regulated Generation - manages Alliant Energy’s non-regulated electric generating facilities. In June 2005, Resources completed the construction and commenced commercial operation of the 300 MW, simple-cycle, natural gas-fired SFEF near Sheboygan Falls, Wisconsin. Resources owns SFEF and leases it to WPL for an initial period of 20 years. Refer to Note 3(b) of WPL’s “Notes to Consolidated Financial Statements” for additional information regarding the SFEF lease. Resources also owns a 309 MW, simple-cycle, natural gas-fired electric generating facility in Neenah, Wisconsin. The entire power output of the facility is sold under contract to Milwaukee-based We Energies through May 2008. Also included in Non-regulated Generation is Industrial Energy Applications, Inc., which provides on-site energy services with small standby generators.

Other non-regulated investments - includes investments in environmental engineering and site remediation, transportation, construction management services for wind farms and several other modest investments, as well as a resort development in Mexico (Laguna del Mar) that Alliant Energy is divesting. Environmental engineering and site remediation includes RMT, Inc., 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. Transportation includes a short-line railway that provides freight service between Cedar Rapids and Iowa City; barge terminal and hauling services on the Mississippi River; and other transfer and storage services. Construction management services for wind farms includes WindConnect™, a construction management service company that provides expertise in engineering, designing and constructing wind electric system projects.

Refer to Note 9(b) of Alliant Energy’s “Notes to Consolidated Financial Statements” for discussion of the sales of Alliant Energy’s investments in New Zealand and Brazil in December 2006 and January 2006, respectively. Refer to “Strategic Overview” in MDA and Note 17 of Alliant Energy’s “Notes to Consolidated Financial Statements” for information on Alliant Energy’s focused approach to its non-regulated operations as well as various other divestitures that Alliant Energy has completed.

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 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.

ITEM 1A. RISK FACTORS

You should carefully consider each of the risks described below relating to Alliant Energy, IPL and WPL, together with all of the other information contained in this combined Annual Report on Form 10-K, before making an investment decision with respect to our securities. If any of the following risks develop into actual events, our business, financial condition, results of operations or cash flows could be materially and adversely affected and you may lose all or part of your investment.

Risks related to the regulation of our business could impact the rates we are able to charge, our costs and our profitability - We are subject to comprehensive regulation by federal and state regulatory authorities, which significantly influences our operating environment and the ability to timely recover costs from customers. In particular, our utility operations are regulated by regulatory authorities with jurisdiction over public utilities, including the IUB, the PSCW, the MPUC and FERC. These authorities regulate many aspects of our operations, including, but not limited to: rates charged to customers; costs of fuel, purchased power and natural gas that can be recovered from customers; the authorized rates of return on capital; our ability to site and construct new generating facilities; construction and maintenance of facilities; operations; safety; issuance of securities; accounting matters; and transactions between affiliates. Further, provisions of the Wisconsin Utility Holding Company Act limit our ability to invest in non-utility activities and could deter takeover attempts by a potential purchaser of our common stock that would be willing to pay a premium for our common stock. Our ability to obtain rate adjustments to maintain current rates of return depends upon regulatory action under applicable statutes and regulations, and we cannot assure that rate adjustments will be obtained or current authorized rates of return on capital will be earned. These regulatory authorities are also empowered to impose financial penalties and other sanctions on us if we are found to have violated statutes and regulations governing utility operations. IPL and WPL from time to time file rate cases with federal and state regulatory authorities. In future rate cases, if IPL and WPL do not receive an adequate amount of rate relief, rates are reduced, increased rates are not approved on a timely basis or costs are otherwise unable to be recovered through rates, we may experience an adverse impact on our financial condition, results of operations and cash flows. We are unable to predict the impact on our business and operating results from future regulatory activities of any of these agencies. Changes in regulations or the imposition of additional regulations may require us to incur additional expenses or change business operations or our business plan, which may have an adverse impact on our financial condition, results of operations and cash flows.

