10-K 1 d258440d10k.htm FORM 10-K Form 10-K
Table of Contents

 

 

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, 2011

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             

 

 

 

 

Commission
File Number

  

Name of Registrant, State of Incorporation,

Address of Principal Executive Offices and Telephone Number

   IRS Employer
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:

 

    

Title of Class

  

Name of Each Exchange

on Which Registered

Alliant Energy Corporation    Common Stock, $0.01 Par Value    New York Stock Exchange
Alliant Energy Corporation    Common Share Purchase Rights    New York Stock Exchange
Interstate Power and Light Company   

8.375% Series B Cumulative Preferred Stock, $0.01 Par Value

   New York Stock Exchange
Wisconsin Power and Light Company    4.50% Preferred Stock, No Par Value    NYSE Amex LLC

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

 

 

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

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

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

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

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

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, non-accelerated filers, or smaller reporting companies. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

     Large
Accelerated
Filer
   Accelerated
Filer
   Non-accelerated
Filer
   Smaller
Reporting
Company
Filer

Alliant Energy Corporation

   x         

Interstate Power and Light Company

         x   

Wisconsin Power and Light Company

         x   

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

The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of June 30, 2011:

 

Alliant Energy Corporation

   $ 4.5 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, 2012:

 

Alliant Energy Corporation

  

Common stock, $0.01 par value, 111,008,651 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 2012 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

TABLE OF CONTENTS

 

              Page Number  
Forward-looking Statements      1   
Website Access to Reports      2   
Part I   Item 1.    Business      3   
    

General

     3   
    

Employees

     3   
    

Regulation

     4   
    

Electric Utility Operations

     7   
    

Gas Utility Operations

     17   
    

Steam Utility Operations

     21   
    

Non-regulated Operations

     21   
  Item 1A.    Risk Factors      21   
  Item 1B.    Unresolved Staff Comments      27   
  Item 2.    Properties      27   
  Item 3.    Legal Proceedings      29   
  Item 4.    Mine Safety Disclosures      30   
  Executive Officers of the Registrants      31   
Part II   Item 5.   

Market for Registrants’ Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     32   
  Item 6.    Selected Financial Data      33   
  Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      35   
    

Executive Summary

     35   
    

Strategic Overview

     39   
    

Rate Matters

     46   
    

Environmental Matters

     53   
    

Legislative Matters

     61   
    

Alliant Energy’s Results of Operations

     62   
    

IPL’s Results of Operations

     71   
    

WPL’s Results of Operations

     76   
    

Liquidity and Capital Resources

     79   
    

Other Matters

     91   
    

Market Risk Sensitive Instruments and Positions

     91   
    

Critical Accounting Policies and Estimates

     92   
    

Other Future Considerations

     96   
  Item 7A.    Quantitative and Qualitative Disclosures About Market Risk      99   
  Item 8.    Financial Statements and Supplementary Data      99   
    

Alliant Energy Corporation

  
    

Management’s Annual Report on Internal Control Over Financial Reporting

     99   
    

Reports of Independent Registered Public Accounting Firm

     100   
    

Consolidated Statements of Income

     102   
    

Consolidated Balance Sheets

     103   
    

Consolidated Statements of Cash Flows

     105   
    

Consolidated Statements of Common Equity

     106   
    

Consolidated Statements of Comprehensive Income

     106   
    

Interstate Power and Light Company

  
    

Management’s Annual Report on Internal Control Over Financial Reporting

     107   
    

Report of Independent Registered Public Accounting Firm

     108   
    

Consolidated Statements of Income

     109   
    

Consolidated Balance Sheets

     110   
    

Consolidated Statements of Cash Flows

     112   
    

Consolidated Statements of Common Equity

     113   


Table of Contents

 

              Page Number  
    

Wisconsin Power and Light Company

  
    

Management’s Annual Report on Internal Control Over Financial Reporting

     114   
    

Report of Independent Registered Public Accounting Firm

     115   
    

Consolidated Statements of Income

     116   
    

Consolidated Balance Sheets

     117   
    

Consolidated Statements of Cash Flows

     119   
    

Consolidated Statements of Common Equity

     120   
    

Combined Notes to Consolidated Financial Statements

  
    

1. Summary of Significant Accounting Policies

     121   
    

2. Utility Rate Cases

     136   
    

3. Leases

     138   
    

4. Receivables

     139   
    

5. Income Taxes

     141   
    

6. Benefit Plans

     147   
    

7. Common Equity

     164   
    

8. Redeemable Preferred Stock

     165   
    

9. Debt

     166   
    

10. Investments

     168   
    

11. Fair Value Measurements

     169   
    

12. Derivative Instruments

     172   
    

13. Commitments and Contingencies

     174   
    

14. Jointly-owned Electric Utility Plant

     181   
    

15. Segments of Business

     181   
    

16. Goodwill and Other Intangible Assets

     185   
    

17. Selected Consolidated Quarterly Financial Data (Unaudited)

     186   
    

18. Discontinued Operations

     187   
    

19. Asset Retirement Obligations

     187   
    

20. Variable Interest Entities

     188   
    

21. Related Parties

     188   
    

22. Earnings Per Share

     189   
  Item 9.   

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

     190   
  Item 9A.   

Controls and Procedures

     190   
  Item 9B.   

Other Information

     190   
Part III   Item 10.   

Directors, Executive Officers and Corporate Governance

     190   
  Item 11.   

Executive Compensation

     191   
  Item 12.   

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     191   
  Item 13.   

Certain Relationships and Related Transactions, and Director Independence

     192   
  Item 14.   

Principal Accounting Fees and Services

     192   
Part IV   Item 15.   

Exhibits, Financial Statement Schedules

     193   
Signatures         198   


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FORWARD-LOOKING STATEMENTS

Statements contained in this Annual Report on Form 10-K that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified as such because the statements include words such as “expect,” “anticipate,” “plan” or other words of similar import. Similarly, statements that describe future financial performance or plans or strategies are forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties of Alliant Energy Corporation (Alliant Energy), Interstate Power and Light Company (IPL) and Wisconsin Power and Light Company (WPL) include:

 

   

federal and state regulatory or governmental actions, including the impact of energy, tax, financial and health care legislation, and of regulatory agency orders;

 

   

IPL’s and WPL’s ability to obtain adequate and timely rate relief to allow for, among other things, the recovery of operating costs, fuel costs, transmission costs, deferred expenditures, capital expenditures, and remaining costs related to generating units that may be permanently closed, earning their authorized rates of return, and the payments to their parent of expected levels of dividends;

 

   

the ability to continue cost controls and operational efficiencies;

 

   

the impact of IPL’s retail electric base rate freeze in Iowa through 2013;

 

   

the state of the economy in IPL’s and WPL’s service territories and resulting implications on sales, margins and ability to collect unpaid bills;

 

   

developments that adversely impact Alliant Energy’s, IPL’s and WPL’s ability to implement their strategic plans, including unanticipated issues with Alliant Energy Resources, LLC’s (Resources’) construction of and selling price of the electricity output from its new 100 megawatt (MW) wind generating project, new emission control equipment for various coal-fired generating facilities of IPL and WPL, WPL’s potential purchase of the Riverside Energy Center (Riverside), IPL’s potential construction of a new natural gas-fired electric generating facility in Iowa, and the potential decommissioning of certain generating facilities of IPL and WPL;

 

   

weather effects on results of utility operations;

 

   

successful resolution of the pending challenge by interveners of the approval by the Public Service Commission of Wisconsin (PSCW) of WPL’s Bent Tree - Phase I wind project;

 

   

issues related to the availability of generating facilities and the supply and delivery of fuel and purchased electricity and price thereof, including the ability to recover and to retain the recovery of purchased power, fuel and fuel-related costs through rates in a timely manner;

 

   

the impact that fuel and fuel-related prices may have on IPL’s and WPL’s customers’ demand for utility services;

 

   

the ability to defend against environmental claims brought by state and federal agencies, such as the United States of America (U.S.) Environmental Protection Agency (EPA), or third parties, such as the Sierra Club;

 

   

issues associated with environmental remediation efforts and with environmental compliance generally, including changing environmental laws and regulations;

 

   

the ability to recover through rates all environmental compliance and remediation costs, including costs for projects put on hold due to uncertainty of future environmental laws and regulations;

 

   

impacts of future tax benefits from deductions for repairs expenditures and mixed service costs and temporary differences from historical tax benefits from such deductions that are reversing into income tax expense in future periods;

 

   

the ability to find a purchaser for RMT, Inc. (RMT), to successfully negotiate a purchase agreement and to close the sale of RMT;

 

   

continued access to the capital markets on competitive terms and rates, and the actions of credit rating agencies;

 

   

inflation and interest rates;

 

   

changes to the creditworthiness of counterparties with which Alliant Energy, IPL and WPL have contractual arrangements, including participants in the energy markets and fuel suppliers and transporters;

 

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issues related to electric transmission, including operating in Regional Transmission Organization (RTO) energy and ancillary services markets, the impacts of potential future billing adjustments and cost allocation changes from RTOs and recovery of costs incurred;

 

   

unplanned outages, transmission constraints or operational issues impacting fossil or renewable generating facilities and risks related to recovery of resulting incremental costs through rates;

 

   

Alliant Energy’s ability to successfully pursue appropriate appeals with respect to, and any liabilities arising out of, the alleged violation of the Employee Retirement Income Security Act of 1974 by Alliant Energy’s Cash Balance Pension Plan;

 

   

current or future litigation, regulatory investigations, proceedings or inquiries;

 

   

Alliant Energy’s ability to sustain its dividend payout ratio goal;

 

   

employee workforce factors, including changes in key executives, collective bargaining agreements and negotiations, work stoppages or additional restructurings;

 

   

impacts that storms or natural disasters in IPL’s and WPL’s service territories may have on their operations and recovery of, and rate relief for, costs associated with restoration activities;

 

   

access to technological developments;

 

   

any material post-closing adjustments related to any past asset divestitures;

 

   

material changes in retirement and benefit plan costs;

 

   

the impact of incentive compensation plans accruals;

 

   

the effect of accounting pronouncements issued periodically by standard-setting bodies;

 

   

the impact of changes to government incentive elections for wind projects;

 

   

the impact of adjustments made to deferred tax assets and liabilities from state apportionment assumptions;

 

   

the ability to utilize tax credits and net operating losses generated to date, and those that may be generated in the future, before they expire;

 

   

the ability to successfully complete tax audits and appeals with no material impact on earnings and cash flows;

 

   

the direct or indirect effects resulting from terrorist incidents, including cyber terrorism, or responses to such incidents; and

 

   

factors listed in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MDA) and in Item 1A Risk Factors.

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

WEBSITE ACCESS TO REPORTS

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

PART I

This Annual Report on Form 10-K includes information relating to Alliant Energy, IPL and WPL (as well as Resources and Alliant Energy Corporate Services, Inc. (Corporate Services)). Where appropriate, information relating to a specific entity has been segregated and labeled as such. Unless otherwise noted, the information herein has been revised to exclude discontinued operations for all periods presented.

 

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ITEM 1. BUSINESS

A. GENERAL

Alliant Energy was incorporated in Wisconsin in 1981 and maintains its principal executive offices in Madison, Wisconsin. Alliant Energy operates as a regulated investor-owned public utility holding company. Alliant Energy’s primary focus is to provide regulated electricity and natural gas service to approximately 1 million electric and approximately 414,000 natural gas customers in the Midwest through its two public utility subsidiaries. The primary first tier subsidiaries of Alliant Energy are: IPL, WPL, Resources and Corporate Services. An illustration of Alliant Energy’s first tier subsidiaries is shown below.

 

LOGO

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

1) IPL - was incorporated in 1925 in Iowa as Iowa Railway and Light Corporation. IPL is a public utility engaged principally in the generation and distribution of electricity and the distribution and transportation of natural gas in selective markets in Iowa and southern Minnesota. In Iowa, IPL provides utility services to incorporated communities as directed by the Iowa Utilities Board (IUB) and utilizes non-exclusive franchises, which cover the use of public right-of-ways for utility facilities in incorporated communities for a maximum term of 25 years. At Dec. 31, 2011, IPL supplied electric and gas service to 525,770 and 233,715 retail customers, respectively. IPL is also engaged in the generation and distribution of steam for two customers in Cedar Rapids, Iowa. In 2011, 2010 and 2009, 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 - was incorporated in 1917 in Wisconsin as Eastern Wisconsin Electric Company. WPL is a public utility engaged principally in the generation and distribution of electricity and the distribution and transportation of natural gas in selective markets in southern and central Wisconsin. WPL operates in municipalities pursuant to permits of indefinite duration and state statutes authorizing utility operation in areas annexed by a municipality. At Dec. 31, 2011, WPL supplied electric and gas service to 456,637 and 179,945 retail customers, respectively. In 2011, 2010 and 2009, WPL had no single customer for which electric, gas and/or other sales accounted for 10% or more of WPL’s consolidated revenues. WPL Transco LLC is a wholly-owned subsidiary of WPL and holds WPL’s investment in the American Transmission Company LLC (ATC).

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

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

Refer to Note 15 of the “Combined 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, 2011, Alliant Energy’s consolidated subsidiaries had the following full- and part-time employees:

 

     Number of
Bargaining Unit
Employees
     Number of
Other
Employees
     Total
Number of
Employees
     Percentage of Employees
Covered by Collective
Bargaining Agreements
 

IPL

     1,121         531         1,652         68

WPL

     1,073         235         1,308         82

Corporate Services

     25         868         893         3

Resources:

           

RMT

     —           296         296         —     

Other

     86         27         113         76
  

 

 

    

 

 

    

 

 

    

 

 

 
     2,305         1,957         4,262         54
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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At Dec. 31, 2011, Alliant Energy employees covered by collective bargaining agreements were as follows:

 

     Number of
Employees
     Contract
Expiration Date
 

IPL:

     

International Brotherhood of Electrical Workers (IBEW) Local 949

     220         9/30/12   

IBEW Local 204 (Dubuque)

     87         9/30/12   

IBEW Local 204 (Mason City)

     42         9/30/12   

IBEW Local 204 (Emery)

     13         4/30/13   

IBEW Local 204 (Cedar Rapids)

     738         8/31/13   

IBEW Local 1439

     16         6/30/14   

IBEW Local 1455

     5         6/30/16   
  

 

 

    
     1,121      

WPL - IBEW Local 965

     1,073         5/31/14   

Resources - Various

     86         Various   

Corporate Services - IBEW Local 204

     25         10/31/14   
  

 

 

    
     2,305      
  

 

 

    

2) CAPITAL EXPENDITURE AND INVESTMENT PLANS - Refer to “Liquidity and Capital Resources - Cash Flows - Investing Activities - Construction and Acquisition Expenditures” in MDA for discussion of anticipated construction and acquisition expenditures for 2012 through 2015.

