UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION

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WISCONSIN POWER & LIGHT COMPANY
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(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
(S) 240.14a-11(c) or (S) 240.14a-12
Wisconsin Power and Light Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Your Vote is Important

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Reg. (S) 240.14a-101.
SEC 1913 (3-99)
Y O U R V O T E I S I M P O R T A N T
Wisconsin
Power and Light
Company
NOTICEOF 2004 ANNUAL MEETING
PROXY STATEMENTAND
2003 ANNUAL REPORT
WISCONSIN POWER AND LIGHT COMPANY

Proxy Statement
Notice of 2001 Annual Meeting
and
2000 Annual Report

WISCONSIN POWER AND LIGHT COMPANY

ANNUAL MEETING OF SHAREOWNERS
DATE: MAY 30, 2001

Wednesday, June 2, 2004
TIME: 1: 3:00 PM, CENTRAL DAYLIGHT SAVINGS TIME

p.m., Central Daylight Time
LOCATION: WISCONSIN POWER AND LIGHT COMPANY
ROOM 1A
222 WEST WASHINGTON AVENUE
MADISON, WISCONSIN
Wisconsin Power and Light Company
Nile Conference Room
4902 North Biltmore Lane
Madison, Wis.
SHAREOWNER INFORMATION NUMBERS

LOCAL CALLS (MADISON, WI AREA) ............ 608-252-3110

TOLL FREE NUMBER .......................... 800-356-5343

Wisconsin Power and Light Company
222 West Washington Avenue
P. O. Box 2568
Madison, WI 53701-2568
Phone: 608-252-3110

LOCAL CALLS (Madison, Wis. Area)
608-458-3110
TOLL FREE NUMBER 800-356-5343
Wisconsin Power and Light Company
4902 North Biltmore Lane
P. O. Box 2568
Madison, WI 53701-2568
Phone: 608.458.3110
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
Dear Wisconsin Power and Light Company Shareowner:
On Wednesday, May 30, 2001,June 2, 2004, Wisconsin Power and Light Company (the "Company"“Company”) will hold its 20012004 Annual Meeting of Shareowners at the officeoffices of the Company,
222 West Washington Avenue,Alliant Energy Corporation, 4902 North Biltmore Lane, Nile Meeting Room, 1A, Madison, Wisconsin.Wis. The meeting will begin at 1:3:00 p.m. Central Daylight Savings Time.
Only the sole common stock shareowner, Alliant Energy Corporation, and preferred shareowners who owned stock at the close of business on April 3, 200113, 2004, may vote at this meeting. All shareowners are requested to be present at the meeting in person or by proxy so that a quorum may be assured.ensured. At the meeting, the Company'sCompany’s shareowners will:

1. Elect four directors for terms expiring at the 2004 Annual Meeting of
Shareowners; and

2. Attend to any other business properly presented at the meeting.

1. Elect one director for a term expiring at the 2006 Annual Meeting of Shareowners and four directors for terms expiring at the 2007 Annual Meeting of Shareowners; and
2. Attend to any other business properly presented at the meeting.
The Board of Directors of the Company presently knows of no other business to come before the meeting.
Please sign and return the enclosed proxy card as soon as possible.
The 2000Company’s 2003 Annual Report of the Company appears as Appendix AB to this Proxy
Statement.proxy statement. The Proxy Statementproxy statement and Annual Report have been combined into a single document to improve the effectiveness of our financial communication and to reduce costs, although the Annual Report does not constitute a part of the Proxy Statement.

proxy statement.
Any Wisconsin Power and Light Company preferred shareowner who desires to receive a copy of the Alliant Energy Corporation 20002003 Annual Report to Shareowners may do so by calling the Shareowner Services Department at the Shareowner Information NumberNumbers shown at the front of this proxy statement or writing to the Company at the address shown above.

By Order of the Board of Directors

/s/ Edward M. Gleason

EDWARD M. GLEASON
Vice President--Treasurer and
Corporate Secretary

By Order of the Board of Directors,
F. J. Buri
Corporate Secretary
Dated and mailed on or about April 10, 2001
16, 2004
TABLE OF CONTENTS
Questions and Answers....................................... 3

Answers 1
Election of Directors....................................... 5

Nominees............................................. 5

Continuing Directors................................. 6

Directors 4
Meetings and Committees of the Board........................ 8

Board 7
Corporate Governance 9
Compensation of Directors................................... Directors 10
Ownership of Voting Securities.............................. 12

Securities 11
Compensation of Executive Officers.......................... 14

Summary Compensation Table........................... 14

Officers 13
Stock Options............................................... 16

Stock Option Grants in 2000.......................... 16

Option Values at December 31, 2000................... 17

Long-Term Incentive Awards.................................. 18

Options 15
Long-Term Incentive Awards in 2000................... 18

17
Certain Agreements and Transactions......................... 19

18
Retirement and Employee Benefit Plans....................... 21

Plans 20
Report of the Compensation and Personnel Committee on Executive Compensation...................................... 25

Compensation 23
Report of the Audit Committee............................... 28

Committee 26
Section 16(a) Beneficial Ownership Reporting Compliance..... 29

Exhibit I --Compliance 27
Appendix A – Audit Committee Charter........................ 30

Charter A-1
Appendix A --B – Wisconsin Power and Light Company Annual Report A-1
B-1

2
QUESTIONS AND ANSWERS
1. Q: WHY AM Why am I RECEIVING THESE MATERIALS?
A receiving these materials?
A: The Board of Directors of Wisconsin Power and Light Company (the "Company"“Company”) is providing these proxy materials to you in connection with the Company'sCompany’s Annual Meeting of Shareowners (the "Annual Meeting"“Annual Meeting”), which will take place on Wednesday, May 30, 2001.June 2, 2004. As a shareowner, you are invited to attend the Annual Meeting and are entitled to and requested to vote on the proposalproposals described in this proxy statement.
2. Q: WHAT IS WISCONSIN POWER AND LIGHT COMPANY AND HOW DOES IT
RELATE TO ALLIANT ENERGY CORPORATION?
What is Wisconsin Power and Light Company and how does it relate to Alliant Energy Corporation?
A: The Company is a subsidiary of Alliant Energy Corporation ("AEC"(“AEC”), a public utility holding company whose other primary first tier subsidiaries include IES Utilities Inc. ("IES"),
Interstate Power and Light Company ("IPC"(“IP&L”), Alliant Energy Resources, Inc. ("AER"(“AER”) and Alliant Energy Corporate Services, Inc. ("(“Alliant Energy Corporate Services"Services”).
3. Q: WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Who is entitled to vote at the Annual Meeting?
A: Only shareowners of record at the close of business on April 3, 200113, 2004, are entitled to vote at the Annual Meeting. As of the record date, 13,236,601 shares of common stock (owned solely by AEC) and 1,049,225 shares of preferred stock, in seven series (representing 599,630 votes), were issued and outstanding. Each share of Company common stock is entitled
to one vote per share. Each share ofand Company preferred stock, with the exception of the 6.50% Series, is entitled to one vote per share. The 6.50% Seriesseries of Company preferred stock is entitled to 1/4¼ vote per share.
4. Q: WHAT MAY What may I VOTE ON AT THE ANNUAL MEETING?
vote on at the Annual Meeting?
A: You may vote on the election of fourfive nominees to serve on the Company'sCompany’s Board of Directors, one nominee for a term expiring at the 2006 Annual Meeting of Shareowners and four nominees for terms expiring at the 2007 Annual Meeting of Shareowners inShareowners.
5. Q: How does the year 2004.

5. Q: HOW DOES THE BOARD OF DIRECTORS RECOMMENDBoard of Directors recommend I VOTE?
vote?
A: The Board of Directors recommends that you vote your shares FOR each of the listed director nominees.
6. Q: HOW CAN How can I VOTE MY SHARES?
vote my shares?
A: You may vote either in person at the Annual Meeting or by appointing a proxy. If you desire to appoint a proxy, then sign and date each proxy card you receive and return it in the envelope provided. Appointing a proxy will not affect your right to vote your shares if you attend the Annual Meeting and desire to vote in person.
7. Q: HOW ARE VOTES COUNTED?
How are votes counted?
A: In the election of directors, you may vote FOR all of the director nominees or your vote may be WITHHELD with respect to one or more nominees. If you return your signed proxy card but do not mark the boxes showing how you wish to vote, your shares will be voted FOR all listed director nominees.
8. Q: CAN Can I CHANGE MY VOTE?
change my vote?
A: You have the right to revoke your proxy at any time before the Annual Meeting by:

- poviding written notice to the Corporate Secretary of
the Company and voting in person at the Annual Meeting;
or
- appointing
Providing written notice to the Corporate Secretary of the Company and voting in person at the Annual Meeting; or
Appointing a new proxy prior to the start of the Annual Meeting.
Attendance at the Annual Meeting will not cause your previously appointed proxy to be revoked unless you specifically so request in writing.
9. Q: What does it mean if I get more than one proxy prior to the start of the
Annual Meeting.

Attendance at the Annual Meeting will not cause your
previously appointed proxy to be revoked unless you
specifically so request in writing.
card?

9. Q: WHAT SHARES ARE INCLUDED ON THE PROXY CARD(S)?
A: Your proxy card(s) covers all of your shares of the
Company's preferred stock.

10. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: If your shares are registered differently and are in more than one account, then you will receive more than one proxy card. Be sure to vote all of your accounts to ensure that all of your shares are voted. The Company encourages you to have all accounts registered in the same name and address (whenever possible). You can accomplish this by contacting the Company'sCompany’s Shareowner Services Department at the Shareowner Information Numbers shown at the front of this proxy statement.

11.
10. Q: WHO MAY ATTEND THE ANNUAL MEETING?
Who may attend the Annual Meeting?
A: All shareowners who owned shares of the Company'sCompany’s common and preferred stock on April 3, 200113, 2004, may attend the Annual Meeting. You may indicate
11. Q: How will voting on the reservation portion of the
enclosed proxy card your intention to attend the Annual
Meeting and return it with your signed proxy.

12. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
any other business be conducted?
A: The Board of Directors of the Company does not know of any business to be considered at the 2001 Annual Meeting other than the election of four directors. If any other business is properly presented at the Annual Meeting, your signed
proxy card gives authority to William D. Harvey,Barbara J. Swan, the Company'sCompany’s President, and Edward M. Gleason,F. J. Buri, the Company's
Vice President-Treasurer andCompany’s Corporate Secretary, authority to vote on such matters inat their discretion.

13.
12. Q: WHERE AND WHEN WILL Where and when will I BE ABLE TO FIND THE RESULTS OF THE
VOTING?
be able to find the results of the voting?
A: The results of the voting will be announced at the Annual Meeting. You may also call ourthe Company’s Shareowner Services Department at the Shareowner Information Numbers shown at the front of this proxy statement for the results. The Company will also publish the final results in its Quar-
terlyQuarterly Report on Form 10-Q for the second quarter of 20012004 to be filed with the Securities and Exchange Commission.

14. Commission (“SEC”).
13. Q: WHEN ARE SHAREOWNER PROPOSALS FOR THE 2002 ANNUAL MEETING
DUE?
When are shareowner proposals for the 2005 Annual Meeting due?
A: All shareowner proposals to be considered for inclusion in the Company'sCompany’s proxy statement for the 20022005 Annual Meeting must be received at the principal office of the Company by December 11, 2001.Dec. 18, 2004. In addition, any shareowner who intends to present a proposal from the floor at the 20022005 Annual Meeting must submit the proposal in writing to the Corporate Secretary of the Company no later than February 24, 2002.

15. March 2, 2005.
14. Q: WHO ARE THE INDEPENDENT AUDITORS OF THE COMPANY AND HOW ARE
THEY APPOINTED?
A: The Board of Directors has appointed Arthur Andersen LLP as Who are the Company's independent auditors for 2001. Arthur Andersenof the Company and how are they appointed?
A: Deloitte & Touche LLP acted as independent auditorsaudited the financial statements of the Company for the Company in 2000.year ended Dec. 31, 2003. Representatives of Arthur AndersenDeloitte & Touche LLP are not expected to be present at the meeting. 16. The Audit Committee of the Board of Directors expects to appoint the Company’s independent auditors for 2004 later in the year.
On June 12, 2002, the Board of Directors of the Company, upon the recommendation of the Audit Committee, dismissed Arthur Andersen LLP as the Company’s independent auditors and contracted with Deloitte & Touche LLP to serve as its independent auditors for 2002. Arthur Andersen’s reports on the Company’s consolidated financial statements for the year ended Dec. 31, 2001 did not contain an adverse opinion, disclaimer of opinion or qualification or modification as to uncertainty, audit scope or accounting principles. During the year ended Dec. 31, 2001 and the subsequent interim period, there were no disagreements between the Company and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of the accounting firm, would have caused it to make a reference to the subject matter of such disagreements in connection with its reports.
15. Q: WHO WILL BEAR THE COST OF SOLICITING PROXIES FOR THE ANNUAL
MEETING?
A. Who will bear the cost of soliciting proxies for the Annual Meeting and how will these proxies be solicited?
A: The Company will pay the cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by the Company'sCompany’s officers and employees who will not receive any additional compensation for these solicitation activities. The Company will pay to banks, brokers, nominees and other fiduciaries
their reasonable charges and expenses incurred in forwarding the proxy materials to their principals.

17. Q: HOW CAN
16. Q. How can I OBTAIN A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORMobtain a copy of the Company’s Annual Report on Form 10-K?
A: The Company will furnish without charge, to each shareowner who is entitled to vote at the Annual Meeting and who makes a written request, a copy of the Company'sCompany’s Annual Report on Form 10-K (without exhibits) as filed with the Securities
and Exchange Commission.SEC. Written requests for the Form 10-K should be mailed to the Corporate Secretary of the Company at the address on the first page of this proxy statement.