Changes in commodity prices or the availability of commodities may increase the cost of producing electric energy or decrease the amount we receive from selling electric energy, harming our financial performance - The prices that we may obtain for electric energy may not compensate for changes in coal, natural gas or energy spot-market costs, or changes in the relationship between such costs and the market prices of electric energy. As a result, we may be unable to pass on the changes in costs to our customers, which may result in an adverse effect on our financial condition, results of operations and cash flows. We are heavily exposed to changes in the price and availability of coal because the majority of the electricity generated by us is from our coal-fired generating facilities. We have contracts of varying durations for the supply and transportation of coal for most of our existing generating capability, but as these contracts end or otherwise are not honored, we may not be able to purchase coal on terms as favorable as the current contracts. Further, we rely on coal primarily from the Power River Basin in Wyoming and any disruption of coal production in, or transportation from, that region may cause us to incur additional costs and adversely affect our financial condition, results of operations and cash flows. We also have responsibility to supply natural gas to certain natural gas-fired electric generating facilities that we own and lease, which increase our exposure to the more volatile market prices of natural gas. We have natural gas supply contracts in place which are generally short term in duration. The natural gas supply commitments are either fixed price in nature or market-based. As some of the contracts are market-based, and all of the contracts are short-term, we may not be able to purchase natural gas on terms as favorable as the current contracts when the current contracts expire. Further, any disruption of production or transportation of natural gas may cause us to incur additional costs to purchase natural gas that may adversely impact our financial condition, results of operations and cash flows. The derivative instruments we use to manage our commodity risks have terms allowing our counterparties to demand cash collateral. Extensive cash collateral demands could adversely impact our cash flows.

We may incur additional costs or experience delays in generating facility construction and may not be able to recover our investment - Large construction projects are subject to risks over which we have limited or no control and which might adversely affect project costs or completion time. These risks include shortages of, the inability to obtain, the cost of and the consistency of labor, materials and equipment, the inability of the general contractor or subcontractors to perform under their contracts, work stoppages, adverse weather conditions, the inability to obtain necessary permits in a timely manner, changes in applicable laws or regulations, adverse interpretation or enforcement of permit conditions, governmental actions, legal action, and unforeseen engineering problems. If the construction of a generating facility is over budget, we may not be able to recover those excess costs. Inability to recover excess costs, or inability to complete construction in a timely manner, could adversely impact our financial condition, results of operations and cash flows.

Costs of compliance with new laws and the incurrence of liabilities, particularly related to the environment, could adversely affect our profitability - Our operations are subject to extensive regulation including environmental protection laws and regulations relating to, among other things, water discharges, management of hazardous and solid waste, and air emissions such as sulfur dioxide, nitrogen oxide, small particulates and mercury. New laws and regulations affecting our operations have been adopted by the EPA, including the Clean Air Mercury Rule and the Clean Air Interstate Rule, and possible new regulations from federal and state authorities may be adopted, requiring modifications to our utility operations. As an example, new regulations on carbon dioxide emissions may be adopted. New interpretations of existing laws and regulations could be adopted or become applicable to us or our facilities. These new regulations, possible new regulations and possible new interpretations may substantially increase compliance expenditures made by us or restrict our operations in the future. We also have current or previous ownership interests in sites associated with the production of gas and the production and delivery of electricity for which we may be liable for additional costs related to investigation, remediation and monitoring of these sites. Citizen groups or others may bring litigation over environmental issues including claims of various types, such as property damage, personal injury, and citizen enforcement of environmental requirements, such as opacity and other air quality standards which could subject us to penalties, injunctive relief and the cost of litigation. We cannot predict with certainty the amount and timing of all future expenditures (including the potential or magnitude of fines or penalties) related to environmental matters because of the difficulty of estimating clean-up and compliance costs, the uncertainty in quantifying liabilities under environmental laws that impose joint and several liabilities on all potentially responsible parties, the possibility that changes will be made to the current environmental laws and regulations, the possible inability to obtain necessary materials or skilled labor force required for certain equipment necessary to comply with environmental regulations, and the uncertainty regarding the type of compliance that will be required by final rules and regulations. Compliance with current and future federal and state environmental laws and regulations may result in increased capital, operating and other costs, including remediation and containment expenses and monitoring obligations which could adversely impact our financial condition, results of operations and cash flows.