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

Federal Energy Regulatory Commission (FERC) -

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

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

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

Electric Wholesale Rates - Corporate Services, as agent for both IPL and WPL, has received wholesale electric market-based rate authority from FERC. Market-based rate authorization allows for wholesale sales of electricity within the Midwest Independent Transmission System Operator (MISO) and PJM Interconnection, LLC (PJM) markets and in bilateral markets, based on the market value of the transactions. IPL and WPL also have FERC-approved cost-of-service based rates related to the provision of firm full- and partial-requirement wholesale electric sales. Both IPL’s and WPL’s wholesale cost-of-service tariffs are formula-based tariffs that allow for annual true-ups to actual costs, including fuel costs.

Electric Transmission Rates - FERC regulates the rates charged for electric transmission facilities used in interstate commerce. Neither IPL nor WPL own or operate electric transmission facilities; however, both IPL and WPL pay for the use of the interstate electric transmission system based upon FERC-regulated rates. IPL relies primarily upon the use of the ITC Midwest LLC (ITC) transmission system. WPL relies primarily upon the use of the ATC transmission system.

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

 

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As part of routine procedures, in the fourth quarter of 2011, FERC commenced an audit of Alliant Energy, including its centralized service company (Corporate Services) and other affiliated companies. A final report is expected to be issued by FERC in late 2012 or early 2013. Alliant Energy does not believe that the final report will have any impact upon its financial condition or results of operations.

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

IUB - IPL is subject to regulation by the IUB related to its operations in Iowa for various matters including, but not limited to, retail utility rates and standards of service, accounting requirements and approval of the location and construction of electric generating facilities. As part of the IUB’s February 2011 order related to IPL’s Iowa retail electric rate case (2009 test year), the IUB outlined plans for IPL’s management activities to be audited by a third party vendor. This audit commenced in the third quarter of 2011. A final report is expected to be issued by the third party vendor to the IUB in the second half of 2012. Alliant Energy and IPL do not currently believe that the final report will have any impact upon their financial condition or results of operations.

Retail Utility Base Rates - IPL files periodic requests with the IUB for retail rate relief. These filings are based on historical test periods. The historical test periods may be adjusted for certain known and measurable capital additions placed in service by IPL within nine months from the end of the historical test period and certain known and measurable operating and maintenance expenses incurred by IPL within 12 months of the commencement of the proceeding. Interim retail rates can be placed in effect 10 days after the rate application filing, subject to refund, and must be based on past precedent. The IUB must decide on requests for retail rate relief within 10 months of the date of the application for which relief is filed, or the interim rates granted become permanent. Refer to “Rate Matters” in MDA for details of a retail electric base rate freeze effective for IPL’s Iowa customers through 2013.

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

Retail Electric Transmission Cost Recovery Mechanism - Effective February 2011, electric transmission service expenses were removed from base rates and billed to IPL’s Iowa retail electric customers through the transmission cost rider. This new cost recovery mechanism provides for subsequent adjustments to electric rates charged to Iowa retail electric customers for changes in electric transmission service expenses. Any over- or under-collection of electric transmission costs for each given month are automatically reflected in future billings to retail customers. The transmission cost rider will remain in effect until the IUB’s decision in IPL’s next retail electric base rate case, whereby the rider will be revisited.

Energy Efficiency Cost Recovery (EECR) Mechanism - IPL’s electric and natural gas tariffs contain an EECR factor to recover prudently incurred energy efficiency costs incurred on behalf of IPL’s Iowa customers. EECR factors are revised annually, subject to approval by the IUB, and include a reconciliation to eliminate any over- or under-recovery of energy efficiency expenses from prior periods.

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

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

 

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Electric Generating Facility Emission Control Projects - IPL is required to submit an Emissions Plan and Budget biennially to the IUB setting out a multi-year plan and budget for managing regulated emissions from its electric generating facilities in a cost-effective manner. IPL must simultaneously submit this plan and budget to the Iowa Department of Natural Resources for a determination of whether the plan and budget meets state environmental requirements for regulated emissions. The reasonable costs associated with implementing the plan are expected to be included in IPL’s future retail electric rates.

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

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

Retail Commodity Cost Recovery Mechanisms -

Electric - WPL’s retail electric base rates include estimates of annual fuel-related costs (fuel and purchased power energy costs) anticipated during the test period. During each electric retail rate proceeding or in a separate fuel cost plan approval proceeding, the PSCW sets fuel monitoring ranges based on the forecasted fuel-related costs used to determine rates in such proceeding. If WPL’s actual fuel-related costs fall outside these fuel monitoring ranges, WPL is authorized to defer the incremental over- or under-collection of fuel-related costs from electric retail customers that are outside the approved ranges. Deferral of under-collections are reduced to the extent actual return on common equity earned by WPL during the fuel cost plan year exceeds the most recently authorized return on common equity. Subject to review and approval by the PSCW, any over- or under-collection of fuel-related costs for each year are reflected in future billings to retail customers. This cost recovery mechanism became effective for WPL on Jan. 1, 2011.

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

EECR Mechanism - WPL contributes a certain percentage of its annual retail utility revenues to help fund Focus on Energy, Wisconsin’s statewide energy efficiency and renewable energy resource program. Estimated contributions to Focus on Energy, along with WPL-run energy efficiency program costs, are recovered from WPL’s retail customers through changes in base rates determined during periodic rate proceedings and include a reconciliation of such estimated amounts to actual costs incurred with any difference deferred for inclusion in future base rate changes.

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

Electric Generating Facility Upgrades - A CA application is required to be filed with the PSCW for construction approval of any additions to electric generating facilities, including emission control projects that exceed a certain threshold amount. The current PSCW rules require a CA for projects with an estimated cost in excess of approximately $8 million.

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

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

 

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Retail Utility Rates - Requests for retail rate relief can be based on either historical or projected data and interim retail rates are permitted. IPL typically files requests for retail rate relief based on historical test periods. The historical test periods may be adjusted for certain known and measurable capital additions placed in service by IPL and operating and maintenance expenses incurred by IPL within 12 months of the end of the test year. Unless otherwise ordered, the MPUC must reach a final decision within 10 months of filing for retail rate relief; however, the MPUC can extend the timing by 90 days.

Renewable Energy Cost Recovery Mechanism - In November 2011, IPL received an order from the MPUC approving the implementation of an automatic cost recovery rider on a temporary basis to recover costs associated with renewable generation. The renewable energy rider does not require a base rate case for annual revision of rates charged to IPL’s Minnesota retail electric customers, but requires that the renewable energy costs incurred be fully reconciled against the revenues collected for such costs. Initially, this would allow recovery of IPL’s Whispering Willow - East wind project located in Iowa. In November 2011, the MPUC deferred judgment on the prudence of the Whispering Willow - East wind project costs. The initial recovery amount of the project costs will be allowed through the temporary renewable energy rider at a levelized cost of $51 per megawatt-hour (MWh). The final recovery amount of the project costs will be addressed in a separate proceeding that is expected to be completed in 2012.

Refer to Notes 1(b), 1(h), 2 and 13(d) of the “Combined Notes to Consolidated Financial Statements,” and “Rate Matters,” “Environmental Matters” and “Legislative Matters” in MDA for additional information regarding regulation and utility rate matters.

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

C. INFORMATION RELATING TO UTILITY OPERATIONS

Alliant Energy’s utility business (IPL and WPL) has three segments: a) electric operations; b) gas operations; and c) other, which includes IPL’s steam operations, various other energy-related products and services, and the unallocated portions of the utility business. In 2011, IPL’s and WPL’s operating revenues and operating income (loss) for these three utility business segments were as follows:

 

     IPL     WPL  
     Operating
Revenues
    Operating
Income
    Operating
Revenues
    Operating
Income (Loss)
 

Electric

     81     87     86     94

Gas

     16     10     14     10

Other

     3     3     —          (4 %) 
  

 

 

   

 

 

   

 

 

   

 

 

 
     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

 

1) ELECTRIC UTILITY OPERATIONS

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

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

 

     2011     2010     2009  
     Amount      Percent     Amount      Percent     Amount      Percent  

IPL:

               

Iowa

   $ 1,327.2         50   $ 1,386.0         52   $ 1,242.3         50

Minnesota

     81.1         3     78.3         3     73.3         3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Subtotal

     1,408.3         53     1,464.3         55     1,315.6         53
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

WPL:

               

Wisconsin

     1,227.5         47     1,209.9         45     1,160.3         47
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 2,635.8         100   $ 2,674.2         100   $ 2,475.9         100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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The percentage of electric utility revenues regulated by the IUB, PSCW, MPUC and FERC were as follows:

 

     IPL     WPL  
     2011     2010     2009     2011     2010     2009  

IUB

     90     91     90     —          —          —     

PSCW

     —          —          —          85     84     80

MPUC

     6     5     5     —          —          —     

FERC

     4     4     5     15     16     20
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     100     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Customers - The number of electric customers and communities served at Dec. 31, 2011 was as follows:

 

     Retail Customers      Wholesale Customers      Other Customers      Total Customers      Communities Served  

IPL

     525,770         9         1,372         527,151         752   

WPL

     456,637         21         2,236         458,894         606   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     982,407         30         3,608         986,045         1,358   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

IPL and WPL provide electric utility service to a diversified base of retail customers in several industries, with the largest concentrations in the food manufacturing, chemical (including ethanol) and paper industries. IPL’s retail customers in the above table are billed under base rates established by the IUB or MPUC that include recovery of and a return on investments in electric infrastructure and recovery of purchased electric capacity costs and other costs required to serve customers. Prior to 2011, electric transmission service expenses were recovered from IPL’s retail electric customers in Iowa through changes in base rates. Effective February 2011, electric transmission service expenses were removed from base rates and billed to IPL’s Iowa retail electric customers through a transmission cost rider. This new cost recovery mechanism provides for subsequent adjustments to electric rates charged to Iowa electric retail customers for changes in electric transmission service expenses. IPL’s electric production fuel and energy purchases costs are recovered pursuant to fuel adjustment clauses. WPL’s retail customers in the above table are billed under base rates established by the PSCW that include recovery of and a return on investments in electric infrastructure and recovery of electric production fuel and purchased energy costs, purchased electric capacity costs, electric transmission service costs and other costs required to serve customers. Effective Jan. 1, 2011, WPL defers electric production fuel and energy purchases costs that exceed or fall below established fuel monitoring ranges through a new electric fuel cost recovery mechanism. WPL’s recovery of deferred electric production fuel and energy purchases costs is restricted if it earns in excess of its authorized return on common equity. Refer to “Rate Matters” in MDA for discussion of a potential retail electric rate filing by WPL in 2012.

Wholesale customers in the above table, which primarily consist of municipalities and rural electric cooperatives, are billed under wholesale service agreements. These agreements include standardized pricing mechanisms that are detailed in tariffs approved by FERC through wholesale rate case proceedings. The tariffs include an annual true-up process for actual costs incurred. A significant majority of IPL’s and WPL’s wholesale service agreements have terms that end after 2017.

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.

Seasonality - Electric sales are seasonal to some extent with the annual peak normally occurring in the summer months due to air conditioning requirements. In 2011, the maximum peak hour demands were as follows:

 

     Alliant Energy      IPL      WPL  

MW

     5,734         3,131         2,761   

Date

     July 18         Aug. 2         July 20   

Competition - Retail electric customers in Iowa, Wisconsin and Minnesota currently do not have the ability to choose their electric supplier. However, IPL and WPL attempt to attract new customers into their service territories in an effort to keep energy rates low for all. Although electric service in Iowa, Wisconsin and Minnesota is regulated, IPL and WPL still face competition from self-generation by large industrial customers, alternative energy sources, and petitions to municipalize (Iowa) as well as service territory expansions by municipal utilities through annexations (Wisconsin). Refer to “Rate Matters - Other - Economic Development Program” in MDA for discussion of the PSCW’s approval of an economic development program to attract and retain industrial customers in WPL’s service territory.

 

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Renewable Energy Standards (RES) -

Iowa - Electric utilities in Iowa are required to purchase or own their proportionate share of 105 MW of capacity and associated energy from alternate energy or small hydro facilities located in the utilities’ service area. IPL’s proportionate share is approximately 50 MW. As of Dec. 31, 2011, IPL had met the requirements of this renewable energy standard.

Wisconsin - A Wisconsin Renewable Portfolio Standard (RPS) was established in 2006 that requires electric utilities in Wisconsin, including WPL, to increase the portion of their total Wisconsin retail electric sales supplied by renewable energy sources above a benchmark of average retail sales from renewables in 2001, 2002 and 2003. The RPS required a 2% increase above the benchmark by 2010 and will require a 6% increase above the benchmark by 2015. Based on this RPS, WPL was required to supply a minimum of 5.28% of its total Wisconsin retail electric sales with renewable energy sources by 2010 and will be required to increase this amount to 9.28% by 2015. Wisconsin utilities may reach the RPS with renewable energy generated by the utility, acquired under purchased power agreements (PPAs), or through the use of renewable resource credits. WPL has met the 2010 requirements of this renewable energy standard and currently expects to meet the 2015 requirements of the RPS with its current wind generation and wind PPAs.

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

Energy Conservation - IPL and WPL continue to promote energy conservation, including their customers’ ability to efficiently manage their energy use. Refer to “Strategic Overview - Energy Efficiency Programs” in MDA for discussion of current energy efficiency programs at IPL and WPL.