4
17. Q: If more than one shareowner lives in my household, how can I obtain an extra copy of the Company’s 2003 Annual Report and this proxy statement?
A: Pursuant to the rules of the SEC, services that deliver the Company’s communications to shareowners that hold their stock through a bank, broker or other holder of record may deliver to multiple shareowners sharing the same address a single copy of the Company’s 2003 Annual Report and proxy statement. Upon written or oral request, the Company will mail a separate copy of the 2003 Annual Report and/or proxy statement to any shareowner at a shared address to which a single copy of each document was delivered. You may notify the Company of your request by calling or writing the Company’s Shareowner Services Department at the Shareowner Information Numbers shown at the front of this proxy statement or at the address of the Company shown on the first page of this proxy statement.
ELECTION OF DIRECTORS

Four
At the Annual Meeting, one director will be elected for a term expiring in 2006 and four directors will be elected this year for terms expiring in 2004.2007. The nominees for election as selectedrecommended by the Nominating and Governance Committee ofand selected by the Company's Board of Directors are: Ann K. Newhall, for a term expiring in 2006; and Michael L. Bennett, Jack B. Evans, Joyce L. Hanes, David A. Perdue and Judith D. Pyle.Pyle for terms expiring in 2007. Each of the nominees is currently serving as a director of the Company. Each person elected as a director will serve until the Annual Meeting of Shareowners of the Company in 20042006 or 2007, as the case may be, or until his or her successor has been duly elected and qualified.
Directors will be elected by a plurality of the votes cast at the meeting (assuming a quorum is present). Consequently,any shares not voted at the meeting whether by abstention or otherwise, will have no effect on the election of directors. The proxies solicited may be voted for a substitute nominee or nominees if any of the nominees are unable to serve, or for good reason will not serve, a contingency not now anticipated.
Brief biographies of the director nominees and continuing directors follow. These biographies include their age (as of DecemberDec. 31, 2000)2003), an account of their business experience and the names of publicly-heldpublicly held and certain other corporations of which they are also directors. Except as otherwise indicated, each nominee and continuing director has been engaged in his or her present occupation for at least the past five years.
NOMINEES

JACK B. EVANS
ANN K. NEWHALL Director Since [PHOTO] 2000
2003
Age 52 Nominated Term Expires in 2004
2006
Ms. Newhall is Executive Vice President, Chief Operating Officer, Secretary and a Director of Rural Cellular Corporation, a cellular communications corporation, located in Alexandria, Minn. She has served as Executive Vice President and Chief Operating Officer since August 2000, as Secretary since February 2000 and as a Director since August 1999. Prior to assuming her current positions, she served as Senior Vice President and General Counsel from 1999 to 2000. She was previously a shareholder and President of the Moss & Barnett law firm in Minneapolis, Minn. Ms. Newhall has served as a Director of AEC, IP&L and AER since August 2003. She was originally recommended as a nominee in 2003 by a third-party search firm acting on behalf of the Nominating and Governance Committee.
MICHAEL L. BENNETT Director Since 2003
Age 50 Nominated Term Expires in 2007
Mr. Bennett has served as President and Chief Executive Officer of Terra Industries Inc., an international producer of nitrogen products and methanol ingredients headquartered in Sioux City, Iowa, since April 2001. From 1997 to 2001, he was Executive Vice President and Chief Operating Officer of Terra Industries Inc. He also serves as Chairman of the Board for Terra Nitrogen Corp., a subsidiary of Terra Industries Inc. Mr. Bennett has served as a Director of AEC, IP&L and AER since August 2003. He was originally recommended as a nominee in 2003 by a third-party search firm acting on behalf of the Nominating and Governance Committee.
JACK B. EVANS Director Since 2000
Age 55 Nominated Term Expires in 2007
Mr. Evans is a directorDirector and since 1996 has served as President of The Hall-Perrine Foundation, a private philanthropic corporation in Cedar Rapids, Iowa. Previously, Mr. Evans was President and Chief Operating Officer of SCI Financial Group, Inc., a regional financial services firm. Mr. Evans is a directorDirector of Gazette Communications, the
Federal Reserve Bank of Chicago and Nuveen Institutional Advisory Corp., and Vice Chairman and a directorDirector of United Fire and Casualty Company. Mr. Evans has served as a directorDirector of AEC, IES, IPCIP&L (or predecessor companies) and AER since 2000. Mr. Evans is Chairperson of the Audit Committee.

JOYCE L. HANES
DAVID A. PERDUE Director Since [PHOTO] 1998
2001
Age 68 54 Nominated Term Expires in 2004
Ms. Hanes has been a director of Midwest Wholesale, Inc., a
products wholesaler in Mason City, Iowa, since 1970 and2007
Mr. Perdue is Chairman of the Board since December 1997, having
previouslyand Chief Executive Officer of Dollar General Corporation, a retail sales organization headquartered in Goodlettsville, Tenn. He was elected Chief Executive Officer and a Director in April 2003 and elected Chairman of the Board in June 2003. From July 2002 to March 2003, he was Chairman and Chief Executive Officer of Pillowtex Corporation, a textile manufacturing company located in Kannapolis, N.C. From 1998 to 2002, he was employed by Reebok International Limited, where he served as ChairmanPresident of the Reebok Brand from 19862000 to 1988. She is a
director of Iowa Student Loan Liquidity Corp. Ms. Hanes2002. Mr. Perdue has served as a director of IPC since 1982 andDirector of AEC, IESIP&L (or predecessor companies) and AER since 1998.

DAVID A. PERDUE 2001.
JUDITH D. PYLE Director Since [PHOTO] 2001
1994
Age 51 60 Nominated Term Expires in 2004
Mr. Perdue2007
Ms. Pyle is President of the Reebok brand for Reebok
International Limited,Judith Dion Pyle and Associates, a designer, distributor and marketer
of footwear, apparel and sports equipment,financial services company located in Canton, Massachusetts.Middleton, Wis. Prior to joining Reebokassuming her current position in 1998,
Mr. Perdue was Senior Vice President of Operations at
Haggar, Inc. He was appointed to serve2003, she served as a director of the
Company, AEC, IES, IPC and AER as of February 15, 2001.

JUDITH D. PYLE Director Since
[PHOTO] 1994
Age 57 Nominated Term
Expires in 2004
Ms. Pyle is Vice Chair of The Pyle Group, a financial services company located in Madison, Wisconsin. Prior to
assuming her current position, Ms. PyleWis. She previously served as Vice Chairman and Senior Vice President of Corporate Marketing of Rayovac Corporation, (aa battery and lighting products manufacturer),manufacturer located in Madison, Wisconsin.Wis. In addition, Ms. Pyle is Vice Chairman of Georgette Klinger, Inc., and a directorDirector of Uniek, Inc. Ms. Pyle has served as a directorDirector of AEC and AER since 1992 and of IES and IPCIP&L (or predecessor companies) since 1998. Ms. Pyle is
the Chairperson of the Compensation and Personnel Committee.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
The Board of Directors unanimously recommends a vote FOR ALL NOMINEES FOR
ELECTION AS DIRECTORS.

all nominees for election as directors.
CONTINUING DIRECTORS

ALAN B. ARENDS Director Since
[PHOTO] 1998
Age 67 Term Expires in
2002
Mr. Arends is Chairman of the Board of Directors of Alliance
Benefit Group Financial Services Corp., Albert Lea,
Minnesota, an employee benefits company that he founded in
1983. He has served as a director of IPC since 1993 and of
AEC, IES and AER since 1998.

ERROLL B. DAVIS, JR. Director Since [PHOTO] 1984
Age 56 59 Term Expires in 2003
Mr. Davis has been President of AEC since January 1990 and
was elected President and Chief Executive Officer of AEC in
July 1990. He was elected Chairman of the Board of AEC in
April 2000. 2006
Mr. Davis joined the Company in August 1978 and was electedserved as President of the Company in July 1987.from 1987 until 1998. He was elected President and Chief Executive Officer of the Company in August 1988. Mr. Davis has served as Chairman of the Board of the Company and AEC since 2000 and as Chief Executive Officer of AEC since 1990. He also served as President of AEC from 1990 through 2003. He has also served as Chief Executive Officer of AER IES and IPCIP&L (or predecessor companies) since 1998. He is a member of the Boards of Directors of BP Amoco p.l.c.,; PPG Industries, Inc.,; Electric Power Research InstituteInstitute; and the Edison Electric Institute. Mr. Davis has served as a directorDirector of AEC since 1982, of AER since 1988 and of IES and
IPC since 1998.

LEE LIU Director Since
[PHOTO] 1998
Age 67 Term Expires in
2003
Mr. Liu served as Chairman of the Board of the Company and
AEC from April 1998 until April 2000 in accordance with the
terms of his employment agreement. He was Chairman of the
Board and Chief Executive Officer of IES Industries Inc. (a
predecessor to AEC) and Chairman of the Board and Chief
Executive Officer of IES prior to 1998. Mr. Liu held a
number of professional, management and executive positions
after joining Iowa Electric Light and Power Company (later
known as IES) in 1957. He is a director of Principal
Financial Group and Eastman Chemical Company. Mr. Liu has
served as a director of IESIP&L (or predecessor companies) since 1981 and of AEC, IPC and AER since 1998.

6
KATHARINE C. LYALL Director Since [PHOTO] 1986
Age 59 62 Term Expires in 2002
2005
Ms. Lyall is President of the University of Wisconsin System in Madison, Wisconsin.Wis. In addition to her administrative position, she is a professor of economics at the University.University of Wisconsin-Madison. Ms. Lyall has announced that she will retire as President of the University of Wisconsin System no later than Aug. 31, 2004. She serves on the Boards of Directors of the Kemper National
Insurance Companies, M&I Corporation and the Carnegie Foundation for the Advancement of Teaching. Ms. Lyall has served as a directorDirector of AEC and AER since 1994 and of IES
and IPCIP&L (or predecessor companies) since 1998.

ROBERT W. SCHLUTZ
SINGLETON B. McALLISTER Director Since 1998
[PHOTO] 2001
Age 64 51 Term Expires in 2003
2005
Ms. McAllister has been a partner in the public law and policy strategies group of the Washington, D.C. law firm office of Sonnenschein, Nath & Rosenthal, LLP, since 2003. She previously was a partner at Patton Boggs LLP, a Washington, D.C. law firm, from 2001 to 2003. From 1996 until 2001, Ms. McAllister was General Counsel for the United States Agency for International Development. She was also a partner at Reed, Smith, Shaw and McClay where she specialized in government relations and corporate law. Ms. McAllister has served as a Director of AEC, IP&L (or predecessor companies) and AER since 2001.
ROBERT W. SCHLUTZ Director Since 1998
Age 67 Term Expires in 2006
Mr. Schlutz is President of Schlutz Enterprises, a diversified farming and retailing business in Columbus Junction, Iowa. Mr. Schlutz has served as a directorDirector of IESIP&L (or predecessor companies) since 1989 and of AEC IPC and AER since 1998. Mr. Schlutz is the Chairperson of the Environmental, Nuclear, Health and Safety Committee.

WAYNE H. STOPPELMOOR
ANTHONY R. WEILER Director Since 1998
[PHOTO]
Age 66 67 Term Expires in 2003
Mr. Stoppelmoor served as Vice Chairman of the Board of the
Company and AEC from April 1998 until April 2000 in
accordance with the terms of his consulting agreement. Prior
to 1998, he was Chairman, President and Chief Executive
Officer of IPC. He retired as President of IPC in 1996 and
as Chief Executive Officer in 1997. Mr. Stoppelmoor has
served as a director of IPC since 1986 and of AEC, IES and
AER since 1998.

ANTHONY R. WEILER Director Since 1998
[PHOTO] Age 64 Term Expires in
2002
2005
Mr. Weiler is Chairman and President of A. R. Weiler Co. LLC, a consultantconsulting firm for several home furnishings organizations. Prior to assuming his current position
Mr. Weiler had beenHe was previously a Senior Vice President for Heilig-
Meyersof Heilig-Meyers Company, a national furniture retailer headquartered in Richmond, Virginia. Mr. WeilerVa. He is a directorDirector of the Retail Home Furnishings Foundation. Mr. Weiler has served as a directorDirector of IESIP&L (or predecessor companies) since 1979 and of AEC IPC and AER since 1998. Mr. Weiler is the
Chairperson of the Nominating and Governance Committee.

RETIRING DIRECTORS

Rockne G. Flowers will turn 70 years of age on April 6, 2001. Milton E. Neshek
turned 70 years of age on October 26, 2000. Pursuant to the mandatory retirement
provisions in the Company's Bylaws, Mr. Flowers and Mr. Neshek will retire as
directors on the date of the Annual Meeting.

In addition, Arnold M. Nemirow has indicated his intent, as a result of his
other time commitments, to resign as a director effective as of the Annual
Meeting.

The Company expresses its most sincere thanks and appreciation to
Messrs. Flowers, Neshek and Nemirow for their many years of service to the
Company and for their valued advice and guidance.

7
MEETINGS AND COMMITTEES OF THE BOARD
The full Board of Directors of the Company considers all major decisions of the
Company. However, the Board has established standing Audit; Compensation and Personnel; Environmental, Nuclear, Health and Safety; Nominating and Governance; and Capital Approval Committees. The Board of Directors has adopted formal written charters for each of the Audit, Compensation and Personnel, and Nominating and Governance Committees, so that certain important matters can be
addressed in more depth than may be possible in a full Board meeting.which are available on the Company’s website atwww.alliantenergy.com/investors under the “Corporate Governance” caption. The following is a description of each of these committees:

AUDIT COMMITTEE

Audit Committee
The Audit Committee held twoseven joint (the Company, AEC, IP&L and AER) meetings in 2000.2003. The Committee currently consists of J. B. Evans (Chair), A. B. Arends, K. C. Lyall, J.M. L. Bennett, S. B. McAllister and D. PyleA. Perdue. Each of the members of the Committee is independent as defined by the New York Stock Exchange (“NYSE”) listing standards and M. E. Neshek.SEC rules. The Board of Directors has determined that Mr. Evans and two additional Audit Committee members qualify as “audit committee financial experts” as defined by SEC rules. The Audit Committee recommends tois responsible for assisting Board oversight of: (1) the Boardintegrity of the Company’s financial statements; (2) the Company’s compliance with legal and regulatory requirements; (3) the independent auditors’ qualifications and independence; and (4) the performance of the Company’s internal audit function and independent auditors. The Audit Committee is also directly responsible for the appointment, of independent
auditors; reviews the reportsretention, termination, compensation and commentsoversight of the Company’s independent auditors; reviews
the activitiesauditors.
Compensation and reports of the Company's internal audit staff; and, in
response to the reports and comments of both the independent auditors and
internal auditors, recommends to the Board any action which thePersonnel Committee
considers appropriate.

COMPENSATION AND PERSONNEL COMMITTEE

The Compensation and Personnel Committee held three joint meetings in 2000.2003. The Committee currently consists of J. D. Pyle (Chair), A. B. Arends, J.M. L. Bennett, S. B. Evans,
A. M. NemirowMcAllister and D. A. Perdue. Each of the members of the Committee is independent as defined by the NYSE listing standards. This Committee setsreviews and approves corporate goals and objectives relevant to Chief Executive Officer (“CEO”) compensation, evaluates the CEO’s performance and determines and approves as a committee or together with the other independent directors the CEO’s compensation level based on the evaluation of the CEO’s performance. In addition, the Committee has responsibilities with respect to the Company’s executive compensation policy; administers the Company's Long-Term Equity Incentive Plan; reviews the
performance of and approves salaries for officersincentive programs and certain other management
personnel; reviews and recommends to the Board new or changed employee benefit
plans; reviews major provisions of negotiated employment contracts; and reviews
human resource development programs.

ENVIRONMENTAL, NUCLEAR, HEALTH AND SAFETY COMMITTEE

Environmental, Nuclear, Health and Safety Committee
The Environmental, Nuclear, Health and Safety Committee held two joint meetings in 2000.2003. The Committee currently consists of R. W. Schlutz (Chair), K. C. Lyall, A. K. Newhall, J. L. Hanes,
M. E. Neshek, D. A. PerduePyle and A. R. Weiler. The Committee'sCommittee’s responsibilities are to review environmental policy and planning issues of interest to the Company, including matters involving the Company before environmental regulatory agencies and compliance with air, water and waste regulations. In addition, the Committee reviews policies and operating issues related to the Company'sCompany’s nuclear generating station investments, including planning and funding for decommissioning of the plants. The Committee also reviews health and safety related policies, activities and operational issues as they affect employees, customers and the general public.