Our operating results may fluctuate on a seasonal and quarterly basis and can be adversely affected by the impacts of weather - Our electric and gas utility businesses are seasonal businesses and weather patterns can have a material impact on their operating performance. Demand for electricity is greater in the summer months associated with air conditioning requirements. In addition, market prices for electricity peak in the summer. Demand for natural gas depends significantly upon weather patterns in winter months due to heavy use for residential and commercial heating. As a result, our overall operating results in the future may fluctuate substantially on a seasonal basis. In addition we have historically generated less revenues and income when weather conditions are warmer in the winter and cooler in the summer. We expect that unusually mild winters and summers could have an adverse effect on our financial condition, results of operations and cash flows.

Failure to provide reliable service to our utility customers could adversely affect our operating results - We are currently obligated to supply electric energy in parts of Iowa, Wisconsin and Minnesota. From time to time and because of unforeseen circumstances, the demand for electric energy required to meet these obligations could exceed our available electric generating capability and energy commitments pursuant to long-term purchased power agreements. The North American transmission grid is highly interconnected and, in extraordinary circumstances, disruptions at particular points within the grid could cause an extensive power outage in our delivery systems. Power outages in our service territories could result from factors outside of our control or service territories. If this occurs, we would have to buy electric energy in the market. Our utilities may not always have the ability to pass all the costs of purchasing the electric energy on to their customers, and even if they are able to do so, there may be a significant delay between the time the costs are incurred and the time the costs are recovered. Since these situations most often occur during periods of peak demand, it is possible that the market price for electric energy at the time we purchase it could be very high. Even if a supply shortage was brief, we could suffer substantial losses that could diminish our financial condition, results of operations and cash flows. The transmission system in our utilities’ service territories, especially in Wisconsin, is constrained, limiting our ability to transmit electric energy within our service territories and access electric energy from outside of our service territories. The transmission constraints could result in failure to provide reliable service to our utility customers or not being able to access lower cost sources of electric energy. Failure to provide safe and reliable service, including effects of equipment failures in electric and natural gas delivery systems or market demand for energy exceeding available supply, may result in reduced revenues and increased maintenance and capital costs, which could adversely impact our financial condition, results of operations and cash flows.

Threats of terrorism and catastrophic events that could result from terrorism or natural disasters may impact our operations in unpredictable ways - We are subject to direct and indirect effects of terrorist threats and activities. Generation and transmission facilities, in general, have been identified as potential targets. The effects of terrorist threats and activities include, among other things, terrorist actions or responses to such actions or threats, the inability to generate, purchase or transmit electric energy, the risk of significant slowdown in growth or a decline in the U.S. economy, disruption or volatility in, or other effects on capital markets, and the increased cost and adequacy of security and insurance. Catastrophic natural disasters may also impact our operations. Terrorists threats and activities and natural disasters may adversely impact our ability to generate, purchase or transmit electric energy or obtain fuel sources and may significantly slow growth, or cause a decline, in the economy within our service territories, which could adversely impact our financial condition, results of operations and cash flows.

Operation of electric generating facilities or construction or capital improvement of utility facilities may involve unanticipated changes or delays in operations that could negatively impact our business - The operation of electric generating facilities involves many risks, including start-up risks, breakdown or failure of equipment, transmission lines or pipelines, use of technology, the dependence on a specific fuel source, including the supply and transportation of fuel, as well as the risk of performance below expected or contracted levels of output or efficiency. These risks could negatively impact our business through asset degradation, lost revenues or increased costs, including the cost of replacement power. Additionally, our ability to successfully and timely complete construction of utility facilities or planned capital improvements to existing facilities within established budgets is contingent upon many variables and may be subject to substantial risks. Should such efforts be unsuccessful, we could be subject to additional costs and increased risk of non-recovery of construction or improvement costs through rates, which could adversely affect our financial condition, results of operations and cash flows.