Electric Supply - Alliant Energy, IPL and WPL have met historical customer demand of electricity and expect to continue meeting future demand through internally generated electric supply, electric supply from long-term PPAs and additional electric supply purchases from wholesale energy markets. Alliant Energy’s mix of electric supply experienced changes in recent years with WPL’s purchases of the Neenah Energy Facility in 2009 and Wisconsin Electric Power Company’s 25% interest in Edgewater Unit 5 in early 2011, the completion of IPL’s Whispering Willow - East wind project in late 2009, the completion of WPL’s Bent Tree - Phase I wind project in early 2011, and IPL’s retirement of various electric generating units in 2010. Alliant Energy expects its mix of electric supply to change further in the next several years with IPL’s potential construction of a new 600 MW natural gas-fired electric generating facility in Iowa, WPL’s anticipated purchase of Riverside, the anticipated decision not to enter into long-term agreements related to IPL’s and WPL’s existing nuclear PPAs, and the anticipated retirement of additional generating units. Alliant Energy, IPL and WPL periodically update their generation plans to identify longer term generation needs. These long-term generation plans are intended to meet customer demand, reduce reliance on PPAs and wholesale market purchases and mitigate the impacts of future plant retirements while maintaining compliance with long-term electric demand planning reserve margins, environmental requirements and renewable energy standards established by regulators. Alliant Energy, IPL and WPL currently expect to meet utility customer demand in the future. However, unanticipated regional or local reliability issues could still arise in the event of unexpected delays in the construction of new generating and/or transmission facilities, retirement of generating facilities, generating facility outages, transmission system outages or extended periods of extreme weather conditions. Refer to the “Electric Operating Information” tables for a profile of the sources of electric supply used to meet customer demand for Alliant Energy, IPL and WPL from 2007 to 2011. Refer to “Strategic Overview - Generation Plans” in MDA for details of Alliant Energy’s, IPL’s and WPL’s future generation plans.

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

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

 

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Generating Capacity - The generating capacity of IPL’s and WPL’s electric generating facilities is based upon MISO’s resource adequacy process, which uses the unforced capacity of the generating facilities. The generating capacity for the June 2011 to May 2012 planning period by fuel type in MWs was as follows:

 

     IPL      WPL      Total  

Coal

     1,392         1,332         2,724   

Natural gas

     779         613         1,392   

Oil

     277         —           277   

Wind (a)

     —           6         6   

Hydro

     —           24         24   
  

 

 

    

 

 

    

 

 

 

Total

     2,448         1,975         4,423   
  

 

 

    

 

 

    

 

 

 

 

(a) As of Dec. 31, 2011, completed wind projects owned by Alliant Energy included IPL’s 200 MW Whispering Willow - East wind project in Franklin County, Iowa, WPL’s 68 MW Cedar Ridge wind project in Fond du Lac County, Wisconsin and WPL’s 200 MW Bent Tree - Phase I wind project in Freeborn County, Minnesota. The amounts in the table above represent 0%, 9% and 0% of the capacity of IPL’s Whispering Willow - East, WPL’s Cedar Ridge and WPL’s Bent Tree - Phase I wind projects, respectively, based upon the MISO resource adequacy process, which is determined separately for each wind site, during the planning period from June 2011 to May 2012.

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

 

     IPL      WPL  
     2011      2010      2009      2011      2010      2009  

All fuels

   $ 2.18       $ 2.17       $ 2.29       $ 2.28       $ 2.17       $ 2.13   

Coal

     1.86         1.73         1.56         2.22         2.06         2.02   

Natural gas (a)

     7.17         9.79         13.31         6.30         12.83         18.53   

 

(a) The average cost of natural gas includes commodity costs as well as gains and losses from swap contracts used to hedge the price of natural gas volumes expected to be used by Alliant Energy’s natural gas-fired electric generating facilities.

Coal - Coal is the primary fuel source for Alliant Energy’s, IPL’s and WPL’s internally generated electric supply and generally represents approximately 50% to 55% of their total sources of electric energy. Alliant Energy, through Corporate Services as agent for IPL and WPL, has entered into contracts with different suppliers to help ensure that a specified supply of coal is available at known prices for IPL’s and WPL’s coal-fired generating facilities for 2012 and 2013. As of Dec. 31, 2011, existing contracts provide for a portfolio of coal supplies that cover approximately 80% and 50% of IPL’s and WPL’s estimated coal supply needs for 2012 and 2013, respectively. Alliant Energy, IPL and WPL believe 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, IPL and WPL expect to meet remaining coal requirements from either future contracts or purchases in the spot market. Alliant Energy, through its subsidiaries Corporate Services, IPL and WPL, also enters into various coal transportation agreements to meet its coal supply requirements. As of Dec. 31, 2011, existing coal transportation agreements cover approximately 100%, 50%, 50% and 15% of IPL’s estimated coal transportation needs for 2012 through 2015, respectively, and 100%, 100%, 100% and 30% of WPL’s estimated coal transportation needs for 2012 through 2015, respectively.

Nearly all 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 2011 were 43 days for generating stations with year-round deliveries and 103 days for generating stations with seasonal deliveries. The average days on hand were computed based on actual tons of inventory divided by estimated average daily tons burned in 2011. Alliant Energy, IPL and WPL periodically test coal from sources other than the Wyoming Powder River Basin to determine which alternative sources of coal are most compatible with their generating stations. Access to alternative sources of coal is expected to provide Alliant Energy, IPL and WPL with further protection against interruptions and lessen their dependence on their primary coal source.

 

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

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

Natural Gas - Alliant Energy owns several natural gas-fired generating facilities including IPL’s 565 MW Emery Generating Station, WPL’s 300 MW Neenah Energy Facility and Resources’ 300 MW Sheboygan Falls Energy Facility. WPL has exclusive rights to the output of the Sheboygan Falls Energy Facility under an affiliated lease agreement. These facilities help meet customer demand for electricity generally during peak hour demands. Internally generated electric supply from natural gas-fired generating facilities generally represents less than 5% of Alliant Energy’s, IPL’s and WPL’s total sources of electric energy.

Alliant Energy has responsibility to supply natural gas to the generating facilities it owns as well as Riverside, which WPL has rights to under a PPA. WPL has contracted with ANR Pipeline (ANR) to provide firm pipeline transportation of 60,000 dekatherms (Dths) per day for Riverside and 2 million Dths of storage capacity for WPL’s natural gas-fired generating facilities.

Wind - IPL’s 200 MW Whispering Willow - East wind project in Franklin County, Iowa began generating electricity in 2009. WPL’s 68 MW Cedar Ridge wind project in Fond du Lac County, Wisconsin began generating electricity in 2008. WPL’s 200 MW Bent Tree - Phase I wind project in Freeborn County, Minnesota began full generation of electricity in early 2011. Internally generated electric supply from wind facilities generally represents less than 5% of Alliant Energy’s, IPL’s and WPL’s total sources of electric energy. All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.

Purchased Power - IPL and WPL enter into PPAs and purchase electricity from wholesale energy markets to meet a portion of their customer demand for electricity. Purchased power represented approximately 40% to 45% of Alliant Energy’s, IPL’s and WPL’s total sources of electric energy in 2011. IPL’s most significant PPA is with NextEra Energy, Inc. for the purchase of energy and capacity from the Duane Arnold Energy Center (DAEC) through February 2014. IPL currently believes it is unlikely that it will enter into any long-term agreement with NextEra Energy, Inc. for the purchase of electricity generated by DAEC beyond the current DAEC PPA term. WPL’s most significant PPAs are with Dominion Resources, Inc. for the purchase of energy and capacity from the Kewaunee Nuclear Power Plant (Kewaunee) through December 2013 and with a subsidiary of Calpine Corporation for the purchase of energy and capacity from Riverside through May 2013. WPL currently believes it is unlikely that it will enter into any long-term agreement with Dominion Resources, Inc. for the purchase of electricity generated by Kewaunee beyond the current Kewaunee PPA term. WPL currently anticipates it will acquire Riverside in late 2012 to replace the electricity output currently obtained from Riverside beyond the current Riverside PPA term.

 

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Refer to Note 1(h) for discussion of IPL’s and WPL’s rate recovery of electric production fuel and purchased energy costs, Note 3(a) for details regarding PPAs accounted for as operating leases and Note 13(a) for details on IPL’s and WPL’s coal, natural gas and other purchased power commitments in the “Combined Notes to Consolidated Financial Statements.”

Electric Transmission -

IPL - IPL completed the sale of its electric transmission assets located in Iowa, Minnesota and Illinois to ITC in 2007. IPL sold its electric transmission assets in order to monetize the value of the assets to help fund future capital expenditures, to capture tax benefits under federal tax policy that allowed deferral of gains on sales of qualifying electric transmission assets completed prior to Jan. 1, 2008 (based on regulations at the time of the sale) and to promote regional transmission expansion that is expected to improve transmission reliability and access for its customers in Iowa and Minnesota. ITC is an independent for-profit, transmission-only company and is a transmission-owning member of the MISO RTO, MRO and Reliability First Corporation Regional Entities. ITC has transmission interconnections at various locations with other transmission owning utilities in the Midwest. These interconnections enhance the overall reliability of the IPL delivery system and provide access to multiple sources of economic and emergency energy. IPL currently receives substantially all its transmission services from ITC. The annual transmission service rates that ITC charge its customers is calculated each calendar year using a FERC-approved cost of service formula rate template referred to as Attachment “O.” Refer to “Other Matters - Other Future Considerations - Electric Transmission Service Charges” in MDA for additional information regarding transmission service charges from ITC. Refer to “Rate Matters - Recent Retail Base Rate Filings - IPL’s Iowa Retail Electric Rate Case (2009 Test Year)” for discussion of a new transmission cost rider for recovery of electric transmission service expenses approved by the IUB in January 2011.

WPL - WPL transferred its transmission assets to ATC in 2001 in exchange for an ownership interest in ATC. As of Dec. 31, 2011, WPL held a 16% ownership interest in ATC with a carrying value of $239 million. WPL currently anticipates making capital contributions of $7 million, $4 million and $2 million to ATC in 2012, 2013 and 2014, respectively, to maintain its current ownership percentage. During 2011, ATC distributed to WPL, in the form of dividends, $31 million or approximately 82% of WPL’s equity earnings from ATC. Although no assurance can be given, WPL anticipates ATC will continue a dividend payout ratio close to this level in the future. ATC is an independent for-profit, transmission-only company and is a transmission-owning member of the MISO RTO, MRO and Reliability First Corporation Regional Entities. ATC has transmission interconnections with various other transmission owning utilities in the Midwest. These interconnections enhance the overall reliability of the WPL delivery system and provide access to multiple sources of economic and emergency energy. WPL currently receives substantially all its transmission services from ATC. Refer to Note 21 of the “Combined Notes to Consolidated Financial Statements” for details of agreements between ATC and WPL.

MISO Markets - IPL and WPL are members of MISO, a FERC-approved RTO, which is responsible for monitoring and ensuring equal access to the transmission system in their service territories. IPL and WPL participate in the wholesale energy and ancillary services markets operated by MISO, which are discussed in more detail below. IPL and WPL are parties to a system coordination and operating agreement whereby Corporate Services serves as agent on behalf of IPL and WPL. The agreement, which has been approved or reviewed by FERC and all state regulatory bodies having jurisdiction, provides a contractual basis for coordinated planning, construction, operation and maintenance of the interconnected electric generation systems of IPL and WPL. As agent of the agreement, Corporate Services enters into energy, capacity, ancillary services, and transmission service sale and purchase transactions. Corporate Services allocates such sales and purchases among IPL and WPL based on information provided by MISO and procedures included in the agreement. Refer to Note 21 of the “Combined Notes to Consolidated Financial Statements” for additional discussion of these allocated amounts.

Wholesale Energy Market - IPL and WPL began participation in the wholesale energy market operated by MISO in 2005. The market impacts the way IPL and WPL buy and sell wholesale electricity, obtain transmission services, schedule generation and ensure resource adequacy to reliably serve load. In the market, IPL and WPL submit day-ahead and/or real-time bids and offers for energy at locations across the MISO region. MISO evaluates IPL’s, WPL’s and other market participants’ offers, bids and energy injections into, and withdrawals from, the system to economically dispatch the entire MISO system on an hourly basis. MISO settles these hourly offers and bids based on locational marginal prices, which are market-driven values based on the specific time and location of the purchase and/or sale of energy. The market is intended to send price signals to stakeholders about 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 that would not have operated based on economic needs. In these cases, MISO’s settlement assures that these generators are made whole financially for their variable costs. IPL and WPL also periodically engage in related transactions in PJM’s bid/offer-based wholesale energy market, which are accounted for in a similar manner as the MISO transactions.

 

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Financial Transmission Rights (FTRs) and Auction Revenue Rights (ARRs) - In areas of constrained transmission capacity, costs could be higher due to congestion and their impact on locational marginal prices. As part of the MISO market restructuring in 2005, physical transmission rights of IPL and WPL were replaced with FTRs. FTRs provide a hedge for congestion costs that occur in the MISO day-ahead energy market. Both IPL and WPL are allocated ARRs from MISO each year based on historical use of the transmission system. The revenue rights associated with these ARRs are used by IPL and WPL to acquire FTRs through the FTR auctions operated by MISO. IPL’s and WPL’s current FTRs acquired from ARRs extend through May 31, 2012. MISO re-allocates ARRs annually based on a fiscal year from June 1 through May 31. Based on the FTRs awarded to IPL and WPL to-date and future expected allocations of ARRs, along with the expected regulatory recovery treatment of MISO costs, the financial impacts associated with FTRs have not differed significantly from the financial impacts associated with physical transmission rights that existed prior to the MISO wholesale energy market.

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

MISO and PJM Market Flow Corrections - In 2009, MISO and PJM disclosed an error in the calculation of market flow data between the two independent system operators that began in 2005. The error resulted in incorrect payments between MISO and PJM during 2005 through 2009. Because IPL and WPL participated in both the MISO and PJM markets during the period of the error, IPL and WPL may have been entitled to refunds or may have been required to make additional payments to MISO and/or PJM. In 2010, MISO and PJM filed complaints against each other with FERC. In January 2011, MISO and PJM filed a settlement, which was approved by FERC in June 2011. Under the settlement, payments were not exchanged between MISO and PJM, resulting in no direct financial impact to Alliant Energy, IPL or WPL. Instead, process changes were established, including a baseline review of market-to-market processes and accounting, establishment of a change management process regarding the same biennial review of process changes, and enhanced access to pertinent data enabling independent verification of calculations related to settlements. Future market-to-market billing adjustment claims are limited to one year before the error is discovered compared to the previous two-year limitation.