NOMINATING AND GOVERNANCE COMMITTEE

Nominating and Governance Committee
The Nominating and Governance Committee held threefour joint meetings in 2000.2003. The Committee currently consists of A. R. Weiler (Chair), R. G. Flowers, J. L.
Hanes, K. C. Lyall, A. K. Newhall and R. W. Schlutz. This Committee's responsibilities include
recommending and nominating newEach of the members of the Board; recommending committee
assignmentsCommittee is independent as defined by the NYSE listing standards. This Committee’s responsibilities are to: (1) identify individuals qualified to become Board members, consistent with the criteria approved by the Board, and committee chairpersons; evaluating overallto recommend nominees for directorships to be filled by the Board effectiveness;
preparing an annual reportor shareowners; (2) identify and recommend Board members qualified to serve on Chief Executive Officer effectiveness;Board committees; (3) develop and consideringrecommend to the Board a set of corporate governance principles; (4) oversee the evaluation of the Board and developingthe Company’s management; and (5) advise the Board with respect to other matters relating to corporate governance of the Company.
In making recommendations to the Company’s Board of Directors of nominees to serve as directors, the Nominating and Governance Committee will examine each director nominee on a case-by-case basis regardless of who recommended the nominee and take into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills or financial acumen, diversity of viewpoint and industry knowledge. However, the Committee believes that, to be recommended as a director nominee, each candidate must:
display the highest personal and professional ethics, integrity and values.
have the ability to exercise sound business judgment.
be highly accomplished in his or her respective field, with superior credentials and recognition and broad experience at the administrative and/or policy-making level in business, government, education, technology or public interest.
have relevant expertise and experience, and be able to offer advice and guidance to the CEO based on that expertise and experience.
be independent of any particular constituency, be able to represent all shareowners of the Company and be committed to enhancing long-term shareowner value; and
have sufficient time available to devote to activities of the Board of Directors onand to enhance his or her knowledge of the Company’s business.
The Committee also believes the following qualities or skills are necessary for one or more directors to possess:
At least one director should have the requisite experience and expertise to be designated as an “audit committee financial expert” as defined by the applicable rules of the SEC.
Directors generally should be active or former senior executive officers of public companies or leaders of major and/or complex organizations, including commercial, governmental, educational and other corporate governance issues. In nominating persons for election tonon-profit institutions.
Directors should be selected so that the Board theof Directors is a diverse body, with diversity reflecting age, gender, race and political experience.
The Nominating and Governance Committee will consider nominees recommended by shareowners. shareowners in accordance with the Company’s Nominating and Governance Committee Charter and the Corporate Governance Principles.
The Company and the Committee maintain a file of recommended potential director nominees which isreviewed at the time a search for a new director needs to be performed. To assist the Committee in its identification of qualified director candidates, the Committee may engage an outside search firm.
Any shareowner wishing to make a recommendation should write to the Corporate Secretary of the Company whoand include appropriate biographical information concerning each proposed nominee. The Corporate Secretary will forward all recommendations to the Committee. The Company'sCompany’s Bylaws also provideset forth certain requirements for shareowner nominations ofshareowners wishing to nominate director candidates directly for election as directors.consideration by shareowners. These provisions require such nominations to be made pursuant to timely notice (as specified in the Bylaws) in writing to the Corporate Secretary of the Company.

CAPITAL APPROVAL COMMITTEE

Capital Approval Committee
The Capital Approval Committee held notwo meetings in 2000.2003. The Committee currently 8
consists of M. L. Bennett, J. B. Evans J. D. Pyle and A. R. Weiler. Mr. Davis is the Chair and a non-voting member of this Committee. The purpose of this Committee is the evaluation ofto evaluate certain investment proposals where (i)(1) an iterative bidding process is required, and/or (ii)(2) the required timelines for such a proposal would not permit the proposal to be brought before a regular meeting of the Board of Directors and/or a special meeting of the full Board of Directors is not practical or merited.
The Board of Directors held sevensix joint meetings during 2000.2003. Each director attended at least 80%75% of the aggregate number of meetings of the Board and Board committees on which he or she served.
The Board and each committee conductsconduct performance evaluations annually to determine itstheir effectiveness and suggestssuggest improvements for consideration and implementation. In addition, the Compensation and Personnel Committee evaluates Mr. Davis'Davis’ performance as ChiefCEO on an annual basis.
Board members are not expected to attend the Company’s Annual Meeting of Shareowners. In 2003, none of the Company’s directors attended the Annual Meeting of Shareowners.
CORPORATE GOVERNANCE
Corporate Governance Principles
The Board of Directors has adopted Corporate Governance Principles that, in conjunction with the Board committee charters, establish processes and procedures to help ensure effective and responsive governance by the Board. The Corporate Governance Principles are available on the Company’s website atwww.alliantenergy.com/investors under the “Corporate Governance” caption.
The Board of Directors has adopted certain categorical standards of independence to assist it in making determinations of director independence under the NYSE listing standards. These categorical standards appear as Appendix A of the Corporate Governance Principles. Based on these standards, the Board of Directors has affirmatively determined by resolution that each of the Company’s directors (other than Mr. Davis, the Company’s Chairman and CEO) has no material relationship with the Company and, therefore, is independent in accordance with the NYSE listing standards. The Board of Directors will regularly review the continuing independence of the directors.
The Corporate Governance Principles provide that at least 75% of the members of the Board of Directors must be independent directors under the NYSE listing standards. The Audit, Nominating and Governance and Compensation and Personnel Committees must consist of all independent directors.
Lead Independent Director; Executive OfficerSessions
The Corporate Governance Principles provide that the chairperson of the Nominating and Governance Committee shall be the designated “Lead Independent Director” or“Presiding Independent Director” and will preside as the chair at meetings or executive sessions of the independent directors. As the Chairperson of the Nominating and Governance Committee, Mr. Weiler is also evaluated bycurrently designated as the Lead Independent Director. At every regular joint meeting of the Board of Directors, the independent directors meet in executive session with no member of Company management present.
Communication with Directors
Shareowners and other interested parties may communicate with the full Board, non-management directors as a group or individual directors, including the Presiding Independent Director, by providing such communication in writing to the Company’s Corporate Secretary, who will post such communications directly to the Company’s Board of Directors’ website.
Ethical and Legal Compliance Policy
The Company has adopted a Code of Ethics that applies to all employees, including its CEO, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer, as well as its Board of Directors. The Company makes its Code of Ethics available free of charge on an annual basis.

9
the Company’s website, atwww.alliantenergy.com/investors, under the “Corporate Governance” caption and such Code of Ethics is available in print to any shareowner who requests it from the Company’s Corporate Secretary. The Company intends to satisfy the disclosure requirements under Item 10 of Form 8-K regarding amendments to, or waivers from, the Code of Ethics by posting such information on its website address stated above under the Corporate Governance caption.
COMPENSATION OF DIRECTORS
No retainer fees are paid to Messrs.Mr. Davis and Stoppelmoor for theirhis service on the Company'sCompany’s Board of Directors. In 2000,2003, all other directors (the "non-employee directors"“non-employee directors”), each of whom serveserved on the Boards of the Company, AEC, IES, IPCIP&L and AER, received an annual retainer of $45,000 for service on all fivefour Boards consisting of $25,000$47,137 in cash. Of this cash and $20,000 inamount, each Director voluntarily elected to use $17,137 to purchase 1,000 shares of AEC common stock.stock pursuant to AEC’s Shareowner Direct Plan or to defer such amount through the Company Stock account in the AEC Director’s Deferred Compensation Plan. Travel expenses are paid for each meeting day attended. Beginning in 2001,
In 2004, the annualnon-employee directors will each receive a cash retainer for each non-employee director has been changedof $70,000. The Directors are encouraged to $25,000 inmake a voluntary election to use not less than 50% of this cash and
1,000retainer to purchase shares of AEC common stock for service on all five Boards. The directors
have the optionpursuant to receive each amount outright (in cash and stock), to have
each amount deposited to theirAEC’s Shareowner Direct Plan account or to a director'sdefer through the AEC Stock account in AEC’s Director’s Deferred Compensation Account or any combination thereof. Effective April 21,
2001, Mr. Stoppelmoor's existing consulting contractPlan. In 2004, the Chairperson of the Audit Committee will expirereceive an additional $7,500 cash retainer and hethe Chairpersons of the Nominating and Governance; Compensation and Personnel; and Environmental, Nuclear, Health, and Safety Committees will be
eligible to receive compensation as a non-employee director on a prorated basis
for 2001.

DIRECTOR'S DEFERRED COMPENSATION PLAN

an additional $5,000 cash retainer.
Director’s Deferred Compensation Plan
Under the Director'sAEC Director’s Deferred Compensation Plan, directors may elect to defer all or part of their retainer fee. Amounts deposited to a Deferred Compensation Interest Account receive an annual return based on the A-Utility Bond Rate with a minimum return no less than the prime interest rate published in THE WALL
STREET JOURNAL. The balance credited to a director's Deferred Compensation
Interest Account as of any date willWall Street Journal, provided that the return may not be the accumulated deferred cash
compensation and interest that are credited to such account as of such date.greater than 12% or less than 6%. Amounts deposited to an AEC Stock Account whether the cash portion or the stock
portion of the director's compensation, are treated as though invested in the common stock of AEC and will be credited with dividends, and those dividendswhich will be treated as if reinvested. Annually, theThe director may elect that the AEC Deferred Compensation Account will be paid in a lump sum or in annual installments for up to ten10 years eitherbeginning in a designatedthe year of or uponone, two or three tax years after retirement or resignation from the Board.

DIRECTOR'S CHARITABLE AWARD PROGRAM

Director’s Charitable Award Program
AEC maintains a Director'sDirector’s Charitable Award Program for the members of its Board of Directors beginning after three yearsthreeyears of service. The purpose of the Program is to recognize the interest of the Company and its directors in supporting worthy institutions and to enhance the Company'sCompany’s director benefit program so that the Company is able to continue to attract and retain directors of the highest caliber. Under the Program, when a director dies, the Company and/or AEC will donate a total of $500,000 to one qualified charitable organization or divide that amount among a maximum of fourfive qualified charitable organizations selected by the individual director. The individual director derives no financial benefit from the Program. All deductions for charitable contributions are taken by the Company or AEC, and the donations are funded by the Company or AEC through life insurance policies on the directors. Over the life of the Program, all costs of donations and premiums on the life insurance policies, including a return of the Company'sCompany’s or AEC’s cost of funds, will be recovered through life insurance proceeds on the directors. The Program, over its life, will not result in any material cost to the Company or AEC.

DIRECTOR'S LIFE INSURANCE PROGRAM

Director’s Life Insurance Program
AEC maintains a split-dollar Director'sDirector’s Life Insurance Program for non-employee directors, beginning after three years of service, which provides a maximum death benefit of $500,000 to each eligible director. Under the split-dollar arrangement, directors are provided a death benefit only and do not have any interest in the cash value of the policies. The Life Insurance Program is structured to pay a portion of the total death benefit to AEC to reimburse AEC for all costs of the program, including a return on its funds. The Life Insurance Program, over its life, will not result in any material cost to AEC. The imputed income allocations reported for each director in 20002003 under the Director'sDirector’s Life Insurance Program were as follows: A. B. Arends--$50, R. G.
Flowers--Arends—$50, J. L. Hanes--B. Evans—$50,2, K. C. Lyall--Lyall—$389, A. M. Nemirow--$50,

M. E. Neshek--$975,488, J. D. Pyle--Pyle—$50,24, W. H. Stoppelmoor—$987 and A. R. Weiler--Weiler—$50.

PENSION ARRANGEMENTS

Prior to April 1998, Mr. Liu participated in the IES Industries Inc. retirement
plan, which plan has been transferred to Alliant Energy Corporate Services.
Mr. Liu's benefits under the plan have been "grandfathered" to reflect the
benefit plan formula in effect in April 1998. See "Retirement and Employee
Benefit Plans--IES Industries Pension Plan."

Alliant Energy Corporate Services also maintains a non-qualified Supplemental
Retirement Plan ("SRP") for eligible former officers of IES Industries Inc.
Mr. Liu participates in the SRP. The SRP generally provides for payment of
supplemental retirement benefits equal to 75% of the officer's base salary in
effect at the date of retirement, reduced by benefits receivable under the
qualified retirement plan, for a period not to exceed 15 years following the
date of retirement. The SRP also provides for certain death benefits to be paid
to the officer's designated beneficiary and benefits if an officer becomes
disabled under the terms of the qualified retirement plan.

CERTAIN AGREEMENTS

Mr. Liu had an employment agreement with AEC, pursuant to which Mr. Liu served
as Chairman of
In November 2003, the Board of AEC until April 2000. At that time, Mr. Liu retired
as ChairmanDirectors terminated this insurance benefit for any director not already having the required vesting period of the Boardthree years of AEC, although he continues to serve as a director.
Mr. Liu's employment agreement provided that he receive an annual base salary of
not less than $400,000, supplemental retirement benefitsservice and the opportunity to
earn short-term and long-term incentive compensation (including stock options,
restricted stock and other long-term incentive compensation).

Mr. Stoppelmoor entered into a three-year consulting arrangement with AEC in
April 1998. Under the terms of his consulting arrangement, Mr. Stoppelmoor
received an annual fee of $324,500 during each of the first two years and is
currently receiving a fee of $200,000 for the third year of the consulting
period. Mr. Stoppelmoor is also entitled to participate in compensation plans
equivalent to those provided AEC's Chairman of the Board and Chief Executive
Officer during the consulting period, subject to approval by the Compensation
and Personnel Committee of the Board. Mr. Stoppelmoor is eligible to participate
in the Director's Charitable Award Program and the Director's Life Insurance
Program. His consulting arrangement provides that he will not be eligible to
receive any other compensation otherwise payable to directors of AEC until the
end of the three-year term on April 21, 2001. At that time, Mr. Stoppelmoor will
be eligible to receive the annual director's compensation.

11
all new directors.
OWNERSHIP OF VOTING SECURITIES
All of the common stock of the Company is held by AEC. None of the directors or officers of the Company own any shares of the Company’s preferred stock. Listed in the following table are the number of shares of AEC'sAEC’s common stock beneficially owned by (1) the executive officers listed in the Summary Compensation Table, and(2) all director nominees and directors of AEC and the Company, as well as the number of shares owned byand(3) all director nominees, directors and executive officers as a group as of March 1, 2001.Feb. 27, 2004. The directors and executive officers of AEC and the Company as a group owned less than one
percent1.4% of the outstanding shares of AEC common stock on that date. ToNo individual director or officer owned more than 1% of the Company's knowledge, no shareowner beneficially owned five percent or moreoutstanding shares of AEC's outstandingAEC common stock as of December 31, 2000.

on that date.

SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)
- ------------------------ --------------

EXECUTIVES(2)

SHARES
BENEFICIALLY
OWNED⁽¹⁾
Executives⁽²⁾
William D. Harvey......................................... 75,815(3)
Harvey 167,236 ⁽³⁾
Eliot G. Protsch.......................................... 77,715(3)
Protsch 173,717 ⁽³⁾
Barbara J. Swan 125,590 ⁽³⁾
Pamela J. Wegner 124,470 ⁽³⁾
Thomas M. Walker.......................................... 36,893(3)
Pamela J. Wegner.......................................... 47,573(3)

DIRECTOR NOMINEES
Walker 1,478 ⁽⁵⁾
Director Nominees
Ann K. Newhall 4,116 ⁽³⁾
Michael L. Bennett 1,803 ⁽³⁾
Jack B. Evans............................................. 32,402(3)
Joyce L. Hanes............................................ 6,250(3)
Evans 39,028 ⁽³⁾
David A. Perdue........................................... 1,556(3)
Perdue 5,558 ⁽³⁾
Judith D. Pyle............................................ 9,440

DIRECTORS
Pyle 13,605
Directors
Alan B. Arends............................................ 4,629(3)
Arends 10,867 ⁽³⁾⁽⁴⁾
Erroll B. Davis, Jr....................................... 202,015(3)
Rockne G. Flowers......................................... 16,423(4)
Lee Liu................................................... 192,773(3)
Jr. 556,063 ⁽³⁾
Katharine C. Lyall........................................ 11,706
Arnold M. Nemirow......................................... 14,564(3)(4)
Milton E. Neshek.......................................... 14,742(3)(4)
Lyall 15,941
Singleton B. McAllister 4,251 ⁽³⁾
Robert W. Schlutz......................................... 6,729(3)
Schlutz. 18,990 ⁽³⁾
Wayne H. Stoppelmoor...................................... 128,162(3)
Stoppelmoor 14,851 ⁽⁴⁾
Anthony R. Weiler......................................... 6,962(3)

Weiler 17,022 ⁽³⁾
All Executives and Directors as a Group
34
21 people, including those listed above................... 1,263,893(3)
above. 1,572,716 ⁽³⁾

(1)
⁽¹⁾ Total shares of AEC common stock outstanding as of Feb. 27, 2004, were 111,274,686.
⁽²⁾ Stock ownership of Mr. Davis is shown with the directors.
⁽³⁾ Included in the beneficially owned shares shown are indirect ownership interests with shared voting and investment powers: Mr. Davis—8,981, Mr. Evans—2,000, Mr. Weiler—1,389, Mr. Harvey—2,717, and Mr. Protsch—820; shares of common stock held in deferred compensation plans: Mr. Arends—5,605, Mr. Bennett—1,415, Mr. Davis—48,303, Mr. Evans—7,028, Ms. McAllister—1,415, Ms. Newhall—2,829, Mr. Perdue—5,558, Mr. Schlutz—7,959, Mr. Weiler—5,841, Mr. Harvey—27,716, Mr. Protsch—33,879, Ms. Swan—20,698 and Ms. Wegner—18,767 (all executive officers and directors as a group—210,729); and stock options exercisable on or within 60 days of Feb. 27, 2004: Mr. Davis—451,687, Mr. Harvey—112,431, Mr. Protsch—112,431, Ms. Swan—94,633 and Ms. Wegner—89,419 (all executive officers and directors as a group—1,094,060).
⁽⁴⁾ Messrs. Arends and Stoppelmoor will retire as directors of the Company at AEC’s Annual Meeting on May 21, 2004.
⁽⁵⁾ Mr. Walker resigned from the Company effective Nov. 15, 2003.
To the Company’s knowledge, no shareowner beneficially owned 5% or more of any class of the Company’s preferred stock as of DecemberDec. 31, 2000 were
79,010,114.

(2) Stock ownership of Mr. Davis is shown with the directors.

(3) Included in the beneficially owned shares shown are indirect ownership
interests with shared voting and investment powers: Mr. Harvey -- 2,210,
Mr. Protsch -- 667, Mr. Davis -- 7,028, Ms. Hanes -- 514, Mr. Liu -- 9,755
and Mr. Weiler -- 1,148; shares of common stock held in deferred

compensation plans: Mr. Arends -- 1,862, Mr. Evans -- 2,402, Ms. Hanes --
174, Mr. Nemirow -- 830, Mr. Neshek -- 1,261, Mr. Perdue -- 1,556,
Mr. Schlutz -- 1,370, Mr. Weiler -- 1,862, Mr. Davis -- 6,187,
Mr. Protsch -- 7,232, Mr. Harvey -- 4,069, Mr. Walker -- 5,166,
Ms. Wegner -- 10 (all executive officers and directors as a group --
35,072); and stock options exercisable on or within 60 days of March 1,
2001: Mr. Davis -- 165,327, Mr. Liu -- 148,849, Mr. Stoppelmoor -- 119,201,
Mr. Harvey -- 44,258, Mr. Protsch -- 44,258, Mr. Walker -- 29,097 and
Ms. Wegner -- 32,319 (all executive officers and directors as a group --
865,376).

(4) Messrs. Flowers, Nemirow and Neshek will retire as directors at the Annual
Meeting.

None of the directors or officers of the Company own any shares of the Company's
preferred stock.2003. The following table sets forth certain information, as of Dec. 31, 2003, regarding
the beneficial ownership ofby the Company's preferred stock by eachonly person known to the CompanyAEC to own more than five percentmorethan 5% of any class of the Company's
preferred stock as of December 31, 2000.

SHARES OF
6.2% PREFERRED STOCK PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------------------------------------------ -------------------- ----------

Wellington Management Company, LLP
75 State Street 18,500(1) 12.33%
Boston, Massachusetts 02109

(1) AsAEC’s common stock. The beneficial ownership set forth below has been reported toon a Schedule 13G with the Securities and Exchange Commission.

13
Commission by the beneficial owner.
Amount and Nature of Beneficial Ownership
Voting Power
Investment Power
Aggregate
Percent
of Class
Name and Address of Beneficial Owner
Sole
Shared
Sole
Shared
Franklin Resources, Inc.
(and certain affiliates)
One Franklin Parkway
San Mateo, CA 94403 6,451,800 0 6,451,800 0 6,451,800 5.8 %
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total compensation paid by AEC, the Company, AEC and AEC'sAEC’s other subsidiaries for all services rendered during
2000, 1999 and 1998 to the Chief Executive Officer and the fourcertain other most
highly compensated executive officers of the Company.

Company for all services rendered during 2003, 2002 and 2001.
SUMMARY COMPENSATION TABLE

- ----------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------------------------------------------------------------
AWARDS PAYOUTS
------------------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS
Name and Principal Position Year Annual Compensation Long-Term Compensation All Other
Compensation⁽⁵⁾
Base
Salary Bonus Other
Annual
Compensation⁽¹⁾ Awards Payouts
Securities
Underlying
Options
(Shares)⁽²⁾ LTIP
PRINCIPAL POSITION YEAR BASE SALARY BONUS(1) COMPENSATION(2) AWARDS(3) (SHARES)(4) PAYOUTS
- ----------------------------------------------------------------------------------------------------------------------
Payouts
Erroll B. Davis, Jr. 2000 $637,692 $895,200 $11,875 -- 111,912 $196,711
Chairman and Chief 1999 580,000 440,220 12,526 -- 77,657 84,870
Executive Officer 1998 540,000 -- 13,045 -- 36,752 --
- ----------------------------------------------------------------------------------------------------------------------

2003
2002
2001 $

685,000
685,000
683,269 $

0
0
489,364 $

14,949
17,582
11,265 151,687
151,687
108,592 $

0
0
359,605 $

45,253
45,485
50,284
William D. Harvey 2000 264,615 206,541 4,234 -- 21,063 47,474
Chief Operating Officer 2003
2002
2001

290,000
282,500
274,616

0
0
161,233

5,954
7,707
4,061 26,642
26,642
21,798

0
0
92,209

15,562
17,599
42,944
Barbara J. Swan
President 1999 254,423 116,535 4,565 $255,004 17,071 31,365
1998 233,846 -- 4,699 -- 11,406 --
- ----------------------------------------------------------------------------------------------------------------------

2003
2002
2001

265,000
260,000
254,616

0
0
134,258

0
6,716
3,459 24,705
24,705
20,212

0
0
84,985

14,536
16,356
36,172
Eliot G. Protsch 2000 264,615 214,942 1,423 -- 21,063 47,474
Chief Financial Officer 2003
2002
2001

290,000
282,500
274,616

0
0
143,688

4,825
6,131
893 26,642
26,642
21,798

0
0
92,209

15,605
16,318
38,372
Pamela J. Wegner
Executive Vice 1999 254,423 152,898 1,909 255,004 17,071 31,365
President 1998 233,846 -- 2,443 -- 11,406 --
- ----------------------------------------------------------------------------------------------------------------------

⁽³⁾ 2003
2002
2001

275,000
270,000
264,615

0
0
124,312

7,282
9,263
2,267 25,673
25,673
21,005

0
0
88,597

19,641
19,178
35,371
Thomas M. Walker 2000 254,616 190,026 -- -- 20,268 47,474⁽⁴⁾ 2003
2002
2001

267,692
277,500
264,615

680,000
0
133,852

13,895
17,543
0 25,673
25,673
21,005

0
0
88,597

27,669
27,297
6,207
⁽¹⁾ Other Annual Compensation consists of income tax gross-ups for reverse split-dollar life insurance.
⁽²⁾ Awards made in 2003 were in addition to performance share awards as described in the table entitled “Long-Term Incentive Awards in 2003.”
⁽³⁾ As of Jan. 28, 2004, Ms. Wegner is no longer an executive officer of the Company but remains an executive officer of AEC.
⁽⁴⁾ Mr. Walker, the Company’s former Executive Vice 1999 244,808 148,960 -- -- 16,402 --
President 1998 229,846 -- 814 -- 11,406 --
&and Chief Financial Officer, - ----------------------------------------------------------------------------------------------------------------------
Pamela J. Wegner 2000 254,608 180,285 2,416 245,017 20,268 27,563
Executive Vice 1999 244,615 145,187 2,569 -- 16,402 19,373
President 1998 193,001 -- 2,689 -- 6,178 --
- ----------------------------------------------------------------------------------------------------------------------

- ---------------------- ----------------

NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION(5)
- ---------------------- ----------------

Erroll B. Davis, Jr. $52,619
Chairmanresigned from the Company effective Nov. 15, 2003. In connection with such resignation, Mr. Walker entered into a Severance Agreement and Chief 53,188
Executive Officer 50,996
- ---------------------------------------------------------
William D. Harvey 42,230
President 37,005
21,642
- --------------------------------------------------------------------------
Eliot G. Protsch 38,058
Executive Vice 32,941
President 18,065
- -------------------------------------------------------------------------------------------
Thomas M. Walker 6,166
Executive Vice 6,531
President 15,026
& Chief Financial
Officer
- ------------------------------------------------------------------------------------------------------------
Pamela J. Wegner 34,377
Executive Vice 29,122
President 17,959
- ----------------------------------------------------------------------------------------------------------------------
Release with AEC, pursuant to which he was paid $680,000, which is reflected in the “Bonus” column above. See “Certain Agreements.”

(1) No bonuses were paid for 1998. The 1999 bonuses were earned in 1999 and
paid in 2000. The 2000 bonuses were earned in 2000 and paid in 2001.

(2) Other Annual Compensation for 2000 consists of income tax gross-ups for
reverse split-dollar life insurance.

(3) In 1999, restricted stock was awarded under the Alliant Energy Corporation
Long-Term Equity Incentive Plan as follows: Mr. Harvey--9,294 shares,
Mr. Protsch--9,294 shares and Ms. Wegner--8,930 shares. Dividends on shares
of restricted stock granted under the Long-Term Equity Incentive Plan are
held in escrow and reinvested in shares of common stock pending vesting of
the underlying restricted stock. If such restricted stock vests, then the
participant is also entitled to receive the common stock into which the
dividends on the restricted stock were reinvested. The amounts shown in the
table above represent the market value of the restricted stock on the date
of grant. The number of shares of restricted stock held by the officers
identified in the table and the market value of such shares as of
December 31, 2000 were as follows: Mr. Harvey--9,294 shares ($296,293),
Mr. Protsch--9,294 shares ($296,293) and Ms. Wegner--8,930 shares
($284,688).

(4) Awards made in 2000 were in combination with performance share awards as
described in the table entitled "Long-Term Incentive Awards in 2000".

(5) The table below shows the components of the compensation reflected under
this column for 2000:

- ------------------------------------------------------------------------------------------------------------------------------
ERROLL ⁽⁵⁾ The table below shows the components of the compensation reflected under this column for 2003:
Erroll B. Davis, Jr. William D. Harvey Barbara J. Swan Eliot G. Protsch Pamela J. Wegner Thomas M. Walker
A. $ 20,550 $ 6,000 $ 6,000 $ 7,450 $ 7,375 $ 6,000
B. 19,656 8,497 7,576 7,104 10,393 19,830
C. 5,047 1,065 960 1,051 1,873 1,839
Total $ 45,253 $ 15,562 $ 14,536 $ 15,605 $ 19,641 $ 27,669
A. Matching contributions to the AEC 401(k) Savings Plan and Deferred Compensation Plan
B. DAVIS, JR. WILLIAM D. HARVEY ELIOT G. PROTSCH THOMAS M. WALKER PAMELA J. WEGNER
- ------------------------------------------------------------------------------------------------------------------------------

A. $19,131 $ 7,938 $ 7,938 $ 5,250 $6,373
- ------------------------------------------------------------------------------------------------------------------------------

B. 18,952 8,524 7,956 0 5,332
- ------------------------------------------------------------------------------------------------------------------------------

Reverse split-dollar life insurance
C. 12,969 5,345 1,852 0 3,050
- ------------------------------------------------------------------------------------------------------------------------------

D. 1,567 320 209 916 306
- ------------------------------------------------------------------------------------------------------------------------------

E. 0 20,103 19,770 0 19,316
- ------------------------------------------------------------------------------------------------------------------------------

Total $52,619 $42,230 $38,058 $ 6,166 $34,377
- ------------------------------------------------------------------------------------------------------------------------------
Life insurance coverage in excess of $50,000

A. Matching contributions to 401(k) Plan and Deferred Compensation Plan

B. Split-dollar life insurance reportable income (the split-dollar insurance
premiums are calculated using the "foregone interest" method)

C. Reverse split-dollar life insurance

D. Life insurance coverage in excess of $50,000

E. Dividends on restricted stock

15
STOCK OPTIONS
The following table sets forth certain information concerning stock options
granted during 2000 to the executives named below:

STOCK OPTION GRANTS IN 2000

- ------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
-------------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED(1) YEAR ($/SHARE) DATE 5% 10%
- ------------------------------------------------------------------------------------------------------------------------------

Erroll B. Davis, Jr. 111,912 12.4% $28.5938 1/18/10 $5,212,861 $8,300,513
- ------------------------------------------------------------------------------------------------------------------------------

William D. Harvey 21,063 2.3% 28.5938 1/18/10 981,115 1,562,243
- ------------------------------------------------------------------------------------------------------------------------------

Eliot G. Protsch 21,063 2.3% 28.5938 1/18/10 981,115 1,562,243
- ------------------------------------------------------------------------------------------------------------------------------

Thomas M. Walker 20,268 2.3% 28.5938 1/18/10 944,083 1,503,278
- ------------------------------------------------------------------------------------------------------------------------------

Pamela J. Wegner 20,268 2.3% 28.5938 1/18/10 944,083 1,503,278
- ------------------------------------------------------------------------------------------------------------------------------

(1) Consists of non-qualified stock options to purchase shares of AEC common stock granted pursuantduring 2003 to AEC's Long-Term Equity Incentive Plan. Options
were granted on January 19, 2000 and will have a three year vesting
schedule with one-third becoming exercisable on January 2, 2001, one-third
becoming exercisable on January 2, 2002 and the final one-third becoming
exercisable on January 2, 2003. Upon a "change in control" of AEC as
defined in the Plan or upon retirement, disability or death of the option
holder, the options will become immediately exercisable.