We are exposed to risks related to economic conditions - Our utility operations are impacted by the economic conditions in our service territories. If economic conditions decline in our service territories, we may experience reduced demand for electricity or natural gas which could result in decreased earnings and cash flows. In addition, adverse economic conditions in our service territories could negatively impact our collections of accounts receivable. Any national economic downturn or disruption of financial markets could reduce our access to capital necessary for our operations and executing our strategic plan. A decline in economic conditions in our service territories or nationally could adversely impact our financial condition, results of operations and cash flows.

We are subject to limitations on our ability to pay dividends - Alliant Energy is a holding company with no significant operations of its own. Accordingly, the primary sources of funds for Alliant Energy to pay dividends to its shareowners are dividends and distributions from its subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts to us, whether by dividends, loans or other payments. The ability of our subsidiaries to pay dividends or make distributions to us and, accordingly, our ability to pay dividends on Alliant Energy common stock will depend on regulatory limitations and the earnings, cash flows, capital requirements and general financial condition of our subsidiaries. Our utilities each have dividend payment restrictions based on the terms of their outstanding preferred stock and regulatory limitations applicable to them. In addition, IPL has dividend payment restrictions based on its bond indentures. If we do not receive adequate dividends and distributions from our subsidiaries, then we may not be able to make, or may have to reduce, dividend payments on Alliant Energy common stock.

We are engaged in sales of assets and businesses; however, market conditions and other factors may hinder this strategy - We are in the process of selling, and may continue to sell, non-core assets. Sales prices for assets and businesses could fluctuate. Asset sales under poor market conditions could result in substantial losses. Buyers may find it difficult to obtain financing to purchase these assets. As part of any asset sale, we face challenges associated with pricing the assets correctly and limiting our environmental or other retained liabilities. These transactions also may divert management attention and other resources from day-to-day operations. Several factors specific to us could make asset sales particularly challenging. We are subject to regulatory approvals for the sale of certain assets, as are potential purchasers. These approvals can impose delays and structuring complications on asset sale transactions. Potential buyers may be reluctant to enter into agreements to purchase assets from us if they believe that required consents and approvals will result in significant delays or uncertainties in the transaction process.

We are subject to employee workforce factors that could affect our businesses - We are subject to employee workforce factors, including loss or retirement of key personnel, availability of qualified personnel, collective bargaining agreements with employees and work stoppage that could affect our businesses and financial condition, results of operations and cash flows.

Inability to access financial markets - We rely on accessing the capital markets to support capital expenditure programs and other capital requirements, including expenditures to build utility infrastructure and comply with future regulatory requirements. Successful implementation of our long-term business strategies is dependent upon the ability of us to access the capital markets under competitive terms and rates. If our access to capital were to become significantly constrained or costs of capital increased significantly due to lowered credit ratings, prevailing market or industry conditions, regulatory constraints or other factors, our financial condition, results of operations and cash flows could be significantly adversely affected.

Energy industry changes could have a negative effect on our businesses - As a public utility company with significant utility assets, we conduct our utility operations in an ever-changing business environment. The advent of new markets has the potential to significantly impact our financial condition, results of operations and cash flows. The new MISO wholesale energy market has the potential to significantly increase costs of transmission, costs associated with inefficient generation dispatching, costs of participation in the market and costs stemming from estimated payment settlements. Competitive pressures, including advances in technology that reduce the costs of alternative methods of producing electric energy to a level that is competitive with that of current electric production methods, could result in our utilities losing market share and customers and incurring stranded costs (i.e., assets and other costs rendered unrecoverable through customer rates as a result of competitive pricing), which would be borne by our shareowners. Although the pace of restructuring in our primary retail electric service territories has been delayed (and may continue to be delayed for a long period of time) due to uncertainty and developments in the industry, we cannot predict the timing of a restructured electric industry or the impact on our financial condition, results of operations and cash flows.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

IPL

IPL’s electric generating stations at Dec. 31, 2006, were as follows:

Name and Location		Primary Fuel		2006 Summer
of Station