Electric Environmental Matters - Alliant Energy, IPL and WPL are subject to extensive environmental laws and regulations at a federal, state and local level relating to the protection of the environment and health and safety matters, including those governing air emissions; water discharges; the management, storage and disposal of hazardous materials and the clean-up of contaminated sites. The laws impacting Alliant Energy’s, IPL’s and WPL’s electric operations include, but are not limited to, the Safe Drinking Water Act; Clean Water Act; Clean Air Act; National Environmental Policy Act of 1969; Toxic Substances Control Act; Resource Conservation and Recovery Act; Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act and Emergency Planning and Community Right-to-Know Act of 1986; Endangered Species Act; Occupational Safety and Health Act; National Energy Policy Act, as amended; Federal Insecticide, Fungicide and Rodenticide Act; Hazardous Materials Transportation Act; Pollution Prevention Act; and Department of Homeland Security Appropriations Act, as well as similar state laws, and regulations promulgated thereunder. Alliant Energy, IPL and WPL regularly obtain federal, state and local permits to assure compliance with environmental protection laws and regulations. Costs associated with such compliance have increased in recent years and are expected to continue to increase in the future. Alliant Energy, IPL and WPL anticipate that prudently incurred compliance and remediation costs for IPL and WPL will be recoverable, in whole or part, through future rate case proceedings. Refer to “Environmental Matters” in MDA and Note 13(d) of the “Combined Notes to Consolidated Financial Statements” for further discussion of electric environmental matters, including current or proposed environmental regulations under the Clean Air Interstate Rule, Cross-State Air Pollution Rule, Clean Air Visibility Rule, Utility Maximum Achievable Control Technology (MACT) Rule, Wisconsin State Mercury Rule, Wisconsin Reasonably Available Control Technology Rule, Industrial Boiler and Process Heater MACT Rule, Ozone National Ambient Air Quality Standard (NAAQS) Rule, Fine Particle NAAQS Rule, Nitrogen Dioxide NAAQS Rule, SO2 NAAQS Rule, Federal Clean Water Act including Section 316(b), Wisconsin and Iowa State Thermal Rules, Hydroelectric Fish Passages and Fish Protective Devices, Coal Combustion Residuals, Closed Ash Landfills, Polychlorinated Biphenyls and various legislation and EPA regulations to monitor and regulate the emission of Greenhouse Gases (GHG) including the Mandatory GHG Reporting Rule, the New Source Performance Standard for GHG Emissions from Electric Utilities and the GHG Tailoring Rule. Refer to “Strategic Overview - Environmental Compliance Plans” in MDA for details of Alliant Energy’s, IPL’s and WPL’s future environmental compliance plans to adhere to applicable environmental requirements.

 

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Alliant Energy Corporation

 

Electric Operating Information

   2011      2010      2009      2008      2007  

Operating Revenues (in millions):

              

Residential

   $ 985.8       $ 1,001.5       $ 868.6       $ 844.7       $ 847.5   

Commercial

     612.1         619.0         556.8         537.5         535.2   

Industrial

     748.9         762.8         710.7         734.7         731.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     2,346.8         2,383.3         2,136.1         2,116.9         2,114.6   

Sales for resale:

              

Wholesale

     189.8         196.8         190.1         201.9         179.8   

Bulk power and other

     52.2         44.1         98.3         31.1         56.7   

Other (includes wheeling)

     47.0         50.0         51.4         61.4         59.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,635.8       $ 2,674.2       $ 2,475.9       $ 2,411.3       $ 2,410.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Electric Sales (000s MWh):

              

Residential

     7,740         7,836         7,532         7,664         7,753   

Commercial

     6,253         6,219         6,108         6,181         6,222   

Industrial

     11,504         11,213         10,948         12,490         12,692   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     25,497         25,268         24,588         26,335         26,667   

Sales for resale:

              

Wholesale

     3,372         3,325         3,251         3,813         3,547   

Bulk power and other

     1,757         1,378         2,583         983         2,550   

Other

     151         153         155         164         167   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     30,777         30,124         30,577         31,295         32,931   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Customers (End of Period):

              

Residential

     842,780         841,726         840,927         840,644         840,122   

Commercial

     136,732         135,832         135,099         134,536         134,235   

Industrial

     2,895         2,875         2,881         2,934         2,964   

Other

     3,638         3,632         3,555         3,534         3,529   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     986,045         984,065         982,462         981,648         980,850   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Selected Electric Data:

              

Maximum peak hour demand (MW)

     5,734         5,425         5,491         5,491         5,751   

Cooling degree days (a):

              

Cedar Rapids, Iowa (IPL) (normal - 736)

     887         923         406         583         846   

Madison, Wisconsin (WPL) (normal - 614)

     814         829         368         538         781   

Sources of electric energy (000s MWh):

              

Coal

     16,440         16,366         15,321         17,495         18,643   

Purchased power:

              

Nuclear

     5,483         5,667         5,428         5,465         5,103   

Other (b)

     7,529         7,514         9,542         7,866         8,298   

Gas

     588         633         661         1,037         1,894   

Other (b)

     1,413         820         402         245         309   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     31,453         31,000         31,354         32,108         34,247   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenue per kilowatt-hour (KWh) sold to retail customers (cents)

     9.20         9.43         8.69         8.04         7.93   

 

(a) Cooling degree days are calculated using a simple average of the high and low temperatures each day compared to a 65 degree base. Normal degree days are calculated using a rolling 20-year average of historical cooling degree days.
(b) All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.

 

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Interstate Power and Light Company

 

Electric Operating Information

   2011      2010      2009      2008      2007  

Operating Revenues (in millions):

              

Residential

   $ 543.2       $ 561.9       $ 478.9       $ 455.2       $ 451.2   

Commercial

     366.0         378.7         336.8         319.4         316.2   

Industrial

     415.4         441.9         412.5         407.0         402.0   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     1,324.6         1,382.5         1,228.2         1,181.6         1,169.4   

Sales for resale:

              

Wholesale

     29.6         29.8         23.5         23.4         21.3   

Bulk power and other

     24.6         23.5         37.3         21.1         42.2   

Other (includes wheeling)

     29.5         28.5         26.6         32.2         37.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,408.3       $ 1,464.3       $ 1,315.6       $ 1,258.3       $ 1,270.1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Electric Sales (000s MWh):

              

Residential

     4,223         4,295         4,113         4,218         4,204   

Commercial

     3,953         3,944         3,851         3,911         3,912   

Industrial

     7,080         6,961         6,829         7,742         7,750   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     15,256         15,200         14,793         15,871         15,866   

Sales for resale:

              

Wholesale

     417         425         403         449         406   

Bulk power and other

     729         683         901         682         1,581   

Other

     84         83         84         90         93   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     16,486         16,391         16,181         17,092         17,946   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Customers (End of Period):

              

Residential

     443,358         443,694         443,615         443,589         444,974   

Commercial

     80,506         80,063         79,805         79,508         79,473   

Industrial

     1,906         1,900         1,914         1,939         1,954   

Other

     1,381         1,366         1,376         1,381         1,398   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     527,151         527,023         526,710         526,417         527,799   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Selected Electric Data:

              

Maximum peak hour demand (MW)

     3,131         2,963         2,981         2,943         3,085   

Cooling degree days (a):

              

Cedar Rapids, Iowa (normal - 736)

     887         923         406         583         846   

Sources of electric energy (000s MWh):

              

Coal

     8,456         8,663         8,162         9,517         10,547   

Purchased power:

              

Nuclear

     3,624         3,623         3,577         3,619         3,066   

Other (b)

     3,755         3,620         4,315         3,154         3,101   

Gas

     532         578         636         983         1,778   

Other (b)

     586         375         58         23         127   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     16,953         16,859         16,748         17,296         18,619   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenue per KWh sold to retail customers (cents)

     8.68         9.10         8.30         7.45         7.37   

 

(a) Cooling degree days are calculated using a simple average of the high and low temperatures each day compared to a 65 degree base. Normal degree days are calculated using a rolling 20-year average of historical cooling degree days.
(b) All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.

 

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Wisconsin Power and Light Company

 

Electric Operating Information

   2011      2010      2009      2008      2007  

Operating Revenues (in millions):

              

Residential

   $ 442.6       $ 439.6       $ 389.7       $ 389.5       $ 396.3   

Commercial

     246.1         240.3         220.0         218.1         219.0   

Industrial

     333.5         320.9         298.2         327.7         329.9   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     1,022.2         1,000.8         907.9         935.3         945.2   

Sales for resale:

              

Wholesale

     160.2         167.0         166.6         178.5         158.5   

Bulk power and other

     27.6         20.6         61.0         10.0         14.5   

Other

     17.5         21.5         24.8         29.2         22.5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,227.5       $ 1,209.9       $ 1,160.3       $ 1,153.0       $ 1,140.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Electric Sales (000s MWh):

              

Residential

     3,517         3,541         3,419         3,446         3,549   

Commercial

     2,300         2,275         2,257         2,270         2,310   

Industrial

     4,424         4,252         4,119         4,748         4,942   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     10,241         10,068         9,795         10,464         10,801   

Sales for resale:

              

Wholesale

     2,955         2,900         2,848         3,364         3,141   

Bulk power and other

     1,028         695         1,682         301         969   

Other

     67         70         71         74         74   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     14,291         13,733         14,396         14,203         14,985   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Customers (End of Period):

              

Residential

     399,422         398,032         397,312         397,055         395,148   

Commercial

     56,226         55,769         55,294         55,028         54,762   

Industrial

     989         975         967         995         1,010   

Other

     2,257         2,266         2,179         2,153         2,131   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     458,894         457,042         455,752         455,231         453,051   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Selected Electric Data:

              

Maximum peak hour demand (MW)

     2,761         2,654         2,558         2,583         2,816   

Cooling degree days (a):

              

Madison, Wisconsin (normal - 614)

     814         829         368         538         781   

Sources of electric energy (000s MWh):

              

Coal

     7,984         7,703         7,159         7,978         8,096   

Purchased power:

              

Nuclear

     1,859         2,044         1,851         1,846         2,037   

Other (b)

     3,774         3,894         5,227         4,712         5,197   

Gas

     56         55         25         54         116   

Other (b)

     827         445         344         222         182   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     14,500         14,141         14,606         14,812         15,628   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Revenue per KWh sold to retail customers (cents)

     9.98         9.94         9.27         8.94         8.75   

 

(a) Cooling degree days are calculated using a simple average of the high and low temperatures each day compared to a 65 degree base. Normal degree days are calculated using a rolling 20-year average of historical cooling degree days.
(b) All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.

 

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2) GAS UTILITY OPERATIONS

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

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

 

     2011     2010     2009  
     Amount      Percent     Amount      Percent     Amount      Percent  

IPL:

               

Iowa

   $ 263.3         55   $ 261.5         54   $ 295.2         56

Minnesota

     13.0         3     12.8         3     13.6         3
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Subtotal

     276.3         58     274.3         57     308.8         59
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

WPL:

               

Wisconsin

     200.4         42     206.3         43     216.5         41
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 
   $ 476.7         100   $ 480.6         100   $ 525.3         100
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Customers - The number of gas customers and communities served at Dec. 31, 2011 were as follows:

 

     Retail
Customers
     Transportation /
Other Customers
     Total
Customers
     Communities
Served
 

IPL

     233,715         273         233,988         243   

WPL

     179,945         227         180,172         239   
  

 

 

    

 

 

    

 

 

    

 

 

 
     413,660         500         414,160         482   
  

 

 

    

 

 

    

 

 

    

 

 

 

IPL’s and WPL’s retail customers in the above table are billed under base rates established by the IUB, MPUC or PSCW that include recovery of and a return on investments in gas infrastructure and recovery of costs required to serve customers. Commodity, storage and transportation costs incurred by IPL and WPL are recovered pursuant to natural gas cost recovery mechanisms. 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 “Rate Matters” in MDA for discussion of potential retail gas rate filings by IPL and WPL in 2012.

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

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

Gas Supply - IPL and WPL maintain purchase agreements with over 70 suppliers of natural gas from various gas producing regions of the U.S. and Canada. The majority of the gas supply contracts are for terms of six months or less, with the remaining supply contracts having terms through March 2014. IPL’s and WPL’s gas supply commitments are primarily market-based.

Recently, natural gas prices have fallen to levels not seen in a decade. Prices have fallen largely due to surging supply caused by shale gas production. Given the tariffs for IPL’s and WPL’s retail gas customers provide for subsequent adjustments to their rates in the cost of gas sold, the decreased natural gas prices do not have a material impact on their respective gas margins.

 

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In providing gas commodity service to retail customers, Corporate Services administers a diversified portfolio of transportation and storage contracts on behalf of IPL and WPL. Transportation contracts with Northern Natural Gas Company (NNG), ANR, Natural Gas Pipeline Co. of America (NGPL), Guardian Pipeline (Guardian) and Northern Border Pipeline (NBPL) allow access to gas supplies located in the U.S. and Canada. Arrangements with Firm Citygate Supplies (FCS) provide IPL with gas delivered directly to its service territory. In 2011, the maximum daily delivery capacity for IPL and WPL was as follows (in Dths):

 

     NNG      ANR      NGPL      FCS      Guardian      NBPL      Total  

IPL

     191,969         43,180         42,618         11,500         —           9,085         298,352   

WPL

     76,056         167,467         —           —           10,000         —           253,523   

Refer to Note 1(h) for information relating to utility natural gas cost recovery mechanisms and Note 13(a) for discussion of natural gas commitments in the “Combined Notes to Consolidated Financial Statements.”