(2) The hypothetical potential appreciation shown for theexecutives named executives is
required by rules of the Securities and Exchange Commission ("SEC"). The
amounts shown do not represent the historical or expected future
performance of AEC's common stock. In order for the named executives to
realize the potential values set forth in the 5% and 10% columns in the
table above, the price per share of AEC's common stock would be $46.58 and
$74.17, respectively, as of the expiration date of the options.

16
below:
STOCK OPTION GRANTS IN 2003
Name Individual Grants Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Option Term⁽²⁾
Number of
Securities
Underlying
Options
Granted⁽¹⁾ % of Total
Options
Granted to
Employees
in Fiscal
Year Exercise
or Base
Price
($/Share) Expiration
Date 5% 10%
Erroll B. Davis, Jr. 151,687 15.8 % $ 16.82 1/21/13 $ 1,604,848 $ 4,066,728
William D. Harvey 26,642 2.8 % 16.82 1/21/13 281,872 714,272
Barbara J. Swan 24,705 2.6 % 16.82 1/21/13 261,379 662,341
Eliot G. Protsch 26,642 2.8 % 16.82 1/21/13 281,272 714,272
Pamela J. Wegner 25,673 2.7 % 16.82 1/21/13 271,620 688,293
Thomas M. Walker⁽³⁾ 25,673 2.7 % 16.82 11/15/03 0 0
⁽¹⁾ Consists of non-qualified stock options to purchase shares of AEC common stock granted pursuant to the AEC Equity Incentive Plan. Options were granted on Jan. 21, 2003 and have a three-year vesting schedule pursuant to which one-third of the options will become exercisable on each of Jan. 2, 2004, Jan. 2, 2005, and Jan. 2, 2006. Upon a “change in control” of AEC as defined in the Plan or upon retirement, disability or death of the option holder, the options will become immediately exercisable.
⁽²⁾ The hypothetical potential appreciation shown for the named executives is required by rules of the Securities and Exchange Commission (“SEC”). The amounts shown do not represent the historical or expected future performance of AEC’s common stock. In order for the named executives to realize the potential values set forth in the 5% and 10% columns in the table above, the price per share of AEC’s common stock would be $27.40 and $43.63, respectively, as of the expiration date of the options.
⁽³⁾ Pursuant to his Severance Agreement and Release, Mr. Walker’s stock options were cancelled in November 2003. See “Certain Agreements.”
The following table provides information for the executives named below regarding the number and value of exercisable and unexercised options. None of the executives exercised options in fiscal 2000.

2003.
OPTION VALUES AT DECEMBERDEC. 31, 2000

2003
Name Number of Securities Underlying
Unexercised Options at Fiscal Year End Value of Unexercised
In-the-Money Options at Year End⁽¹⁾
Exercisable Unexercisable Exercisable Unexercisable
Erroll B. Davis, Jr. 388,778 289,009 $ 0 $ 1,225,631
William D. Harvey 87,403 51,669 0 215,267
Barbara J. Swan 71,426 47,912 0 199,616
Eliot G. Protsch 87,403 51,669 0 215,267
Pamela J. Wegner 73,859 49,790 0 207,438
Thomas M. Walker 0 0 0 0

- ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT FISCAL YEAR END AT YEAR END(1)
---------------------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------

Erroll B. Davis, Jr. 165,327 100,494 $363,360 $297,362
- ------------------------------------------------------------------------------------------------------------------------------

William D. Harvey 44,258 19,732 95,168 57,607
- ------------------------------------------------------------------------------------------------------------------------------

Eliot G. Protsch 44,258 19,732 95,168 57,607
- ------------------------------------------------------------------------------------------------------------------------------

Thomas M. Walker 29,097 18,979 47,773 55,416
- ------------------------------------------------------------------------------------------------------------------------------

Pamela J. Wegner 32,319 18,979 73,099 55,416
- ------------------------------------------------------------------------------------------------------------------------------
⁽¹⁾ Based on the closing per share price of AEC’s common stock on Dec. 31, 2003 of $24.90.

(1) Based on the closing per share price of AEC common stock on December 31,
2000 of $31.88.

17
LONG-TERM INCENTIVE AWARDS
The following table provides information concerning long-term incentive awards made to the executives named below in 2000.

2003.
LONG-TERM INCENTIVE AWARDS IN 2000

2003
Name Number of
Shares,
Units or
Other Rights
(#)⁽¹⁾ Performance
or Other
Period Until
Maturation
or Payout Estimated Future Payouts Under
Non-Stock Price-Based Plans
Threshold
(#) Target
(#) Maximum
(#)
Erroll B. Davis, Jr. 57,135 1/01/06 28,568 57,135 114,270
William D. Harvey 12,108 1/01/06 6,054 12,108 24,216
Barbara J. Swan 11,007 1/01/06 5,504 11,007 22,014
Eliot G. Protsch 12,108 1/01/06 6,054 12,108 24,216
Pamela J. Wegner 11,416 1/01/06 5,708 11,416 22,832
Thomas M. Walker⁽²⁾ 12,263 N/A N/A N/A N/A

- -----------------------------------------------------------------------------------------------------------------------------
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS
PERFORMANCE OR ------------------------------------------------------
NUMBER OF OTHER PERIOD
SHARES, UNITS UNTIL
OR OTHER RIGHTS MATURATION OR THRESHOLD TARGET MAXIMUM
NAME (#)^{(1) PAYOUT (#) (#) (#)
- -----------------------------------------------------------------------------------------------------------------------------

Erroll B. Davis, Jr. 19,025 1/1/03 9,513 19,025 38,050
- -----------------------------------------------------------------------------------------------------------------------------

William D. Harvey 3,707 1/1/03 1,854 3,707 7,414
- -----------------------------------------------------------------------------------------------------------------------------

Eliot G. Protsch 3,707 1/1/03 1,854 3,707 7,414
- -----------------------------------------------------------------------------------------------------------------------------

Thomas M. Walker 3,567 1/1/03 1,784 3,567 7,134
- -----------------------------------------------------------------------------------------------------------------------------

Pamela J. Wegner 3,567 1/1/03 1,784 3,567 7,134
- -----------------------------------------------------------------------------------------------------------------------------} Consists of performance shares awarded under AEC’s Long-Term Equity Incentive Plan. The payout from the performance shares is based on AEC’s three-year Total Shareowner Return (TSR) relative to an investor-owned utility peer group during the three-year performance cycle ending Dec. 31, 2005. Payouts are subject to modification pursuant to a performance multiplier that ranges from 0 to 2.00, and will be made in shares of AEC common stock or a combination of AEC common stock and cash.

(1) Consists of performance shares awarded under the AEC's Long-Term Equity
Incentive Plan. The payout from the performance shares is based on two
equally-weighted performance components: AEC's three-year Total Shareholder
Return (TSR) relative to an investor-owned utility peer group, and
annualized earnings per share growth versus internally set performance
hurdles contained in the Alliant Energy Strategic Plan during the
performance cycle ending December 31, 2002. Payouts are subject to
modification pursuant to a performance multiplier that ranges from 0 to
2.00, and will be made in shares of AEC common stock or a combination of
common stock and cash.

18
⁽²⁾ Pursuant to his Severance Agreement and Release, Mr. Walker’s awards were cancelled in November 2003. See “Certain Agreements.”
CERTAIN AGREEMENTS AND TRANSACTIONS

Mr. Davis currently has an employment agreement with AEC, pursuant to which Mr. Davishe will serve as the Chairman of AEC until the expiration of the term of the agreement on the date of AEC’s 2006 annual meeting of shareowners, but no later than May 30, 2006. In addition, he will serve as the Chief Executive Officer of AEC until April 21, 2003.during the term of the agreement unless otherwise determined by the Board of Directors. Mr. Davis will also began servingserve as the Chairman of AEC effective April 21, 2000. Following the
expiration of the initial term of Mr. Davis' employment agreement, his agreement
will automatically renew for successive one-year terms, unless either Mr. Davis
or AEC gives prior written notice of his or its intent to terminate the
agreement. Mr. Davis also serves as Chief Executive Officer of the Company and each subsidiary of AEC, andincluding the Company, as a director of such companies duringlong as he holds the term of his employment
agreement.same position for AEC. Pursuant to Mr. Davis'the employment agreement, he isMr. Davis will be paid an annual base salary of not less than $450,000. Mr. Davis' current salary under his
employment agreement is $685,000.$750,000. Mr. Davis also haswill have the opportunity to earn short-term and long-term incentive compensation (including stock options, restricted stock and other long-term incentive compensation) at least equal to other executive officers and receive supplemental retirement benefits (including continued participation in the CompanyAEC Executive Tenure Compensation Plan) and life insurance providing a death benefit of three times his annual salary. For purposes of AEC’s Supplemental Executive Retirement Plan described in detail under “Retirement and Employee Benefit Plans,” (i) Mr. Davis will be deemed to have been paid an annual bonus for 2003 of $595,539 (the amount that he would have received had he been eligible for such a bonus for such year); (ii) if Mr. Davis ceases to be the Chief Executive Officer while remaining the Chairman in 2005 and if the annual bonus for 2005 payable in 2006 is less than the target award for Mr. Davis for 2005, Mr. Davis will be deemed to have earned the target award; (iii) a special calculation will apply to protect the dollar amount that Mr. Davis could have been paid on May 1, 2003 if he had retired on April 30, 2003; and (iv) upon termination of employment Mr. Davis generally will be deemed to be a retiree not subject to the early commencement reduction factors that would otherwise apply. For purposes of AEC’s Executive Tenure Compensation Plan, the Board of Directors has determined to treat Mr. Davis as an eligible retiree at his future termination of employment, regardless of the circumstances other than death. If, prior to the end of the term of the agreement, the employment of Mr. Davis is terminated by AEC without cause (as defined in the employment agreement), or if Mr. Davis terminates his employment for good reason (as defined in the employment agreement), or if the employment of Mr. Davis is terminated as a result of the mutual agreement of Mr. Davis and the Board of Directors, AEC or its affiliates will continue to provide the compensation and benefits called for by the employment agreement through the endlater of theend of the term of the agreement or one year after such termination of employment agreement (with incentive compensation based on the maximum potential awards and with any stock compensation paid in cash), and all unvested stock compensation will vest immediately. If Mr. Davis dies or becomes disabled, or terminates his employment without good reason duringprior to the end of the term of his respective employmentthe agreement, AEC or its affiliates will pay to Mr. Davis or his beneficiaries or estate all compensation earned through the date of death disability or such termination (including previously deferred compensation and pro rata incentive compensation based upon the maximum potential awards). If Mr. Davis’ employment is terminated by reason of his disability, he will be entitled to such benefits as may be provided by AEC’s current disability program. If Mr. Davis is terminated for cause, AEC or its affiliates will pay his base salary through the date of termination plus any previously deferred compensation. In any such case, Mr. Davis shall also be eligible for the benefits he has accrued under the applicable retirement plans, including the benefits under the Supplemental Executive Retirement Plan and the Executive Tenure Compensation Plan. Under Mr. Davis'the employment agreement, if any payments thereunder constitute an excess parachute payment under the Internal Revenue
Code, (the "Code"),then AEC will pay to Mr. Davis the amount necessary to offset the excise tax and any applicable taxes on this additional payment.
AEC currently has in effect key executive employment and severenceseverance agreements (the "KEESAs"“KEESAs”) with certain executive officers and key employees of AEC (including Messrs. Davis, Harvey and Protsch Walker and Ms.Mses. Swan and Wegner). The KEESAs provide that each executive officer who is a party thereto is entitled to benefits if, within fivea period of up to three years (depending on which executive is involved) after a change in control of AEC (as defined in the KEESAs) (the “Employment Period”), the officer'sofficer’s employment is ended through (i)(a) termination by AEC, other than by reason of death or disability or for cause (as defined in the KEESAs),; or (ii)(b) termination by the officer due to a breach of the agreement by AEC or a significant change in the officer's responsibilities,officer’s responsibilities; or (iii)(c) in the case of Mr. Davis'Davis’ agreement, termination by Mr. Davis following the first anniversary of the change of control. The benefits provided are (i)(a) a cash termination payment of two orup to three times (depending on which executive is involved) the sum of the officer'sofficer’s annual salary and his or her average annual bonus during the three years before the terminationtermination; and (ii)(b) continuation for up to five yearsthe end of the Employment Period of equivalent hospital, medical, dental, accident disability and
life insurance coverage as in effect at the time of termination. Each KEESA for executive officers below the level of Executive Vice President of AEC provides that if any portion of the benefits under the KEESA or under any other agreement for the officer would constitute an excess parachute payment for purposes of the Code, benefits will be reduced so that the officer will be entitled to receive $1 less than the maximum amount which he or she could receive without becoming subject to the 20% excise tax imposed by the Code on certain excess parachute payments, or which AEC may pay 19
without loss of deduction under the Code. The KEESAs for the Chief Executive Officer, President, Senior Executive Vice President and the Executive Vice Presidents of AEC (including Messrs. Davis, Harvey and Protsch Walker and Ms.Mses. Swan and Wegner) provide that if any payments thereunder or otherwise constitute an excess parachute payment, AEC will pay to the appropriate officer the amount necessary to offset the excise tax and any additional taxes on this additional payment. Mr. Davis'Davis’ employment agreement as described above limits benefits paid thereunder to the extent that duplicate payments would be provided to him under his KEESA.