Gas Environmental Matters - Alliant Energy is subject to extensive environmental laws and regulations at a federal, state and local level relating to the protection of the environment and health and safety matters, including remediation of former manufactured gas plant sites. The laws impacting Alliant Energy’s gas operations include, but are not limited to, the Safe Drinking Water Act; Clean Water Act; National Environmental Policy Act of 1969; Toxic Substances Control Act; Resource Conservation and Recovery Act; Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act and Emergency Planning and Community Right-to-Know Act of 1986; Endangered Species Act; Occupational Safety and Health Act; National Energy Policy Act, as amended; Federal Insecticide, Fungicide and Rodenticide Act; Hazardous Materials Transportation Act; Pollution Prevention Act, and Department of Homeland Security Appropriations Act, as well as similar state laws, and regulations promulgated thereunder. Alliant Energy regularly obtains federal, state and local permits to assure compliance with environmental protection laws and regulations. Costs associated with such compliance have increased in recent years and are expected to continue to increase in the future. Alliant Energy anticipates that prudently incurred compliance and remediation costs for IPL and WPL will be recoverable, in whole or part, through future rate case proceedings. Refer to Note 13(d) of the “Combined Notes to Consolidated Financial Statements” for discussion of gas environmental matters. Refer to “Legislative Matters” in MDA for discussion of the Pipeline Safety, Regulatory Certainty and Job Creation Act of 2011, which was enacted in January 2012.

 

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Alliant Energy Corporation

 

Gas Operating Information

   2011      2010      2009      2008      2007  

Operating Revenues (in millions):

              

Residential

   $ 269.7       $ 273.7       $ 290.8       $ 385.0       $ 348.6   

Commercial

     155.1         154.2         174.7         240.5         199.0   

Industrial

     24.5         27.3         30.7         51.1         39.4   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     449.3         455.2         496.2         676.6         587.0   

Interdepartmental

     1.1         1.5         4.9         7.8         17.4   

Transportation/other

     26.3         23.9         24.2         26.0         25.8   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 476.7       $ 480.6       $ 525.3       $ 710.4       $ 630.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gas Sales (000s Dths):

              

Residential

     26,891         27,128         27,711         30,630         28,137   

Commercial

     19,271         18,691         20,725         22,461         19,417   

Industrial

     3,848         4,158         4,558         5,558         4,694   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     50,010         49,977         52,994         58,649         52,248   

Interdepartmental

     887         887         938         1,373         2,591   

Transportation/other

     51,323         49,521         53,580         59,253         58,911   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     102,220         100,385         107,512         119,275         113,750   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail Customers at End of Period:

              

Residential

     367,497         366,261         365,597         365,193         363,825   

Commercial

     45,667         45,552         45,641         45,413         45,374   

Industrial

     496         549         571         584         591   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     413,660         412,362         411,809         411,190         409,790   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Selected Gas Data:

              

Heating degree days (a):

              

Cedar Rapids, Iowa (IPL) (normal - 6,763)

     6,745         6,868         7,074         7,636         6,815   

Madison, Wisconsin (WPL) (normal - 7,083)

     6,992         6,798         7,356         7,714         6,935   

Revenue per Dth sold to retail customers

   $ 8.98       $ 9.11       $ 9.36       $ 11.54       $ 11.23   

Purchased gas costs per Dth sold to retail customers

   $ 5.88       $ 6.05       $ 6.47       $ 8.73       $ 8.11   

 

(a) Heating degree days are calculated using a simple average of the high and low temperatures each day compared to a 65 degree base. Normal degree days are calculated using a rolling 20-year average of historical heating degree days.

 

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Interstate Power and Light Company

 

Gas Operating Information

   2011      2010      2009      2008      2007  

Operating Revenues (in millions):

              

Residential

   $ 155.2       $ 155.6       $ 168.6       $ 219.3       $ 203.4   

Commercial

     87.8         88.4         100.8         137.3         115.0   

Industrial

     19.0         18.4         25.0         40.4         31.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     262.0         262.4         294.4         397.0         349.6   

Interdepartmental

     0.7         1.0         2.9         2.2         2.6   

Transportation/other

     13.6         10.9         11.5         11.2         12.3   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 276.3       $ 274.3       $ 308.8       $ 410.4       $ 364.5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gas Sales (000s Dths):

              

Residential

     15,660         15,923         16,072         18,110         16,541   

Commercial

     10,677         10,596         11,451         13,099         11,080   

Industrial

     3,023         2,869         3,787         4,539         3,811   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     29,360         29,388         31,310         35,748         31,432   

Interdepartmental

     116         148         474         217         327   

Transportation/other

     27,604         27,923         29,924         34,776         34,433   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     57,080         57,459         61,708         70,741         66,192   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail Customers at End of Period:

              

Residential

     206,964         206,979         206,937         206,866         206,873   

Commercial

     26,455         26,470         26,545         26,603         26,664   

Industrial

     296         343         359         367         366   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     233,715         233,792         233,841         233,836         233,903   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Selected Gas Data:

              

Heating degree days (a):

              

Cedar Rapids, Iowa (normal - 6,763)

     6,745         6,868         7,074         7,636         6,815   

Revenue per Dth sold to retail customers

   $ 8.92       $ 8.93       $ 9.40       $ 11.11       $ 11.12   

Purchased gas cost per Dth sold to retail customers

   $ 5.96       $ 6.05       $ 6.61       $ 8.50       $ 8.38   

Wisconsin Power and Light Company

 

Gas Operating Information

   2011      2010      2009      2008      2007  

Operating Revenues (in millions):

              

Residential

   $ 114.5       $ 118.1       $ 122.2       $ 165.7       $ 145.2   

Commercial

     67.3         65.8         73.9         103.2         84.0   

Industrial

     5.5         8.9         5.7         10.7         8.2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     187.3         192.8         201.8         279.6         237.4   

Interdepartmental

     0.4         0.5         2.0         5.6         14.8   

Transportation/other

     12.7         13.0         12.7         14.8         13.5   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 200.4       $ 206.3       $ 216.5       $ 300.0       $ 265.7   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gas Sales (000s Dths):

              

Residential

     11,231         11,205         11,639         12,520         11,596   

Commercial

     8,594         8,095         9,274         9,362         8,337   

Industrial

     825         1,289         771         1,019         883   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail subtotal

     20,650         20,589         21,684         22,901         20,816   

Interdepartmental

     771         739         464         1,156         2,264   

Transportation/other

     23,719         21,598         23,656         24,477         24,478   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     45,140         42,926         45,804         48,534         47,558   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retail Customers at End of Period:

              

Residential

     160,533         159,282         158,660         158,327         156,952   

Commercial

     19,212         19,082         19,096         18,810         18,710   

Industrial

     200         206         212         217         225   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     179,945         178,570         177,968         177,354         175,887   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other Selected Gas Data:

              

Heating degree days (a):

              

Madison, Wisconsin (normal - 7,083)

     6,992         6,798         7,356         7,714         6,935   

Revenue per Dth sold to retail customers

   $ 9.07       $ 9.36       $ 9.31       $ 12.21       $ 11.40   

Purchased gas cost per Dth sold to retail customers

   $ 5.77       $ 6.06       $ 6.28       $ 9.08       $ 7.70   

 

(a) Heating degree days are calculated using a simple average of the high and low temperatures each day compared to a 65 degree base. Normal degree days are calculated using a rolling 20-year average of historical heating degree days.

 

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3) STEAM UTILITY OPERATIONS - IPL has historically provided steam service to approximately 200 customers in Cedar Rapids, Iowa, who used high-pressure steam for production purposes or low-pressure steam for hot water and heat. Substantially all of the steam for these customers was generated by IPL’s Prairie Creek Generating Station (Prairie Creek) and Sixth Street Generating Station (Sixth Street) in Cedar Rapids prior to June 2008. In June 2008, Prairie Creek and Sixth Street were shutdown as a result of significant damage caused by severe flooding in downtown Cedar Rapids. Soon after the flood waters receded, IPL made necessary repairs to its steam distribution systems and established temporary steam generating systems (natural gas-fired package boilers and water treatment systems) to resume steam service for its customers. Following months of evaluations and discussions with its steam customers, IPL announced in 2009 its decision to discontinue providing temporary steam service to those steam customers located in downtown Cedar Rapids previously served by Sixth Street. IPL ceased low-pressure steam operations in downtown Cedar Rapids in December 2009 and high-pressure steam operations in downtown Cedar Rapids in the second quarter of 2010. Prairie Creek was returned to service in 2009 and is expected to be the primary source of steam for IPL’s remaining two high-pressure steam customers in the future.

IPL’s largest remaining high-pressure steam customer accounts for approximately 95% of IPL’s steam revenues. This customer is under contract through 2025 for annual steam usage of at least 3.8 million Dths, with certain conditions. IPL is currently negotiating a 10-year contract with the other remaining high-pressure steam customer for annual steam usage of at least 175,000 Dths, with certain conditions.

D. INFORMATION RELATING TO NON-REGULATED OPERATIONS

Resources manages a portfolio of wholly-owned subsidiaries and additional investments through several distinct platforms: Transportation, RMT, Non-regulated Generation and other non-regulated investments.

Transportation - includes a short-line railway that provides freight service between Cedar Rapids, Iowa and Iowa City, Iowa; a barge terminal and hauling services on the Mississippi River; and other transfer and storage services.

RMT - provides renewable energy services to clients throughout the U.S., including facility siting, permitting, design, procurement, construction and high voltage connection services for wind and solar projects. In February 2012, Alliant Energy announced plans to sell RMT in 2012.

Non-regulated Generation - owns the 300 MW, simple-cycle, natural gas-fired Sheboygan Falls Energy Facility near Sheboygan Falls, Wisconsin, which is leased to WPL for an initial period of 20 years ending in 2025, and the 100 MW Franklin County wind project in Franklin County, Iowa that is currently under construction. The Franklin County wind project is expected to be placed in service by the end of 2012.

Other non-regulated investments - include the Whiting Petroleum Corporation tax sharing agreement receivable discussed in Note 4(c) of the “Combined Notes to Consolidated Financial Statements,” real estate investments, two corporate airplanes and several other modest investments.

 

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 or results of operations could be materially and adversely affected and you may lose all or part of your investment.

Our business is significantly impacted by government regulation - We are subject to extensive regulation by federal and state regulatory authorities, which significantly influences our operations and our ability to timely recover costs from customers and earn authorized rates of return. In particular, regulatory authorities with jurisdiction over public utilities, including the IUB, the PSCW, the MPUC and FERC, regulate many aspects of our operations, including: the rates charged to our customers; our ability to site and construct new generating facilities, such as the proposed natural gas generating facility in Iowa and future wind projects to utilize our remaining available wind sites, and the amount of costs associated therewith that may be recovered from customers; the installation of environmental emission control equipment and the amount of costs for the construction and maintenance of such equipment that may be recovered from customers; our ability to decommission generating facilities and recover the costs incurred to decommission the facilities and the remaining carrying value of such facilities; the amount of certain sources of energy such as renewable sources and reductions in energy usage by customers; our ability to purchase generating facilities, such as the Riverside Energy Center and the amount of costs associated therewith that may be recovered from customers; the rates paid to transmission operators; safety; the issuance of securities; accounting

 

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matters; and transactions between affiliates. These regulatory authorities are also empowered to impose financial penalties and other sanctions if we are found to have violated statutes and regulations governing utility operations. Failure to obtain approvals from regulatory authorities, failure to receive approvals in a timely manner, or receiving approvals with uneconomical conditions, to recover costs, construct new generating facilities, purchase generating facilities, install environmental emission control equipment or decommission generating facilities may adversely impact our ability to achieve our strategic plan, cause us to record an impairment of our assets, and have a material adverse impact on our results of operation and financial condition.

In addition, our utility financial condition is influenced by how these regulatory authorities establish our authorized rates of return and common equity levels, and the amount of deferred costs that may be recovered from customers. Our ability to obtain rate adjustments to earn authorized rates of return depends upon timely regulatory action under applicable statutes and regulations, and we cannot assure that rate adjustments will be obtained or authorized rates of return on capital will be earned. In pending and future rate cases, IPL and WPL may not receive an adequate amount of rate relief, rates may be reduced, rate refunds may be required, rate adjustments may not be approved on a timely basis, costs may not be otherwise recovered through rates, future rates may be temporarily frozen (as occurred in the IPL rate case in Iowa through 2013) and authorized rates of return on capital may be reduced. As a result, we may experience adverse impacts on our financial condition and results of operations. 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 costs or change business operations or our business plan, which may have an adverse impact on our financial condition and results of operations.

We are subject to a wide variety of regulations, including and in addition to those described above, which are constantly changing. While we believe we comply with all laws and regulations governing us, state or federal agencies may not agree and may find that our compliance programs are inadequate. Such a finding could cause fines or penalties or could require us to implement new compliance programs which could increase our costs of compliance and may adversely impact our financial condition.

Provisions of the Wisconsin Utility Holding Company Act (WUHCA) limit our ability to invest in non-utility activities. Takeover attempts by potential purchasers who might be willing to pay a premium for our stock are also limited by certain provisions of WUHCA and the delays and conditions that generally result from the requirement that regulatory authorities approve such a transaction.

Large construction projects are subject to delays and cost increases that may not be recovered from customers - Our strategic plan includes installing environmental control equipment, making other large-scale improvements to our newer and more-efficient coal-fired generating facilities, constructing a new wind generating facility and the potential construction of a natural gas-fired generating facility. These large construction projects are subject to various risks that could cause costs to increase or cause delays in completion. 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; the inability to agree to contract terms or disputes in contract terms; work stoppages; adverse weather conditions; the inability to obtain necessary permits in a timely manner; adverse interpretation or enforcement of permit conditions; changes in applicable laws or regulations; governmental actions; legal action; unforeseen engineering or technology issues; limited access to capital and other adverse economic conditions. If a construction project is not completed or is delayed or final costs exceed the costs approved by our regulators, we may not be able to recover all costs for the project in rates. Inability to recover excess costs, or inability to complete the project in a timely manner, could adversely impact our financial condition and results of operations.

We are subject to numerous environmental laws and regulations, compliance with which could be difficult and costly - We are subject to environmental laws and regulations that affect many aspects of our past, present and future operations, including air emissions, water quality, cooling water intake structures, wastewater discharges, the generation, transport and disposal of coal combustion products and other solid wastes and hazardous substances, and the clean-up of contaminated sites. These laws and regulations require us to obtain and comply with a wide variety of environmental registrations, licenses, permits, inspections and other approvals, which are subject to renewal proceedings and legal challenges. Environmental laws and regulations can also require us to restrict or limit the output of certain facilities or the use of certain fuels, to install emission control equipment at our facilities, clean up spills and correct environmental hazards and other contamination. We may be required to pay all or a portion of the cost to remediate (i.e. clean-up) sites where our past activities, or the activities of certain other parties, caused environmental contamination, including sites of former manufactured gas plants operated by our predecessors. We cannot predict with certainty the amount and timing of all future expenditures (including the potential or magnitude of any fines or penalties, including the severity of any restriction on our operations) necessary to comply with these environmental laws and regulations, although we expect the expenditures to be material.

 

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Although we believe we comply in all material respects with all environmental laws and regulations, we may receive notices of violation from state or federal agencies, as occurred when the EPA issued a notice of violation to WPL in 2009 alleging non-compliance with various permitting requirements under the Clean Air Act. Citizen groups or private individuals may bring litigation over environmental issues. WPL is currently involved in matters in which the Sierra Club is alleging various violations of the Clean Air Act. If we are unsuccessful defending litigation from governmental agencies or citizen groups, we could be subject to restrictions or prohibitions on operating our generation facilities, costly upgrades to our generation facilities, payment of damages or fines, requirements to complete other beneficial environmental projects, and litigation costs, all of which could be material. An adverse result in such legal actions could have a material adverse impact on our financial condition and results of operations.

We are also subject to mandates to provide customers with clean energy, renewable energy and energy conservation offerings. These mandates are designed in part to mitigate the potential environmental impacts of utility operations. Failure to meet the requirements of these mandates may result in fines or penalties, which could have a material adverse effect on our results of operations. If our regulators do not allow us to recover all or a part of the costs incurred to comply with the mandates, it could have a material adverse effect on our results of operations.

Existing environmental laws or regulations may be revised and new laws or regulations seeking to protect the environment may be adopted or become applicable to us, including but not limited to regulation of mercury, nitrogen oxide, sulfur dioxide, carbon dioxide and other greenhouse gas emissions, particulates, coal ash and other coal combustion products, and cooling water intake structures. Such changes could materially increase our cost of compliance. Our strategic plan was developed in part to comply with the environmental laws and regulations as we anticipate they will be finally adopted. Revision of existing environmental laws or regulations may cause (i) state utility commissions to not approve our plans to install environmental emission control equipment at our existing generating facilities or not allow us to recover costs of such projects, (ii) state utility commissions to not approve costs of emission allowances purchased to comply with environmental regulations that are no longer applicable to our operations, (iii) co-owners in our jointly-owned facilities to not agree with our decision to move forward with these projects, or (iv) our current plans to not meet new requirements. These outcomes could have a material adverse effect on our results of operations and financial condition.

Demand for energy may decrease - Adverse economic conditions in our service territories, such as the most recent recession, reduce the demand for electricity and natural gas. We lost certain customers after plants closed due to the most recent recession and could lose additional customers due to economic conditions, customers constructing their own generation facilities, or loss of service territory or franchises. Further, the energy conservation and technological advances that increase energy efficiency may temporarily or permanently reduce the demand for energy products. In addition, state and/or federal regulations require mandatory conservation measures, which would reduce the demand for energy. We may also lose wholesale customers to competitors. Future economic growth may not create enough growth for us to replace the lost energy demand from these customers. The loss of customers, the inability to replace those customers with new customers, and the decrease in demand for energy could negatively impact our financial condition and results of operations.

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 higher air conditioning needs. In addition, market prices for electricity generally peak in the summer due to the higher demand. Conversely, demand for natural gas depends significantly upon weather patterns in winter months due to heavy use in 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. Thus, unusually mild winters and summers could have an adverse effect on our financial condition and results of operations.

We may not be able to fully recover costs related to commodity prices - The prices that we may obtain for electric energy may not compensate for changes in delivered coal, natural gas or electric 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, especially at WPL where we do not have a retail automatic fuel cost adjustment clause, which allows more consistent and timely cost recovery. 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

 

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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 currently rely on coal primarily from the Powder 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 and results of operations.

We also have responsibility to supply natural gas to certain natural gas-fired electric generating facilities that we own and lease, which increases our exposure to 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 and results of operations.

We face risks related to non-regulated operations - We have two non-regulated subsidiaries that operate in the renewable energy market. RMT is a subsidiary that offers facility siting, permitting, design, procurement, construction and high voltage connection services for wind and solar projects in the U.S. We recently announced plans to sell RMT. We cannot currently predict whether we will find a buyer for RMT or be able to consummate a sale of RMT, the amount of consideration we might receive for RMT, or whether RMT will regain profitability. The contractual terms and conditions of certain projects currently or previously serviced by RMT, including Alliant Energy’s parental guarantee obligations and financing provided to customers, may hinder RMT’s ability to be profitable on certain projects, may impact the ability to sell or the sale price of RMT, and may materially impact our financial condition. Our inability to effect a strategic alternative for RMT, or continued losses incurred by RMT, could adversely impact our results of operations and financial condition.

Franklin County Wind LLC is a subsidiary that is building a non-regulated 100 MW wind project in Franklin County, Iowa, referred to as the Franklin County wind project. The Franklin County wind project does not currently have a buyer of the electrical output expected to be generated by the project when completed. Failure to find a buyer for the output, or selling the output at disadvantageous pricing, may cause the project to lose money or cause an impairment of its assets. Such losses or impairments could adversely impact our results of operations and financial condition.

We are dependent on the capital markets and could be negatively impacted by disruptions in the capital markets - Successful implementation of our strategic plan and other long-term business strategies is dependent upon our ability to access the capital markets under competitive terms and rates. We have forecasted capital expenditures of $4 billion over the next four years. Capital markets, particularly debt markets, have come under considerable strain in the past few years, resulting in negative impacts on the availability and terms of credit available to certain businesses. In August 2011, Standard & Poor’s Ratings Services lowered its long-term sovereign credit rating on the U.S. The effect of this or any further downgrades to the U.S. government’s sovereign credit rating, or its perceived creditworthiness, and the effect of the economic crisis in Europe with respect to the ability of certain European Union countries to continue to service their sovereign debt obligations, is inherently unpredictable and could adversely affect the U.S. and global financial markets and economic conditions. In turn, any national economic downturn or disruption of financial markets could reduce our access to capital necessary to execute our strategic plan and for our operations as we may be unable to access the credit markets or may face significantly higher costs of borrowing. We rely on our strong credit ratings to access the credit markets. If our credit ratings are downgraded for any reason, we could pay higher interest rates in future financings, the pool of potential lenders could be reduced, borrowing costs under existing credit facilities could increase, our access to the commercial paper market could be limited, or we could be required to provide additional credit assurance, including cash collateral, to contract counterparties. If our access to capital were to become significantly constrained or costs of capital increased significantly due to lowered credit ratings, prevailing industry conditions, regulatory constraints, the volatility of the capital markets or other factors, our financial condition and results of operations could be significantly adversely affected.

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 and our ability to recruit qualified personnel, collective bargaining agreements with employees and work stoppage that could affect our businesses and financial condition and results of operations. Further, our workforce includes employees who are nearing retirement. We need employees with specialized and technical skills in order to achieve our strategic plan. It may be difficult to retain current employees with these specialized skills, especially as they near retirement, and it may be difficult to find new employees with the necessary skills. These factors could adversely affect our ability to implement our strategic plan and our financial condition.

 

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We face risks associated with operating electric and natural gas infrastructure - The operation of electric generating facilities involves many risks, including start-up risks, breakdown or failure of equipment, the dependence on a specific fuel source, including the supply and transportation of fuel, the risk of performance below expected or contracted levels of output or efficiency, operator error and compliance with mandatory reliability standards. In addition, 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. Further, the transmission system in our utilities’ service territories is constrained, limiting the 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 and the inability to deliver energy from generating facilities, particularly wind generating facilities, to the national grid, or not being able to access lower cost sources of electric energy. We also have obligations to provide electrical service under regulatory requirements and contractual commitments. Failure to meet our service obligations could adversely impact our financial condition and results of operations.

The operation of our natural gas distribution activities also involves many risks, such as leaks, explosions and mechanical problems, which could cause substantial financial losses. These risks could result in loss of human life, particularly in highly populated areas, significant damage to property, environmental emissions, impairment of our operations and substantial losses to us. We also have obligations to provide service under regulatory requirements and contractual commitments. Failure to meet our service obligations could adversely impact our financial condition and results of operations.

Storms or other natural disasters may impact our operations in unpredictable ways - Storms and other natural disasters, including events such as floods, tornados or ice storms, may adversely impact our ability to generate, purchase or distribute electric energy or obtain fuel sources and may significantly slow growth or cause a decline in the economy within our service territories. Storms and natural disasters may prevent our customers from being able to operate, causing lower sales and revenues, which may not be replaced or recovered in rates. In addition, we could incur large costs of repairing damage to our generating facilities and infrastructure, or costs related to environmental remediation, due to storms or natural disasters. The restoration costs may not be fully covered by insurance policies. Damage to assets could also require us to take impairments, such as occurred with our damaged Sixth Street Generating Station. Some costs may not be recovered in rates, or there could be significant delays in cost recovery. Any of these items could adversely affect our financial condition and results of operations.

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, primarily its utility 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. 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.

Changes to certain tax elections, tax regulations and future taxable income could negatively impact our financial condition - Our strategic plan includes our utility subsidiaries and Resources building and operating wind generating facilities. The health of, and growth of, the wind market is impacted by government incentives, such as the production tax credits and cash grants. We currently operate wind generating facilities for which we receive production tax credits. If we were to elect a cash grant for certain facilities that have already been placed in service, we may incur material charges against earnings for the recapture of previously recognized production tax credits. The failure of tax incentives to work as expected or the elimination of, or changes to, these incentives could adversely impact our ability to achieve our strategic plan and could adversely impact our financial condition and results of operations.

We have significantly reduced our federal and state income tax obligations for the past few years through tax planning strategies. These tax planning strategies have generated large annual taxable losses over the past few years that have resulted in significant federal and state net operating loss (NOL) carryforwards. We plan to utilize these NOL carryforwards in the future to reduce our income tax obligations. If we cannot generate enough taxable income in the future to utilize all of the NOL carryforwards before they expire, we may incur material charges to earnings. Further, a future disallowance of some or all of the NOL carryforwards, or a change to the period of time in which we are able to utilize the NOL carryforwards, could have an adverse impact on our financial condition.

 

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Changes to the level of revenues generated in the different states we operate or changes to tax laws in such states may impact how we apportion our taxable income to each state, which could have a negative impact on our results of operations and financial condition. If corporate tax rates were changed with future federal or state legislation, we may be required to take material charges against earnings. Finally, we have a tax benefit rider in place in Iowa that provides billing credits to our customers. We have made certain assumptions regarding the timing of the tax benefit rider for accounting purposes. If those assumptions are not accurate, our results of operations and financial condition may be adversely impacted.

Poor performance of pension and other postretirement plan investments could negatively impact our financial condition - We have pension and other postretirement benefit plans that provide benefits to a large portion of our employees and retirees. Costs of providing benefits and related funding requirements of these plans are subject to changes in the market value of the assets that fund the plans. As a result of the extreme volatility and disruption in the domestic and international equity and bond markets in recent years, the asset values of our pension plans have fluctuated significantly since 2008. The funded status of the plans and the related costs reflected in our financial statements are affected by various factors that are subject to an inherent degree of uncertainty, particularly in the current economic environment. Future losses of asset values may necessitate accelerated funding of the plans in the future to meet minimum federal government requirements. Downward pressure on the asset values of our pension plans may require us to fund obligations earlier than originally planned, which would have an adverse impact on our financial condition and results of operations.

Actions related to global climate change and reducing GHG emissions could negatively impact us - The primary GHG emitted from our utility operations is carbon dioxide (CO2) from combustion of fossil fuels at our generating facilities. Our generating facilities are primarily coal-fired facilities. We could be subject to any regulations that are adopted in the future, and could become the target of legal claims or challenges, because generating electricity using fossil fuels emits CO2 and other GHGs. Due to the uncertainty of what form CO2 emissions regulations could take, control technologies available to reduce GHG emissions, including CO2, and the unknown nature of potential compliance obligations should climate change regulations be enacted, we cannot provide any assurance regarding the potential impacts any future regulations would have on our operations. The impacts of such proposals could have a material adverse impact on our financial condition and results of operations.

We face risks associated with our use of derivatives - We use derivative instruments to manage commodity price volatility. We could recognize financial losses as a result of volatility in the market value of these contracts or if a counterparty fails to perform. In addition, the derivative instruments that we use may not offset the underlying exposure being mitigated as expected, due to pricing inefficiencies or other terms of the derivative instruments, and any such failure to mitigate exposure could result in financial losses. 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. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was enacted. One of the most significant financial provisions of the Dodd-Frank Act for us is a commercial end-user exemption that is expected to allow utilities to continue trading derivatives “over-the-counter” without having to make such trades through cleared exchanges with collateral requirements. If, as a result of the rulemaking associated with the Dodd-Frank Act, we do not qualify for the end-user exemption, we could be subject to higher collateral requirements, which could adversely impact our cash flows.

Threats of terrorism, cyber attacks, and catastrophic events that could result from terrorism and cyber attacks 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 of both physical and cyber attacks. The risks posed by such attacks could include, among other things, the disruption of, volatility in, or other effects on capital markets, the increased cost of security and insurance; an adverse effect on our ability to generate, purchase or distribute electric energy or obtain fuel sources, and significantly slow growth or a decline in the economy within our service territories, all of which could adversely impact our financial condition and results of operations. In addition, the cost of repairing damage to our generating facilities and infrastructure due to acts of terrorism, and the loss of revenue if such events prevent us from providing utility service to our customers, could adversely impact our financial condition and results of operations. Further, an attack could result in the unauthorized disclosure of confidential information. As protection against such risks, we have instituted safeguards to protect our operational systems and information technology assets. FERC, through the North American Electric Reliability Corporation, requires certain safeguards be implemented to prevent cyber attacks. The safeguards we have may not always be effective due to the evolving nature of cyber attacks and cyber security. We cannot guarantee that such protections will be completely successful in the event of a cyber attack. We also maintain insurance coverage against some, but not all, potential losses. However, our insurance agreements may not be adequate to protect us against all of the operational and financial risks from such an attack.