20
AEC entered into a Severance Agreement and Release with Mr. Walker in connection with the conclusion of his employment with AEC as of November 15, 2003. AEC (a) paid Mr. Walker $680,000, (b) paid $10,000 towards his legal fees associated with the agreement and (c) agreed to provide him with up to $20,000 for either outplacement services or tuition reimbursement. Mr. Walker ceased to be eligible to participate under any of AEC’s stock option, bonus, equity, incentive compensation, non-qualified supplemental retirement plan, medical, dental, life insurance, retirement, pension and other compensation or benefit plans upon his termination of employment, except that he retained vested rights under AEC’s qualified retirement plans and his rights under AEC’s Key Employee Deferred Compensation Plan, and he is eligible for COBRA continuation for his medical and dental plans. If Mr. Walker elects COBRA continuation, AEC will pay for this coverage for up to 18 months. Under the agreement, Mr. Walker agreed to a two-year covenant not to compete and agreed to keep Company information confidential. In connection with the agreement, Mr. Walker provided AEC and its affiliates, including the Company, a general liability release.
RETIREMENT AND EMPLOYEE BENEFIT PLANS

ALLIANT ENERGY CORPORATE SERVICES RETIREMENT PLANS

Alliant Energy Cash Balance Pension Plan
Salaried employees (including officers) of the Company are eligible to participate in a Retirementthe Alliant Energy Cash Balance Pension Plan (the “Pension Plan”) maintained by Alliant Energy Corporate Services. In 1998, the Retirement Plan was amended to implement a cash balance
format, thereby changing the benefit calculation formulas and adding a lump sum
distribution option for eligible participants. The Alliant Energy Cash Balance Pension Plan bases a participant'sparticipant’s defined benefit pension on the value of a hypothetical account balance. For individuals participating in the Pension Plan as of AugustAug. 1, 1998, a starting account balance was created equal to the present value of the benefit accrued as of DecemberDec. 31, 1997, under the Plan'sapplicable prior benefit formula prior to the change to a cash balance approach. That formula provided a
retirement income based on years of credited service and final average
compensation for the 36 highest consecutive months, with a reduction for a
Social Security offset.formula. In addition, such individuals participating in the Plan as of
August 1, 1998 received a special one-time transition credit amount equal to a specified percentage varying with age multiplied by credited service and base pay. For 1998 and thereafter, a participant receives annual credits to the account equal to 5% of base pay (including certain incentive payments, pre-tax deferrals and other items), plus an interest credit on all prior accruals equal to 4%, plus a potential share of the gain on the investment return on assets in the trust investment for the year.
The life annuity payable under the Pension Plan is determined by converting the hypothetical account balance credits into annuity form. Individuals who were participants in the Pension Plan on AugustAug. 1, 1998, are in no event to receive any less than what would have been provided under the prior formula that was applicable to them, had it continued, if they terminate on or before AugustbeforeAug. 1, 2008, and do not elect to commence benefits before the age of 55.
All of the individuals listed in the Summary Compensation Table who participate in the Pension Plan (Messrs. Davis, Protsch Harvey and Ms. Wegner) are "grandfathered"“grandfathered” under the applicable prior plan benefit formula. SinceBecause their estimated benefits under thatthe applicable prior plan benefit formula are higher than under the Pension Plan formula, utilizing current assumptions, their benefits would currently be determined by the applicable prior plan benefit formula. At the time of his resignation from the Company in November 2003, Mr. Walker had a vested balance of $68,056 in the Pension Plan. The following table illustrates the estimated annual benefits payable upon retirement at age 65 under the applicable prior plan formula based on average annual compensation and years of service. To the extent benefits under the Plan are limited by tax law, any excess will be paid under the Unfunded Excess Plan described below.

RETIREMENT PLAN TABLE

AVERAGE ANNUAL BENEFIT AFTER SPECIFIED YEARS IN PLAN
ANNUAL ---------------------------------------------
COMPENSATION 15 20 25 30+
-------------- --------- --------- --------- ---------

$ 200,000 $ 55,000 $ 73,300 $ 91,700 $110,000
300,000 82,500 110,000 137,500 165,000
400,000 110,000 146,700 183,300 220,000
500,000 137,500 183,300 229,100 275,000
600,000 165,000 220,000 275,000 330,000
700,000 192,500 256,700 320,800 385,000
800,000 220,000 293,300 366,700 440,000
900,000 247,000 330,000 412,500 495,000
1,000,000 275,000 366,700 458,300 550,000
1,100,000 302,500 403,300 504,100 605,000
Company Plan A Prior Formula.
One of the applicable prior plan formulas provided retirement income based on years of credited service and final average compensation for the 36 highest consecutive months, with a reduction for Social Security offset. The individuals listed in the Summary Compensation Table covered by this formula are Messrs. Davis, Protsch and Harvey and Mses. Swan and Wegner. The benefits would be as follows:
Company Plan A Prior Plan Formula Table
Average
Annual
Compensation
Annual Benefit After Specified Years in Plan
15
20
25
30+
$ 200,000 $ 55,000 $ 73,333 $ 91,667 $ 110,000
300,000 82,500 110,000 137,500 165,000
400,000 110,000 146,667 183,333 220,000
500,000 137,500 183,333 229,167 275,000
600,000 165,000 220,000 275,000 330,000
700,000 192,500 256,667 320,833 385,000
800,000 220,000 293,333 366,667 440,000
900,000 247,500 330,000 412,500 495,000
1,000,000 275,000 366,667 458,333 550,000
1,100,000 302,500 403,333 504,167 605,000
For purposes of the Pension Plan, compensation means payment for services rendered, including vacation and sick pay, and is substantially equivalent to the salary amounts reported in the foregoing Summary Compensation Table. PlanPensionPlan benefits depend upon length of Pension Plan service (up to a maximum of 30 years), age at retirement and amount of compensation (determined in accordance with the Pension Plan) and are reduced by up to 50% of Social
Security benefits. The estimated benefits in the table above do not reflect the Social Security offset. The estimated benefits are computed on a straight-life annuity basis. Benefits will be adjusted if the employee receives one of the optional forms of payment. Credited years of service under the Pension Plan for covered persons named in the foregoing Summary Compensation Table are as follows: Erroll B. Davis, Jr., 2124 years; Eliot G. Protsch, 2124 years; William D. Harvey, 1316 years; Barbara J. Swan, 15 years; and Pamela J. Wegner, 69 years.

IES INDUSTRIES PENSION PLAN

Prior to April 1998, Mr. Walker participated in the IES Industries retirement
plan (which plan has been transferred to Alliant Energy Corporate Services).
Plan benefits payable to Mr. Walker have been "grandfathered" to reflect the
benefit plan formula in effect at that time. Since his estimated benefits under
that formula are higher than under the Plan formula, utilizing current
assumptions, his benefits would currently be determined by the prior plan
benefit formula. The following table illustrates the estimated annual benefits
payable upon retirement at age 65 under the prior formula for the average annual
compensation and years of service. To the extent benefits under the Plan are
limited by tax law, any excess will be paid under the
Unfunded Excess Plan
described below.

PENSION PLAN TABLE

AVERAGE ANNUAL BENEFIT AFTER SPECIFIED YEARS IN PLAN
ANNUAL ---------------------------------------------------------
COMPENSATION 15 20 25 30 35
-------------- --------- --------- --------- --------- ---------

$200,000 $ 43,868 $ 58,490 $ 73,113 $ 87,735 $102,358
300,000 67,118 89,490 111,863 134,235 156,608
400,000 90,367 120,490 150,612 180,735 210,857
500,000 113,618 151,490 189,363 227,235 265,108
600,000 136,868 182,490 228,113 273,735 319,358

For purposes of the Plan, compensation means payment for services rendered,
including vacation and sick pay, and is substantially equivalent to the salary
amounts reported in the

foregoing Summary Compensation Table. Plan benefits depend upon length of Plan
service (up to a maximum of 35 years), age at retirement and amount of
compensation (determined in accordance with the Plan). The estimated benefits
are computed on a straight-life annuity basis. Benefits will be adjusted if the
employee receives one of the optional forms of payment. Mr. Walker has four
years of credited service under this plan.

UNFUNDED EXCESS PLAN--Alliant
Alliant Energy Corporate Services maintains an Unfunded Excess Plan that provides funds for payment of retirement benefits above the limitations on payments from qualified pension plans in those cases where an employee'semployee’s retirement benefits exceed the qualified plan limits. The Unfunded Excess Plan provides an amount equal to the difference between the actual pension benefit payable under the pension planPension Plan and what such pension benefit would be if calculated without regard to any limitation imposed by the Code on pension benefits or covered compensation.

UNFUNDED EXECUTIVE TENURE COMPENSATION PLAN--Alliant
Unfunded Executive Tenure Compensation Plan
Alliant Energy Corporate Services maintains an Unfunded Executive Tenure Compensation Plan to provide incentive for selected key executives to remain in the service of the CompanyAEC by providing additional compensation whichthat is payable only if the executive remains with the
CompanyAEC until retirement (or other termination if approved by the Board of Directors). In the case of the Chief Executive Officer only,Any participant in the event that
the Chief Executive Officer (1) is terminated under his employment agreement
with AEC as described above other than for cause, death or disability (as those
terms are defined in the employment agreement), (2) terminates his employment
under the employment agreement for good reason (as such term is defined in the
employment agreement), or (3) is terminated as a result of a failure of the
employment agreement to be renewed automatically pursuant to its terms
(regardless of the reason for such non-renewal), then for purposes of the plan,
the Chief Executive Officer shall be deemed to have retired at age 65 and shall
be entitled to benefits under the plan. Participants in the planPlan must be designatedapproved by the Chief Executive Officer of the Company and approved by its Board of Directors. Mr. Davis was the only active participant in the planPlan as of DecemberDec. 31, 2000.2003. The planPlan provides for monthly payments to a participant after retirement (at or after age 65, or with Board approval, prior to age 65) for 120 months. The payments will be equal to 25% of the participant'sparticipant’s highest average salary for any consecutive 36-month period. If a participant dies prior to retirement or before 120 payments have been made, the participant'sparticipant’s beneficiary will receive monthly payments equal to 50% of such amount for 120 months in the case of death before retirement or, if the participant dies after retirement, 50% of such amount for the balance of the 120 months. Annual benefits of $160,000$171,250 would be payable to Mr. Davis upon retirement, assuming he continues in Alliant Energythe service of AlliantEnergy Corporate Services' serviceServices until retirement at the same salary as was in effect on DecemberDec. 31, 2000.

ALLIANT ENERGY CORPORATE SERVICES SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The Company2003.
Supplemental Executive Retirement Plan
AEC maintains an unfunded Supplemental Executive Retirement Plan (“SERP”) to provide incentive for key executives to remain in the service of the Company by providing additional compensation whichthat is payable only if the executive remains with the CompanyAEC until retirement, disability or death. While the SERP provides different levels of benefits depending on the executive covered, this summary reflects the terms applicable to all of the individuals listed in the Summary Compensation Table. Participants in the planSERP must be approved by the Compensation and Personnel Committee of the Board. The planSERP provides for payments of 60% of the participant'sparticipant’s average annual earnings (base salary and bonus) for the highest paid three years out of the last ten10 years of the participant'sparticipant’s employment reduced by the sum of benefits payable to the officer from the officer'sofficer’s defined benefit plan and the Unfunded Excess Plan. The normal retirement date under the planSERP is age 62 with at least ten10 years of service and early retirement is at age 55 with at least ten years of service. If a participant retires prior to age 62, the 60% payment under the planSERP is reduced by 3% per year for each year the participant'sparticipant’s retirement date precedes his/her normal retirement date. The actuarial reduction factor will be waived for senior officersparticipants who have attained age 55 and have a minimum of ten10 years of service in a senior executive position with AEC after April 21, 1998. At the Company. Benefit
paymentstimely election of the participant, benefits under the planSERP will be made in a lump sum, in installments over a period of up to 10 years, or for the lifetime of the senior officer,
with a minimum ofparticipant. If the lifetime benefit is selected and the participant dies prior to receiving 12 years of payments, ifpayments continue to any surviving spouse or dependent children of a deceased participant who dies while still employed by the participant dies after retirement.Company, payable for a maximum of 12 years. A 23

postretirementpost-retirement death benefit of one times the senior executive officer'sparticipant’s final average earnings at the time of retirement will be paid to the designated beneficiary. Messrs. Davis, Harvey and Protsch Walker and Ms.Mses. Swan and Wegner are participants in this plan.the SERP. The following table shows the amount of retirement payments under the plan,SERP, assuming a minimum of ten10 years of service at retirement age.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE

AVERAGE ANNUAL BENEFIT AFTER SPECIFIED YEARS IN PLAN
ANNUAL ---------------------------------------------
COMPENSATION < 10 YEARS > 10 YEARS*
-------------- -------------------- ----------------------

$ 200,000 0 $120,000
300,000 0 180,000
400,000 0 240,000
500,000 0 300,000
600,000 0 360,000
700,000 0 420,000
800,000 0 480,000
900,000 0 540,000
1,000,000 0 600,000
1,100,000 0 660,000

- ------------

age and payment in the annuity form.
Supplemental Executive Retirement Plan Table
Average
Annual
Compensation
Annual Benefit After Specified Years in Plan
< 10 Years
>10 Years*
$ 200,000 0 $ 120,000
300,000 0 180,000
400,000 0 240,000
500,000 0 300,000
600,000 0 360,000
700,000 0 420,000
800,000 0 480,000
900,000 0 540,000
1,000,000 0 600,000
1,100,000 0 660,000
* Reduced by the sum of the benefit payable from the applicable retirement ordefined benefit pension plan and the Unfunded Excess Plan.

KEY EMPLOYEE DEFERRED COMPENSATION PLAN--The Company
Key Employee Deferred Compensation Plan
AEC maintains an unfunded Key Employee Deferred Compensation Plan under which participants may defer up to 100% of base salary, or incentive compensation.compensation and eligible SERP payments. Participants who have made the maximum allowed contribution to the Company-sponsoredAEC-sponsored 401(k) Savings Plan may receive an additional credit to the Deferred Compensation Plan. The credit will be equal to 50% of the lesser of (i)(a) the amount contributed to the 401(k) Savings Plan plus the amount deferred under this Plan,Plan; or (ii)(b) 6% of base salary, reduced by the amount of any matching contributions in the 401(k) Savings Plan. The employee may elect to have his or her deferrals credited to an Interest Account or an AEC Stock Account. Deferrals and matching contributions to the Interest Account receivean annual return based on the A-Utility Bond Rate with a minimum return no less than the prime interest rate published in THE WALL STREET JOURNAL.The Wall Street Journal, provided that the return may not be greater than 12% or less than 6%. Deferrals and matching contributions credited to the CommonAEC Stock Account are treated as though invested in theAEC common stock of AEC and will be credited with dividends, and
those dividendswhich will be treated as if reinvested. The shares of common stock identified as obligations under the plan as of December 31, 2000Plan are held in a rabbi trust
established in 2000.trust. Payments from the planPlan may be made in a lump sum or in annual installments for up to ten10 years at the election of the participant. Participants are selected by the Chief Executive Officer of Alliant Energy Corporate Services. Messrs. Davis, Harvey and Protsch Walker and Ms.Mses. Swan and Wegner participateare participants in the plan.

24
Plan.
REPORT OF THE COMPENSATION AND PERSONNEL
COMMITTEE ON EXECUTIVE COMPENSATION

TO OUR SHAREOWNERS:

To Our Shareowners:
The Compensation and Personnel Committee (the "Committee"“Committee”) of the Board of Directors of the Company is currently comprised of four non-employeefive independent directors (the same directors that comprise the AEC Compensation and Personnel Committee). The following is a report prepared by these directors with respect to compensation paid by AEC, the Company and AEC'sAEC’s other subsidiaries.
The Committee assesses the effectiveness and competitiveness of, approves the design of and administers executive compensation programs within a consistent total compensation framework for the Company. The Committee also reviews and approves all salary arrangements and other remuneration for executives, evaluates executive performance, and considers related matters. It also makes recommendations to the Nominating and Governance Committee regarding Director compensation. To support the Committeeit in carrying out its mission, the Committee engages an independent consultant is engaged to provide assistance to the Committee.

assistance.
The Committee is committed to implementing an overall compensation program for executives that furthers the Company'sCompany’s mission. Therefore, the Committee adheres to the following compensation policies, which are intended to facilitate the achievement of the Company'sCompany’s business strategies:

-
Executive management compensation (and particularly, long-term incentive compensation) should be closely and strongly aligned with the long-term interests of AEC’s shareowners.
Total compensation should enhance the Company'sCompany’s ability to attract, retain and encourage the development of exceptionally knowledgeable and experienced executives, upon whom, in large part, the successful operation and management of the Company depends.

- Base salary levels should be targeted at a competitive market range paid
to executives of comparable companies. Specifically, the Committee targets
the median (50th percentile) of base salaries paid by a selected group of
utility and general industry companies.