Energy industry changes could have a negative effect on our businesses - We operate in a highly regulated business environment. The advent of new and unregulated markets has the potential to significantly impact our financial condition and results of operations. The evolution of the wholesale and transmission markets has the potential to significantly increase

 

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costs of transmission, costs associated with inefficient generation dispatching, costs of participation in the new markets 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. Increased competition from any restructuring efforts in our primary retail electric service territories may have a significant adverse impact on our financial condition and results of operations.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

 

ITEM 2. PROPERTIES

IPL - At Dec. 31, 2011, IPL’s electric generating facilities by primary fuel type were as follows. Generating capacity is based upon the unforced capacity of the generating stations included in MISO’s resource adequacy process for the planning period from June 2011 to May 2012.

 

Name of Generating Facility

   Location    No.
Of
Units
   In-service
Dates
   Primary
Dispatch
Type (a)
   Generating
Capacity

in MW
 

Ottumwa Generating Station (Unit 1)

   Ottumwa, IA    1    1981    BL      295         (b  

Lansing Generating Station (Units 3-4)

   Lansing, IA    2    1957-1977    BL      224         (c  

M.L. Kapp Generating Station (Unit 2)

   Clinton, IA    1    1967    BL      176        

Burlington Generating Station (Unit 1)

   Burlington, IA    1    1968    BL      168        

George Neal Generating Station (Unit 4)

   Sioux City, IA    1    1979    BL      160         (d  

George Neal Generating Station (Unit 3)

   Sioux City, IA    1    1975    BL      140         (e  

Prairie Creek Generating Station (Units 1,3,4)

   Cedar Rapids, IA    3    1958-1997    BL      114        

Sutherland Generating Station (Units 1,3)

   Marshalltown, IA    2    1955-1961    BL      87         (f  

Louisa Generating Station (Unit 1)

   Louisa, IA    1    1983    BL      28         (g  
              

 

 

      

Total Coal

                      1,392   

Emery Generating Station (Units 1-3)

   Mason City, IA    3    2004    IN      511        

Fox Lake Generating Station (Units 1,3)

   Sherburn, MN    2    1950-1962    PK      93         (c  

Dubuque Generating Station (Units 3-4)

   Dubuque, IA    2    1952-1959    IN      61         (f  

Burlington Combustion Turbines (Units 1-4)

   Burlington, IA    4    1994-1996    PK      58        

Grinnell Combustion Turbines (Units 1-2)

   Grinnell, IA    2    1990-1991    PK      42        

Red Cedar Combustion Turbine (Unit 1)

   Cedar Rapids, IA    1    1996    PK      14        
              

 

 

      

Total Gas

                      779   

Marshalltown Combustion Turbines (Units 1-3)

   Marshalltown, IA    3    1978    PK      165        

Lime Creek Combustion Turbines (Units 1-2)

   Mason City, IA    2    1991    PK      52        

Centerville Combustion Turbines (Units 1-2)

   Centerville, IA    2    1990    PK      33        

Montgomery Combustion Turbine (Unit 1)

   Montgomery, MN    1    1974    PK      14        

Diesel Stations

   Iowa and Minnesota    9    1963-1996    PK      13        
              

 

 

      

Total Oil

                      277   

Whispering Willow - East

   Franklin Co., IA    121    2009    IN      —           (h  
              

 

 

      

Total Wind

                      —     
                   

 

 

 

Total generating capacity

                      2,448   
                   

 

 

 

 

(a) Base load units (BL) are designed for nearly continuous operation at or near full capacity to provide the system base load. Intermediate units (IN) follow system load changes with frequent starts and curtailments of output during low demand. Peaking units (PK) are generally low efficiency, quick response units run only when there is high demand.
(b) Represents IPL’s 48% ownership interest in this 615 MW generating station, which is operated by IPL.

 

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(c) In 2011, IPL received notification from MISO that Lansing Generating Station Unit 3 (0 MW) and Fox Lake Generating Station Unit 1 (12 MW) may be retired. IPL is currently evaluating its future plans for these units, including potential retirement of the units. Capacity testing required by MISO’s resource adequacy process was not able to be completed for Lansing Generating Station Unit 3 resulting in no capacity being credited to this facility for the planning period from June 2011 to May 2012.
(d) Represents IPL’s 25.695% ownership interest in this 623 MW generating station, which is operated by MidAmerican Energy Company (MidAmerican).
(e) Represents IPL’s 28% ownership interest in this 500 MW generating station, which is operated by MidAmerican.
(f) IPL’s November 2010 IRP began a process of retiring Dubuque Generating Station Units 3 (29 MW) and 4 (32 MW) and Sutherland Generating Station Unit 1 (28 MW), and indicated IPL would evaluate the operating impacts of proposed environmental rules on Sutherland Generating Station Unit 3 (59 MW). In 2011, IPL switched the Dubuque Generating Station to a natural gas-fired facility and no longer operates the site as a coal-fired unit. IPL expects to switch the Sutherland Generating Station to a natural gas-fired facility in the first half of 2012. Refer to “Strategic Overview - Generation Plans - Coal-Fired Generation Projects” in MDA for further discussion of the possible retirements of the Dubuque Generating Station and the Sutherland Generating Station.
(g) Represents IPL’s 4% ownership interest in this 700 MW generating station, which is operated by MidAmerican.
(h) Represents 0% of the capacity of this 200 MW wind project based upon the MISO resource adequacy process, which is determined separately for each wind site, during the planning period from June 2011 to May 2012. The 0% allocation resulted from the lack of firm transmission at this wind site during the planning period from June 2011 to May 2012.

At Dec. 31, 2011, IPL owned approximately 19,762 miles of overhead electric distribution line and 2,716 miles of underground electric distribution cable, as well as 698 substation distribution transformers, substantially all of which are located in Iowa and Minnesota. IPL sold its electric transmission assets in 2007. IPL’s gas properties consist primarily of mains and services, meters, regulating and gate stations and other related distribution equipment. At Dec. 31, 2011, IPL’s gas distribution facilities included approximately 5,025 miles and 236 miles of gas mains located in Iowa and Minnesota, respectively. IPL’s other property included in “Other plant in service” on its Consolidated Balance Sheets consists primarily of operating and storeroom facilities, vehicles, computer hardware and software, communication equipment and other miscellaneous tools and equipment. IPL’s properties are suitable for their intended use. IPL continues to evaluate the potential retirement of other older, smaller and less-efficient electric generating units within its generation fleet.

WPL - At Dec. 31, 2011, WPL’s electric generating facilities by primary fuel type were as follows. Generating capacity is based upon the unforced capacity of the generating stations included in MISO’s resource adequacy process for the planning period from June 2011 to May 2012.

 

Name of Generating Facility

   Location    No.
of
Units
   In-service
Dates
   Primary
Dispatch
Type (a)
   Generating
Capacity

in MW
 

Columbia Energy Center (Units 1-2)

   Portage, WI    2    1975-1978    BL      466         (b  

Edgewater Generating Station (Unit 5)

   Sheboygan, WI    1    1985    BL      396        

Nelson Dewey Generating Station (Units 1-2)

   Cassville, WI    2    1959-1962    IN      208        

Edgewater Generating Station (Unit 4)

   Sheboygan, WI    1    1969    BL      192         (c  

Edgewater Generating Station (Unit 3)

   Sheboygan, WI    1    1951    IN      70        
              

 

 

      

Total Coal

                      1,332   

Neenah Energy Facility (Units 1-2)

   Neenah, WI    2    2000    PK      292        

South Fond du Lac Combustion Turbines

   Fond du Lac, WI    2    1994    PK      155         (d  

Rock River Combustion Turbines (Units 3-6)

   Beloit, WI    4    1967-1972    PK      139        

Sheepskin Combustion Turbine (Unit 1)

   Edgerton, WI    1    1971    PK      27        
              

 

 

      

Total Gas

                      613   

Cedar Ridge

   Fond du Lac Co., WI    41    2008    IN      6         (e  

Bent Tree - Phase I

   Freeborn Co., MN    77    2010-2011    IN      —           (f  
              

 

 

      

Total Wind

                      6   

Prairie du Sac Hydro Plant

   Prairie du Sac, WI    8    1914-1940    IN      16        

Kilbourn Hydro Plant

   Wisconsin Dells, WI    4    1926-1939    IN      8        
              

 

 

      

Total Hydro

                      24   
                   

 

 

 

Total generating capacity

                      1,975   
                   

 

 

 

 

(a) Base load units (BL) are designed for nearly continuous operation at or near full capacity to provide the system base load. Intermediate units (IN) follow system load changes with frequent starts and curtailments of output during low demand. Peaking units (PK) are generally low efficiency, quick response units run only when there is high demand.

 

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(b) Represents WPL’s 46.2% ownership interest in this 1,009 MW generating station, which is operated by WPL.
(c) Represents WPL’s 68.2% ownership interest in this 282 MW generating station, which is operated by WPL.
(d) Represents Units 2 and 3, which WPL owns. WPL also operates South Fond du Lac Combustion Turbines Units 1 and 4.
(e) Represents 9% of the capacity of this 68 MW wind project based upon the MISO resource adequacy process, which is determined separately for each wind site, during the planning period from June 2011 to May 2012.
(f) Represents 0% of the capacity of this 200 MW wind project based upon the MISO resource adequacy process, which is determined separately for each wind site, during the planning period from June 2011 to May 2012.

At Dec. 31, 2011, WPL owned approximately 16,472 miles of overhead electric distribution line and 4,855 miles of underground electric distribution cable, as well as 295 substation distribution transformers, substantially all of which are located in Wisconsin. In 2001, WPL’s electric transmission assets were transferred to ATC. WPL’s gas properties consist primarily of mains and services, meters, regulating and gate stations and other related distribution equipment. At Dec. 31, 2011, WPL’s gas distribution facilities included approximately 4,048 miles of gas mains located in Wisconsin. As of Dec. 31, 2011, WPL completed the installation of over 641,000 advanced metering infrastructure electric meters and gas modules in its service territory. WPL’s other property included in “Other plant in service” on its Consolidated Balance Sheets consists primarily of operating and storeroom facilities, vehicles, computer hardware and software, communication equipment and other miscellaneous tools and equipment. WPL’s properties are suitable for their intended use. Refer to Note 3(b) of the “Combined Notes to Consolidated Financial Statements” for information regarding WPL’s lease of the Sheboygan Falls Energy Facility from Resources’ Non-regulated Generation business. WPL continues to evaluate the potential retirement of other older, smaller and less-efficient electric generating units within its generation fleet.

Refer to “Strategic Overview - Generation Plans” in MDA for discussion of IPL’s and WPL’s generation plans.

Resources - Resources’ principal properties included in “Property, plant and equipment - Non-regulated and other” on Alliant Energy’s Consolidated Balance Sheet at Dec. 31, 2011 were as follows:

Non-regulated Generation - includes a 300 MW, simple-cycle, natural gas-fired facility near Sheboygan Falls, Wisconsin that is leased to WPL and the 100 MW Franklin County wind project in Franklin County, Iowa that is currently under construction. The Franklin County wind project is expected to be placed in service by the end of 2012.

Transportation - includes a short-line railway in Iowa with 114 railroad track miles, 13 active locomotives and 123 railcars; and a barge terminal on the Mississippi River.

Other non-regulated investments - includes two airplanes and real estate investments.

Corporate Services

Corporate Services’ property included in “Property, plant and equipment - Non-regulated and other” on Alliant Energy’s Consolidated Balance Sheet at Dec. 31, 2011 consisted primarily of computer software. Alliant Energy currently has a synthetic lease related to the financing of its corporate headquarters. Alliant Energy currently plans to exercise its option under the corporate headquarters lease and purchase the building at the expiration of the lease term in April 2012.

 

ITEM 3. LEGAL PROCEEDINGS

Alliant Energy - None.

IPL - None.

WPL -

Air Permitting Violation Claims - In September 2010, Sierra Club filed in the U.S. District Court for the Western District of Wisconsin a complaint against WPL, as owner and operator of the Nelson Dewey Generating Station (Nelson Dewey) and the Columbia Energy Center (Columbia), based on allegations that modifications were made at the facilities without complying with the Prevention of Significant Deterioration (PSD) program requirements, Title V Operating Permit requirements of the Clean Air Act (CAA) and state regulatory counterparts contained within the Wisconsin state implementation plan (SIP) designed to implement the CAA. In October 2010, WPL responded to these claims related to

 

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Nelson Dewey and Columbia by filing with the U.S. District Court an answer denying the Columbia allegations and a motion to dismiss the Nelson Dewey allegations based on statute of limitations arguments. In November 2010, WPL filed a motion to dismiss the Nelson Dewey and Columbia allegations based on lack of jurisdiction. Sierra Club has responded to the motions. WPL and Sierra Club are engaged in settlement negotiations. In January 2012, the Court reset the trial date to Dec. 10, 2012 and scheduled a status conference for Feb. 15, 2012 to receive an update on settlement progress. At the Feb. 15, 2012 status conference, the Court reaffirmed the Dec. 10, 2012 trial date, but set a pre-trial schedule that allows the parties to work toward settlement.

In September 2010, Sierra Club filed in the U.S. District Court for the Eastern District of Wisconsin a complaint against WPL, as owner and operator of the Edgewater Generating Station (Edgewater), which contained similar allegations regarding air permitting violations at Edgewater. In the Edgewater complaint, additional allegations were made regarding violations of emission limits for visible emissions. In February 2011, WPL responded to these claims related to Edgewater by filing with the U.S. District Court an answer denying the allegations and a motion to dismiss the allegations based on lack of jurisdiction. WPL and Sierra Club are engaged in settlement negotiations. In December 2011, the Court stayed all discovery and scheduling deadlines for 60 days (through Feb. 15, 2012) so that the Parties may continue settlement negotiations. In February 2012, the Court extended the stay through April 16, 2012.

In December 2009, the EPA sent a Notice of Violation (NOV) to WPL as an owner and the operator of Edgewater, Nelson Dewey and Columbia. The NOV alleges that the owners failed to comply with appropriate pre-construction review and permitting requirements and as a result violated the PSD program requirements, Title V Operating Permit requirements of the CAA and the Wisconsin SIP. WPL is engaged in settlement negotiations with the EPA in conjunction with the settlement negotiations with the Sierra Club discussed above.