-
• Base salary levels should be targeted at a competitive market range of base salaries paid to executives of comparable companies. Specifically, the Committee targets the median (50^th percentile) of base salaries paid by companies within the utility and general industries.
Incentive compensation programs should strengthen the relationship between pay and performance by emphasizing variable, at-risk compensation that is consistent with meeting predetermined Company, subsidiary, business unit and individual performance goals. In addition, the Committee targets incentive levels are
targeted at the median (50th percentile) of incentive compensation paid by a selected group ofsimilarly sized companies within the utility and general industry companies.

COMPONENTS OF COMPENSATION

industries.
Components of Compensation
The major elements of the Company'sAEC’s executive compensation program are base salary, short-term (annual) incentives and long-term (equity) incentives. These elements are addressed separately below. In setting the level for each major component of compensation, the Committee considers all elements of an executive'sexecutive’s total compensation package, including employee benefit and perquisite programs. The Committee'sCommittee’s goal is to provide an overall compensation package for each executive officer that is competitive to the packages offered other similarly situated executives. The Committee has determined that total executive compensation at target levels, including that for Mr. Davis, is in line with competitive compensation of the comparison group ofcomparative companies.

BASE SALARIES

Base Salaries
The Committee annually reviews each executive'sexecutive’s base salary. Base salaries are targeted at a competitive market range (i.e., at the median level) when comparing both utility and non-utility (general industry) data. BaseThe Committee annually adjusts base salaries
are adjusted annually by the Committee to recognize changes in the market, varying levels of responsibility, prior experience and breadth of knowledge. Increases to base salaries are driven primarily by market adjustments for a particular salary level, which generally limitlimits across-the-board increases. IndividualThe Committee considers individual performance factors are not considered by the Committee in setting base salaries. The Committee reviewed executive salaries for market comparability using utility and general industry data contained in compensation surveys published by the Edison Electric Institute, the American Gas Association and several compensation consulting firms. Based on
In consideration of industry conditions and Company performance, the foregoing,Committee did not increase the 25

annual salary for Mr. Davis was fixed at $640,000 for the 2000 fiscal year.

SHORT-TERM INCENTIVES

The goalbase salaries of the Company'sChief Executive Officer and the Executive Vice Presidents in 2003.
Short-Term Incentives
AEC’s short-term (annual) incentive programs is to promoteprogram promotes the Committee'sCommittee’s pay-for-performance philosophy by providing executives with direct financial incentives in the form of annual cash or stock based bonuses based ontied to the achievement of corporate, subsidiary, business unit and individual performance goals. Annual bonus opportunities allow the Committee to communicate specific goals that are of primary importance during the coming year and motivate executives to achieve these goals. The Committee on an annual basis reviews and approves the programs'program’s performance goals, and the relative weight assigned to each goal as well asand the targeted and maximum award levels. A description of the short-term incentive programs available during 20002003 to executive officers follows.

ALLIANT ENERGY CORPORATION MANAGEMENT INCENTIVE COMPENSATION PLAN--
Alliant Energy Corporation Management Incentive Compensation Plan—In 2000,2003, the Alliant Energy Corporation Management Incentive Compensation Plan (the "MICP"“MICP”) covered executives and was based on achieving annual targets in corporate performance that included earnings per share ("EPS"(“EPS”), cash flow, safety, diversity and environmental targets for the utility businesses, and business unit (including customer service and reliability) and individual performance goals. Target and maximum bonus awards under the MICP in 20002003 were set at the median of the utility and general industry market levels. Targets wereThe Committee considered by the Committeethese targets to be achievable, but requiredto require above-average performance from each of the executives. The level of performance achieved in each category determines actual payment of bonuses, as a percentage of annual salary. Weighting factors are applied to the percentage achievement under each category to determine overall performance. If a pre-determined EPS target is not met, there is no bonus payment associated with the MICP. If the threshold performance for any other performance target is not reached, there is no bonus payment associated with that particular category. Once the designated maximum performance is reached, there is no additional payment for performance above the maximum level. The actual percentage of salary paid as a bonus, within the allowable range, is equal to the weighted average percent achievement for all the performance categories. Potential MICP awards range from 0% to 90%150% of annual salary for eligible executives other than Mr. Davis. The amounts paid under the
MICP to eligible officers included in the Summary Compensation Table are
reflected in that table.

In 2000, Mr. Davis was covered by the MICP. Awards for Mr. Davis under the MICP
in 2000 were based on corporate and strategic goal achievement in relation to
predetermined goals. For each plan year, the Committee determines the
performance apportionment for Mr. Davis. In 2000, that apportionment was 70% for
corporate performance and 30% for strategic goal performance. Corporate
performance is measured based on Company-wide EPS and environmental and safety
targets established at the beginning of the year. Strategic goals are measured
based on the achievement of certain specific goals, which included strategy
development and implementation, established for Mr. Davis by the Committee. The
2000 MICP award range for Mr. Davis was from 0% to 150%100% of annual salary. The
award earned by Mr. Davis undersalary for other eligible executives.
Due to industry and market conditions, the Committee determined that the Chief Executive Officer and Executive Vice Presidents were not eligible to receive MICP awards for 2000 is set forth in the Summary
Compensation Table under the heading "Bonus".

LONG-TERM INCENTIVES

2003 plan year performance.
Long-Term Incentives
The Committee strongly believes compensation for executives should include long-term, at-risk pay to strengthentostrengthen the alignment of the interests of the shareowners and management. In this regard, the Alliant Energy Corporation
Long-Term Equity Incentive Plan permitsAEC maintains plans that permit grants of stock options, restricted stock and performance unit/ units/shares with respect to AEC'sAEC’s common stock. The Long-Term Equity Incentive Plan is administered by the AEC Compensation and
Personnel Committee. The Committee believes that the Long-Term Equity Incentive Plan
balancesincentive plans balance the Company's existingCompany’s annual compensation programs by emphasizing compensation based on the long-term, successful performance of the Company from the perspective of the shareowners of AEC.AEC’s shareowners. A description of the long-term incentive programs available during 20002003 to executive officers under the
Long-Term Equity Incentive Plan is set forth below.

ALLIANT ENERGY CORPORATION LONG-TERM INCENTIVE PROGRAM--The
Alliant Energy Corporation 26
Long-Term Incentive Program—The Alliant Energy Corporation Long-Term Incentive Program covered executives and consisted of the following components in 2000:2003: non-qualified stock options and performance shares. StockNon-qualified stock options provide a reward that is directly tied to the benefit shareowners of AEC receive from increases in the price of AEC'sAEC’s common stock. TheUntil 2003, the payout from the performance shares iswas based on two equally-weighted performance components: AEC'sAEC’s three-year total return to shareowners relative to an investor-owned utility peer group (“TSR”), and annualized EPS growth versus internally set performance hurdles contained in the Alliant Energy Strategic Plan. Beginning in 2003, TSR was used as the sole measure of the performance share plan. Thus, the two components of the Long-Term Incentive Program (i.e., stock options and performance shares) provide incentives for management to produce superior shareowner returns on both an absolute and relative basis. During 2000,2003, the AEC Compensation and Personnel Committee made a grant of stock options and performance shares to various executive officers, including Messrs. Davis, Harvey and Protsch Walker and Ms.Mses. Swan and Wegner.All option grants had per share exercise prices equal to the fair market value of a share of AEC common stock on the day following the date the grants were approved. Options vest on a one-third basis at the beginning of each calendar year after grant and have a ten-year10-year term from the date of the grant. Executives
in the Alliant Energy Corporation Long-Term Equity Incentive ProgramSuch executives were also granted performance shares. Performance shares will be paid out in sharesa combination of AEC'sAEC common stock orand cash. The award will be modified by a performance multiplier, which ranges from 0 to 2.00 based on AECCompany performance.
In determining actual award levels under the Alliant Energy Corporation Long-Term Equity Incentive Program, the AEC Compensation and Personnel Committee was primarily concerned with providing a competitive total compensation opportunity level to officers. As such, award levels (including awards made to Mr. Davis) were based on a competitive analysis of similarly sized utility and general industry companies that took into consideration the market level of long-term incentives, as well as the competitiveness of the total
compensation package. AwardThe Committee then established award ranges as well asand individual award levels were then established based on responsibility level and market competitiveness. No corporate or individual performance measures were reviewed in connection with the awards of options and performance shares. Award levels were targeted to the median of the range of such awards paid by comparable companies. The AEC Compensation and Personnel Committee did not consider the amounts of options and performance shares already outstanding or previously granted when making awards for 2000.2003. Mr. Davis'Davis’ awards in 20002003 under the Long-Term Incentive Program are shown in the Stocktables under “Stock Option Grants in 2000
Table2003” and “Long-Term Incentive Awards in 2003.”
Due to the EPS and TSR goals not being achieved, there was no payout for the performance share portion of the Long-Term Incentive AwardsProgram’s three-year cycle that ended in 2000 Table.

POLICY WITH RESPECT TO THEDecember 2003.
Policy with Respect to the $1 MILLION DEDUCTION LIMIT

Million Deduction Limit
Section 162(m) of the Internal Revenue Code generally limits the corporate deduction for compensation paid to executive officers named in the proxy statement to $1 million unless such compensation is based upon performance objectives meetingobjectivesmeeting certain regulatory criteria or is otherwise excluded from the limitation. Based on the Committee'sCommittee’s commitment to link compensation with performance as described in this report, the Committee currently intends to qualify future compensation paid to the Company'sCompany’s executive officers for deductibility by the Company under Section 162(m) except in limited appropriate circumstances.

CONCLUSION

Conclusion
The Committee believes the existing executive compensation policies and programs provide thean appropriate level of competitive compensation for the Company'sCompany’s executives. In addition, the Committee believes that the longlong- and short termshort-term performance incentives effectively align the interests of executives and shareowners toward a successful future for the Company.
COMPENSATION AND PERSONNEL COMMITTEE*

Arnold M. Nemirow (Chair)
Alan B. Arends
COMMITTEE
Judith D. Pyle Anthony R. Weiler

* Members of the Compensation and Personnel Committee on December 31, 2000 who
approved this Report.

27
(Chairperson)
Alan B. Arends
Michael L. Bennett
Singleton B. McAllister
David A. Perdue
REPORT OF THE AUDIT COMMITTEE
To Our Shareowners:
The Audit Committee (the "Committee") of the Board of Directors of the Company is composed of five independent directors, each of whom is independent as
defined inunder the American Stock Exchange'sNYSE listing standards (the same directors
that comprise the AEC Audit Committee).and SEC rules. The Committee operates under a written charter adopted by the Board of Directors, which is attached to this proxy
statementDirectors. The Audit Committee charter, as Exhibit I. The Committee recommends toamended by the Board of Directors the
selection of the Company's independent auditors.

on March 11, 2004, is attached as Appendix A to this proxy statement.
The Company'sCompany’s management ("management") is responsible for the Company'sCompany’s internal controls and the financial reporting process, including the system of internal controls. The Company's independent auditors are responsible for expressing an opinion on the conformity of the Company'sCompany’s audited consolidated financial statements with accounting principles generally accepted accounting principles.in the United States of America. The Committee has reviewed and discussed the audited consolidated financial statements with management and the independent auditors. The Committee has discussed with the independent auditors matters required to be discussed by Statement on Auditing Standards No. 61 (Communication With Audit Committees).
The Company'sCompany’s independent auditors have provided to the Committee the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Committee discussed with the independent auditors their independence.
The Committee considered
whetherhas adopted a policy that requires advance approval of all audit, audit-related, tax and other permitted services performed by the independent auditors'auditor. The policy provides for pre-approval by the Committee of specifically defined audit and non-audit services after the Committee is provided with the appropriate level of details regarding the specific services to be provided. The policy does not permit delegation of the Committee’s authority to management. In the event the need for specific services arises between Committee meetings, the Committee has delegated to the Chairperson of the Committee authority to approve permitted services provided that the Chairperson reports any decisions to the Committee at its next scheduled meeting.
The independent auditor fees paid by AEC include those on behalf of the Company and certain other AEC subsidiaries for 2002 and 2003, and were as follows:
2002
2003
Audit Fees $ 2,843,000 * $ 2,293,000
Audit-Related Fees 19,000 332,000
Tax Fees 1,125,000 435,000
All Other Fees 297,000 54,000
Audit-Related Fees consisted of the fees billed for Sarbanes-Oxley Section 404 planning in 2003, employee benefits plan audits, and attest services required by statute or regulations.
Tax Fees consisted of the fees billed for professional services rendered for tax compliance, tax advice and tax planning, including all services performed by the professional staff in the independent auditors’ tax division, except those rendered in connection with the audit.
All Other Fees consisted of license fees for tax and accounting research software products and, in 2002, fees for generation strategy consultation.
* Includes approximately $1.4 million for 2000 and 2001 re-audit fees
The Audit Committee does not consider the provision of non-audit services is compatible with maintaining the independent auditors'
independence. The fees toby the independent auditors for 2000 for the Company and
AEC were as follows:

Audit Fees.................. $ 840,000
Financial Information
Systems Design and
Implementation Fees......... 0
All Other Fees.............. 1,145,000
described above to be incompatible with maintaining auditor independence.
The Committee discussed with the Company'sCompany’s internal and independent auditors the overall scopes and plans for their respective audits. The Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, the evaluation of the Company'sCompany’s internal controls and overall quality of the Company'Company’s financial reporting.
Based on the Committee'sCommittee’s reviews and discussions with management, the internal auditors and the independent auditors referred to above, the Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company'sCompany’s Annual Report on Form 10-K for the year ended DecemberDec. 31, 20002003, for filing with the SEC.
AUDIT COMMITTEE
Jack B. Evans (Chair)
(Chairperson)
Alan B. Arends
Katharine C. Lyall
Milton E. Neshek
Judith D. Pyle

28
Michael L. Bennett
Singleton B. McAllister
David A. Perdue
SECTION 16(A)16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
The Company'sCompany’s directors and its executive officers and certain other officers are required to report their ownership of AEC's common stock and subsidiary
preferredthe Company’s Preferred stock and any changes in that ownership towith the SEC and the New York
Stock Exchange.NYSE. As a matter of practice, the Company’s Shareowner Services Department assists the Company’s reporting persons in preparing initial reports ofownership and reports of changes in ownership and files those reports on their behalf. To the best of the Company'sCompany’s knowledge, all required filings in 20002003 were properly made in a timely fashion. In making the above statements, the Company has relied on the representations of the personsparties involved and on copies of their reports filed with the SEC.
By Order of the Board of Directors,

/s/ Edward M. Gleason

Edward M. Gleason
Vice President -- Treasurer
and
F. J. Buri
Corporate Secretary

EXHIBIT I
APPENDIX A – AUDIT COMMITTEE CHARTER
Purposes and Role of Committee
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors in accordance with the
requirements of the American Stock Exchange listing standards. All members of
the Committee shall be financially literate and at least one member of the
Committee shall have accounting or related financial management expertise. The
Chair and the memberspurposes of the Audit Committee shall be elected annually by a
majority vote of the members(the “Committee”) of the Board of Directors. The Audit Committee
shall meet atDirectors (the “Board”) of Wisconsin Power and Light Company (the “Company”) are to: (1) assist Board oversight of (a) the call of any one of its members, but in no event shall it meet
less than twice a year. Subsequent to each Audit Committee meeting, a reportintegrity of the actions taken byCompany’s financial statements, (b) the Audit Committee shall be made toCompany’s compliance with legal and regulatory requirements, (c) the Board of
Directors.