In response to similar EPA CAA enforcement initiatives, certain utilities have elected to settle with the EPA, while others have elected to litigate. If the EPA and/or Sierra Club successfully prove their claims that projects completed in the past at Edgewater, Nelson Dewey and Columbia required either a state or federal CAA permit, WPL may, under the applicable statutes, be required to pay civil penalties in amounts of up to $37,500 per day for each violation and/or complete actions for injunctive relief. Payment of fines and/or injunctive relief could be included in a settlement outcome. Injunctive relief contained in settlements or court-ordered remedies for other utilities required the installation of emission control technology, changed operating conditions including use of alternative fuels other than coal, caps for emissions and limitations on generation including retirement of generating units, and other beneficial environmental projects. If similar remedies are required for final resolution of these matters at Edgewater, Nelson Dewey and Columbia, Alliant Energy and WPL would incur additional capital and operating expenditures. Alliant Energy and WPL are continuing to analyze the allegations and are unable to predict the impact of the allegations on their financial condition or results of operations, but believe that the outcome could be significant. WPL and the other owners of Edgewater and Columbia are exploring settlement options while simultaneously defending against these allegations. Alliant Energy and WPL believe the projects at Edgewater, Nelson Dewey and Columbia were routine or not projected to increase emissions and therefore did not violate the permitting requirements of the CAA.

Environmental Matters

Additional information required by Item 3 with regards to environmental matters is included in “C. Information Relating to Utility Operations - Electric Utility Operations” in Item 1 Business, “Environmental Matters” in MDA and Note 13(d) of the “Combined Notes to Consolidated Financial Statements,” which information is incorporated herein by reference.

Rate Matters

The information required by Item 3 with regards to rate matters is included in “B. Information Relating to Alliant Energy on a Consolidated Basis - Regulation” and “C. Information Relating to Utility Operations” in Item 1 Business, Notes 1(b), 1(h) and 2 of the “Combined Notes to Consolidated Financial Statements” and “Rate Matters” in MDA, which information is incorporated herein by reference.

 

ITEM 4. MINE SAFETY DISCLOSURES

None.

 

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EXECUTIVE OFFICERS OF THE REGISTRANTS

None of the executive officers for Alliant Energy, IPL or WPL listed below are related to any member of the Board of Directors or nominee for director or any other executive officer. All of the executive officers have no definite terms of office and serve at the pleasure of the Board of Directors. The executive officers of Alliant Energy, IPL and WPL as of the date of this filing are as follows (numbers following the names represent the officer’s age as of the date of this filing):

Executive Officers of Alliant Energy

William D. Harvey, 63, has served as Chairman of the Board since February 2006, Chief Executive Officer (CEO) since July 2005 and as a director since January 2005. He previously served as President from January 2004 to February 2011. Mr. Harvey announced his intent to retire effective March 31, 2012.

Patricia L. Kampling, 52, was elected to serve as a director effective Jan. 20, 2012 and to serve as Chairman of the Board, President and CEO effective April 1, 2012. She has served as President and Chief Operating Officer (COO) since February 2011. She previously served as Executive Vice President (EVP) and Chief Financial Officer (CFO) since September 2010, as EVP-CFO and Treasurer from January 2010 to September 2010, as Vice President (VP)-CFO and Treasurer from January 2009 to January 2010, and as VP and Treasurer from January 2007 to January 2009.

Thomas L. Aller, 62, was elected Senior VP-Energy Resource Development effective January 2009. He previously served as Senior VP-Energy Delivery since January 2004.

John O. Larsen, 48, was elected Senior VP-Generation effective January 2010. He previously served as VP-Generation since August 2008 and as VP-Technical and Integrated Services from January 2004 to August 2008.

James H. Gallegos, 51, was elected VP and General Counsel effective November 2010. He previously served as VP and Corporate General Counsel of BNSF Railway Company, a subsidiary of Burlington Northern and Santa Fe Corporation from April 2003 to April 2010.

Thomas L. Hanson, 58, was elected VP and CFO effective May 2011. He previously served as VP-CFO and Treasurer since February 2011, VP-Chief Accounting Officer (CAO) and Treasurer from September 2010 to February 2011, and as VP-Controller and CAO from January 2007 to September 2010.

Robert J. Durian, 41, was elected Controller and CAO effective February 2011. He previously served as Controller since September 2010, as Assistant Controller from March 2009 to September 2010 and as Director of Financial Reporting from February 2006 to March 2009.

Executive Officers of IPL

William D. Harvey, 63, was elected Chairman of the Board effective February 2006 and CEO effective July 2005 and has been a director since January 2005. Mr. Harvey announced his intent to retire effective March 31, 2012.

Patricia L. Kampling, 52, was elected to serve as a director effective Jan. 20, 2012 and to serve as Chairman of the Board and CEO effective April 1, 2012. She has served as COO since February 2011.

Thomas L. Aller, 62, was elected President effective January 2004.

John O. Larsen, 48, was elected Senior VP-Generation effective January 2010.

James H. Gallegos, 51, was elected VP and General Counsel effective November 2010.

Thomas L. Hanson, 58, was elected VP and CFO effective May 2011.

Robert J. Durian, 41, was elected Controller and CAO effective February 2011.

Executive Officers of WPL

William D. Harvey, 63, was elected Chairman of the Board effective February 2006 and CEO effective July 2005, and has been a director since January 2005. Mr. Harvey announced his intent to retire effective March 31, 2012.

Patricia L. Kampling, 52, was elected to serve as a director effective Jan. 20, 2012 and to serve as Chairman of the Board and CEO effective April 1, 2012. She has served as COO since February 2011.

John O. Larsen, 48, was elected President effective December 2010. He previously served as Senior VP-Generation since January 2010.

Thomas L. Aller, 62, was elected Senior VP-Energy Resource Development effective January 2009.

James H. Gallegos, 51, was elected VP and General Counsel effective November 2010.

Thomas L. Hanson, 58, was elected VP and CFO effective May 2011.

Robert J. Durian, 41, was elected Controller and CAO effective February 2011.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANTS’ COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Price - Alliant Energy’s common stock trades on the New York Stock Exchange under the symbol “LNT.” Quarterly sales price ranges and dividends with respect to Alliant Energy’s common stock were as follows:

 

     2011      2010  

Quarter

   High      Low      Dividend      High      Low      Dividend  

First

   $ 40.68       $ 36.78       $ 0.425       $ 33.87       $ 30.12       $ 0.395   

Second

     42.14         37.84         0.425         35.77         29.20         0.395   

Third

     42.09         33.91         0.425         36.74         31.12         0.395   

Fourth

     44.49         36.82         0.425         37.65         35.66         0.395   

Year

     44.49         33.91         1.70         37.65         29.20         1.58   

Stock closing price at Dec. 31, 2011: $44.11

Shareowners - At Dec. 31, 2011, there were 33,957 holders of record of Alliant Energy’s common stock, including holders through Alliant Energy’s Shareowner Direct Plan. Alliant Energy is the sole common shareowner of all 13,370,788 and 13,236,601 shares of IPL and WPL common stock, respectively, currently outstanding.

Dividends - Alliant Energy does not have any significant common stock dividend restrictions. Although Alliant Energy’s practice has been to pay cash dividends on its common stock quarterly, the timing of payment and amount of future dividends are necessarily dependent upon future earnings, capital requirements, general financial conditions, general business conditions, the ability of Alliant Energy’s subsidiaries to pay dividends, approval from its Board of Directors and other factors. In December 2011, Alliant Energy announced an increase in its targeted 2012 annual common stock dividend to $1.80 per share, which is equivalent to a quarterly rate of $0.45 per share, beginning with the Feb. 15, 2012 dividend payment. Payment of future 2012 quarterly dividends is subject to the actual dividend declaration by Alliant Energy’s Board of Directors.

Refer to Note 7 of the “Combined Notes to Consolidated Financial Statements” for information about IPL’s and WPL’s dividend restrictions and limitations on distributions to their parent company.

Common Stock Repurchases - A summary of Alliant Energy common stock repurchases for the quarter ended Dec. 31, 2011 was as follows:

 

Period

   Total Number
of Shares
Purchased (a)
     Average Price
Paid Per Share
     Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
     Maximum Number (or
Approximate Dollar
Value) of Shares That
May Yet Be Purchased
Under the Plan (a)

Oct. 1 to Oct. 31

     3,623       $ 39.92         —         N/A

Nov. 1 to Nov. 30

     2,725         42.11         —         N/A

Dec. 1 to Dec. 31

     73         42.48         —         N/A
  

 

 

       

 

 

    

Total

     6,421         40.88         —        
  

 

 

       

 

 

    

 

(a) All shares were purchased on the open market and held in a rabbi trust under the Alliant Energy Deferred Compensation Plan (DCP). There is no limit on the number of shares of Alliant Energy common stock that may be held under the DCP, which currently does not have an expiration date.

 

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ITEM 6. SELECTED FINANCIAL DATA

Alliant Energy

 

Financial Information

   2011 (a)     2010 (a)     2009 (a)     2008     2007  
     (dollars in millions, except per share data)  

Income Statement Data:

          

Operating revenues

   $ 3,665.3      $ 3,416.1      $ 3,427.3      $ 3,669.1      $ 3,430.6   

Income from continuing operations, net of tax

     320.6        308.0        128.8        298.1        443.8   

Income (loss) from discontinued operations, net of tax

     1.3        (1.7     0.9        8.6        0.2   

Net income

     321.9        306.3        129.7        306.7        444.0   

Amounts attributable to Alliant Energy common shareowners:

          

Income from continuing operations, net of tax

     302.3        289.3        110.1        279.4        425.1   

Income (loss) from discontinued operations, net of tax

     1.3        (1.7     0.9        8.6        0.2   

Net income

     303.6        287.6        111.0        288.0        425.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common Stock Data:

          

Earnings per weighted average common share attributable to Alliant Energy common shareowners (basic):

          

Income from continuing operations, net of tax

   $ 2.73      $ 2.62      $ 1.00      $ 2.53      $ 3.79   

Income (loss) from discontinued operations, net of tax

   $ 0.01        ($0.02   $ 0.01      $ 0.08      $ —     

Net income

   $ 2.74      $ 2.60      $ 1.01      $ 2.61      $ 3.79   

Earnings per weighted average common share attributable to Alliant Energy common shareowners (diluted):

          

Income from continuing operations, net of tax

   $ 2.73      $ 2.62      $ 1.00      $ 2.53      $ 3.78   

Income (loss) from discontinued operations, net of tax

   $ 0.01        ($0.02   $ 0.01      $ 0.08      $ —     

Net income

   $ 2.74      $ 2.60      $ 1.01      $ 2.61      $ 3.78   

Common shares outstanding at year-end (000s)

     111,019        110,894        110,656        110,449        110,359   

Dividends declared per common share

   $ 1.70      $ 1.58      $ 1.50      $ 1.40      $ 1.27   

Market value per share at year-end

   $ 44.11      $ 36.77      $ 30.26      $ 29.18      $ 40.69   

Book value per share at year-end

   $ 27.14      $ 26.09      $ 25.06      $ 25.56      $ 24.30   

Market capitalization at year-end

   $ 4,897.0      $ 4,077.6      $ 3,348.5      $ 3,222.9      $ 4,490.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other Selected Financial Data:

          

Cash flows from operating activities

   $ 702.7      $ 984.9      $ 657.1      $ 338.2      $ 607.5   

Construction and acquisition expenditures

   $ 673.4      $ 866.9      $ 1,202.6      $ 879.0      $ 542.0   

Total assets at year-end

   $ 9,687.9      $ 9,282.9      $ 9,036.0      $ 8,201.5      $ 7,189.7   

Long-term obligations, net

   $ 2,708.0      $ 2,710.3      $ 2,512.2      $ 1,887.1      $ 1,547.1   

Times interest earned before income taxes (b)

     3.37X        3.78X        1.77X        4.48X        7.00X   

Capitalization ratios:

          

Common equity

     50     49     49     56     59

Preferred stock

     3     4     4     5     5

Long- and short-term debt

     47     47     47     39     36
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Refer to “Alliant Energy’s Results of Operations” in MDA for discussion of the 2011, 2010 and 2009 results of operations.
(b) Represents the sum of income from continuing operations before income taxes plus interest expense, divided by interest expense. The calculation does not consider the “Loss on early extinguishment of debt” that Alliant Energy has incurred as part of interest expense.

 

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IPL

 

     2011 (a)      2010 (a)      2009 (a)      2008      2007  
     (in millions)  

Operating revenues

   $ 1,740.1       $ 1,795.8       $ 1,708.0       $ 1,758.0       $ 1,695.9   

Net income

     139.3         143.4         153.0         141.6         290.3   

Earnings available for common stock

     124.3         128.0         137.6         126.2         274.9   

Cash dividends declared on common stock

     73.4         —           —           29.1         609.9   

Cash flows from operating activities

     366.9         549.6         373.2         113.7         257.4   

Total assets

     5,093.5         4,937.6         4,892.2         4,210.9         3,362.0   

Long-term obligations, net

     1,311.0         1,310.6         1,160.9         996.8         765.4   

 

(a) Refer to “IPL’s Results of Operations” in MDA for a discussion of the 2011, 2010 and 2009 results of operations.

Alliant Energy is the sole common shareowner of all 13,370,788 shares of IPL’s common stock outstanding. As such, earnings per share data is not disclosed herein.

WPL

 

     2011 (a)      2010 (a)      2009 (a)      2008      2007  
     (in millions)  

Operating revenues

   $ 1,434.4       $ 1,423.6       $ 1,386.1       $ 1,465.8       $ 1,416.8   

Net income

     163.5         152.3         89.5         118.4         113.5   

Earnings available for common stock

     160.2         149.0         86.2         115.1         110.2   

Cash dividends declared on common stock

     112.1         109.5         91.0         91.3         191.1   

Cash flows from operating activities

     428.8         372.4         305.8         239.7         258.0   

Total assets

     4,044.0         3,889.6         3,681.4         3,265.5         2,788.6   

Long-term obligations, net

     1,190.7         1,193.7         1,146.3