The Audit Committee will reviewindependent auditors’ qualifications and update this Charter periodically, at least
annually, as conditions dictate.

The functionsindependence, and responsibilities of the Audit Committee shall be to:

1. Evaluate(d) the performance of the Company’s internal audit function and independent auditorsauditors; and recommend(2) prepare the report that Securities and Exchange Commission (“Commission”) rules require to the
Board of Directors the appointment of the independent auditors, who are
ultimately accountable to the Audit Committee and the Board. Where
appropriate, recommend that the Board of Directors replace the
independent auditors.

2. Discuss with the independent auditors the scope of their audit.

3. Discuss with the independent auditors and management the Company's
accounting principles, policies and practices and its reporting policies
and practices.

4. Review and discuss with the independent auditors and Company management
the Company's audited annual financial statements and the results of the
annual audit. Determine whether to recommend to the Board of Directors
that the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K.

5. Consider the independent auditors' judgements about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.

6. Discuss with the independent auditors and the Company's internal auditor
the adequacy of the Company's or any of its subsidiaries accounting,
financial and operational controls.

7. Discuss with the Company's internal auditor the scope and results of
internal audits and initiate such accounting principles, policies and
practices, and reporting policies and practices as it may deem necessary
or proper.

8. Consider whether the independent auditors provision of non-audit
services is compatible with maintaining the independent auditors
independence.

9. Annually review and verify the effectiveness of the Company's Legal
Compliance Program.

10. Annually review and verify the effectiveness of the Company's Risk
Management Program including the use of financial derivative
instruments.

11. As a whole, or through the Audit Committee Chair, review with the
independent auditors the Company's interim financial results included in
the Quarterly Reports on Form 10-Q prior to filing with the Securities
and Exchange Commission.

12. Submit appropriate reports required by the SEC to the shareowners in the
Company'sCompany’s annual proxy statements and provide appropriate certification
to the NYSE as required.

13. Ensure that the independent auditors submit periodic reports to the
Audit Committee delineating all relationships between the independent
auditor and the Company, consistent with Independence Standards Board
Standard No. 1; discuss such reports with the independent auditors; and
recommend that the Board of Directors take appropriate action to satisfy
itself of the independence of the independent auditors.

14. Discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61.statement. While the Audit Committee has the responsibilities and functionspowers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company'sCompany’s financial statements and disclosures are complete and accurate and are in accordance with accounting principles generally accepted accounting principles.
This isin the responsibilityUnited States of managementAmerica (“GAAP”) and applicable laws and regulations.
Committee Membership
The Committee shall consist of three or more members of the Board, each of whom satisfies the requirements for independence and experience under Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”), Commission rules and the independent auditors. Nor is it
the dutylisting standards of the New York Stock Exchange (the “NYSE”). The Board will endeavor to ensure that at least one Committee member shall qualify as an “audit committee financial expert” as defined by SEC rules. Committee members may not serve on audit committees of more than two other public companies without the prior consent of the Board to enable the Board to determine that such service would not impair the ability of such a member to effectively serve on the Audit Committee.
Appointment and Removal of Committee Members
The Committee members shall be appointed by the Board annually or as necessary to conduct investigations, to resolve
disagreements, if any, between managementfill vacancies upon recommendation of the Company’s Nominating and Governance Committee. Each member shall serve until his or her successor is duly elected and qualified or until such member’s earlier resignation or removal. Any member of the Committee may be removed, with or without cause, by a majority vote of the Board upon recommendation of the Company’s Nominating and Governance Committee.
Committee Structure and Operations
The Board shall designate one member of the Committee as its Chair. The Committee shall meet in formal session at least three times each year and, in addition, hold quarterly meetings with the independent auditors and management to discuss the annual audited financial statements and the quarterly financial statements and earnings releases. Additional meetings shall be held when deemed necessary or to
assure compliance with laws and regulations.

APPENDIX A

WISCONSIN POWER AND LIGHT COMPANY
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2000

desirable at the request of the Chairperson of the Board, the Chief Executive Officer or any Committee member. The Committee will meet periodically in executive session without management present.
Committee Responsibilities
The responsibilities of the Committee are to:

CONTENTS PAGE
- -------- ----
1. Be directly responsible for the appointment, compensation, retention, termination and oversight of the Company’s independent auditors (including resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The Company................................................. A-3

Selected Financial Data..................................... A-3

Management'sindependent auditors must report directly to the Committee.
2. Pre-approve all audit services and permitted non-audit services to be performed by the independent auditors, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Committee prior to the completion of the audit. Such pre-approval may be pursuant to pre-approval policies and procedures established by the Committee provided such policies and procedures are detailed as to the particular service to be provided, require the Committee to be informed about each such service prior to making pre-approval decisions and do not include delegation of the Committee’s responsibilities to management. The Committee may delegate authority to grant pre-approvals of audit services and permitted non-audit services to subcommittees consisting of one or more of its members, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Committee at its next scheduled meeting.
3. Review with the independent auditors the scope of the prospective audit, the estimated fees therefore and such other matters pertaining to such audit as the Committee may deem appropriate. Receive copies of the annual comments from the independent auditors on accounting procedures and systems of control.
4. Review and discuss with management and the independent auditors, before filing with the Commission, the annual audited financial statements and quarterly financial statements, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations................................. A-4

Operations,” and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K.
5. Review and discuss with management and the independent auditors the Company’s earnings press releases (including the use of “pro forma” or “adjusted” non-GAAP information), as well as financial information and earnings guidance provided to analysts and rating agencies; provided that the discussion of financial information and earnings guidance provided to analysts and ratings agencies may be done generally (e.g. discussion of the types of information to be disclosed and the type of presentation to be made) and need not occur in advance of each instance in which the Company may provide such information or guidance.
6. Review and discuss with management, the internal auditing department and the independent auditors: (1) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies; (2) analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; (3) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
7. Review and discuss quarterly reports from the independent auditors on: all critical accounting policies and practices to be used; all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments and the preferred treatment by the independent auditors; other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.
8. Review and discuss with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any audit problems or difficulties and management’s response, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management. The review shall include a discussion of the responsibilities, budget and staffing of the Company’s internal audit function.
9. Review the action taken by management on the internal auditors’ and independent auditors’ recommendations.
10. Review with the senior internal audit executive the annual internal audit plan and scope of internal audits.
11. Make or cause to be made, from time to time, such other examinations or reviews as the Committee may deem advisable with respect to the adequacy of the systems of internal controls and accounting practices of the Company and its subsidiaries and with respect to current accounting trends and developments, and take such action with respect thereto as may be deemed appropriate.
12. Review the appointment, reassignment and replacement of the senior internal audit executive.
13. Set clear policies for hiring by the Company of employees or former employees of the independent auditors.
14. Meet in separate private sessions, on a periodic basis, with each of the independent auditors, the internal auditors and members of management as appropriate.
15. Review disclosures made to the Committee by the Company’s Chief Executive Officer and Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting or any fraud, whether or not material, involving management or other employees who have a significant role in the Company’s internal control over financial reporting.
16. As and when required by Commission rules, obtain, on a quarterly basis, reports from management regarding its evaluation of the Company’s disclosure controls and procedures and internal control over financial reporting.
17. As and when required by Commission rules, obtain, on an annual basis, the independent auditors’ attestation report on management’s assessment of the Company’s internal control over financial reporting.
18. Review with management, the independent auditors and the senior internal audit executive the adequacy of, and any significant changes in, the internal controls; the accounting policies, procedures or practices of the Company and its subsidiaries; and compliance with corporate policies, directives and applicable laws.
19. Annually receive from and discuss with the independent auditors a written statement delineating all relationships between the auditors and the Company that may have a bearing on the auditors’ independence.
20. Obtain and review, at least annually, a report by the independent auditors describing: the independent auditors’ internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, Public Company Accounting Oversight Board inspection, or by any inquiry or investigation by governmental or professional authorities (including any material litigation), within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the auditors’ independence) all relationships between the independent auditors and the Company. Evaluate the qualifications, performance and independence of the independent auditors taking into account the opinions of management and the internal auditors. The Committee shall present its conclusions with respect to the independent auditors to the Board.
21. Review and evaluate the lead partner of the independent auditors.
22. Ensure the rotation of lead and concurring audit partners as required by Commission rules. Consider whether, in order to ensure continuing auditor independence, there should be regular rotation of the audit firm itself.
23. Establish procedures for the receipt and handling of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by employees of the Company and its affiliates of concerns regarding questionable accounting, internal control or auditing matters.
24. Review the status of compliance with laws, regulations, and internal procedures, contingent liabilities and risks that may be material to the Company, the scope and status of systems designed to ensure Company compliance with laws, regulations and internal procedures.
25. Discuss with management the Company’s policies with respect to risk assessment and risk management, the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.
26. Conduct or authorize investigations into any matters within the Committee’s scope of responsibility, consistent with procedures to be adopted by the Committee.
27. As appropriate, obtain advice and assistance from outside legal, accounting or other advisors.
Committee Reports
1. Report to the Board on a regular basis on the activities of the Committee (i) following meetings of the Committee, (ii) with respect to such other matters as are relevant to the Committee’s discharge of its responsibilities and (iii) with respect to such recommendations as the Committee may deem appropriate. This report shall include a review of any issues that arise with respect to the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance and independence of the Company’s independent auditors, or the performance of the internal audit function. The report to the Board may take the form of an oral report by the Committee’s Chair or any other member of the Committee designated by the Committee to make such report.
2. Annually produce a report on matters required by the rules of the Commission for inclusion in the Company’s annual proxy statement.
3. Maintain minutes or other records of meetings and activities of the Committee
Annual Performance Evaluation
Conduct an annual performance evaluation of the Committee, which shall assess the performance of the Committee with respect to the duties and responsibilities of the Committee as set forth in this charter. In addition, the Committee shall review and reassess, at least annually, the adequacy of this charter and recommend to the Board any improvements to this charter that the Committee considers necessary or appropriate. The Committee shall conduct such evaluations and reviews in such manner as it deems appropriate.
Resources and Authority of the Committee
The Committee shall have the authority, as it deems necessary to carry out its duties, to retain, discharge and approve fees and other terms for retention of its own independent experts in accounting and auditing, legal counsel and other independent experts or advisors. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditors for the purpose of rendering or issuing an audit report or related work and to any experts or advisors employed by the Committee. The Committee may direct any officer or employee of the Company or request any employee of the Company’s independent auditors, outside legal counsel or other consultants or advisors to attend a Committee meeting or meet with any Committee members.
(As Amended March 11, 2004)
APPENDIX B – WISCONSIN POWER AND LIGHT COMPANY
ANNUAL REPORT
For the Year Ended December 31, 2003
Contents
Page
Definitions B-2
The Company B-3
Selected Financial Data B-3
Management’s Discussion and Analysis of Financial Condition and Results of Operations B-4
Independent Public Accountants.................... A-14

Auditors’ Report B-18
Consolidated Financial Statements
Consolidated Statements of Income......................... A-15

Income B-19
Consolidated Balance Sheets............................... A-16

Sheets B-20
Consolidated Statements of Cash Flows..................... A-18

Flows B-22
Consolidated Statements of Capitalization................. A-19

Capitalization B-23
Consolidated Statements of Changes in Common Equity....... A-20

Equity B-24
Notes to Consolidated Financial Statements................ A-21

Statements B-25
Shareowner Information...................................... A-38

Information B-42
Executive Officers.......................................... A-38
Officers B-43

A-1
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this report are defined below:
Abbreviation or Acronym
Definition
- ----------------------- ----------
AFUDC Allowance for Funds Used During Construction
Alliant Energy Alliant Energy Corporation
APB Accounting Principles Board Opinion
ATC American Transmission Company LLC
ARO Asset Retirement Obligation
CAA Clean Air Act
Corporate Services Alliant Energy Corporate Services, Inc.
DNR Department of Natural Resources
Dth Dekatherm
EDS Electronic Data Systems Corporation
EITF Emerging Issues Task Force
EPA United States U.S. Environmental Protection Agency
FAC Fuel Adjustment Clause
FASB Financial Accounting Standards Board
FERC Federal Energy Regulatory Commission
FIN FASB Interpretation No.
FIN 46 Consolidation of Variable Interest Entities
GAAP Accounting Principles Generally Accepted in the U.S.
ICC Illinois Commerce Commission
IES IES Industries Inc.
IESU IES Utilities Inc.
IPC
IP&L Interstate Power and Light Company
ISO Independent System Operator
Kewaunee Kewaunee Nuclear Power Plant
KWh Kilowatt-hour
MD&A Management's Management’s Discussion and Analysis of Financial Condition and Results of Operations
MGP Manufactured Gas Plants
Moody’s Moody’s Investors Service
MW Megawatt
MWh Megawatt-Hour
Megawatt-hour
N/A Not Applicable
NEPA National Energy Policy Act of 1992
NOx Nitrogen Oxides
NRC Nuclear Regulatory Commission
PGA Purchased Gas Adjustment
PRP Potentially Responsible Party
PSCW Public Service Commission of Wisconsin
PUHCA Public Utility Holding Company Act of 1935
Resources Alliant Energy Resources, Inc.
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards
SFAS 71 Accounting for the Effects of Certain Types of Regulation
SFAS 109 Accounting for Income Taxes
SFAS 115 Accounting for Certain Investments in Debt and Equity Securities
SFAS 133 Accounting for Derivative Instruments and Hedging Activities
SFAS 143 Accounting for Asset Retirement Obligations
SFAS 149 Amendment of SFAS 133 on Derivative Instruments and Hedging Activities
South Beloit South Beloit Water, Gas and Electric Company
STB Surface Transportation Board
Standard & Poor’s Standard & Poor’s Rating Services
TBD To Be Determined
U.S. United States WDNR Wisconsin Department of Natural Resources
WNRB Wisconsin Natural Resources Board
America
VEBA Voluntary Employees’ Beneficiary Association
WP&L Wisconsin Power and Light Company
WPLH WPL Holdings, Inc.
WRPC Wisconsin River Power Company

A-2
WP&L filed a combined Form 10-K for 20002003 with the SEC; such document included the filings of WP&L's&L’s parent, Alliant Energy, IESUIP&L and WP&L. Certain portions of MD&A and the Notes to Consolidated Financial Statements included in this WP&L Proxy Statement represent excerpts from the combined Form 10-K. As a result, the disclosure included in this WP&L Proxy Statement at times includes information relating to Alliant Energy, IESU, IPC,IP&L, Resources and/or Corporate Services. All required disclosures for WP&L are included in this proxy statement thus such additional disclosures represent supplemental information.
THE COMPANY

In April 1998, WPLH, IES and IPC completed a merger resulting in Alliant Energy.
The primary first tier subsidiaries of Alliant Energy include: WP&L, IESU, IPC,IP&L, Resources and Corporate Services. WP&L was incorporated in 1917 in Wisconsin in 1917 as the Eastern Wisconsin Electric Company andCompany. WP&L is a public utility engaged principally in the generation, transmission, distribution and sale of electric energy; and the purchase, distribution, transportation and sale of natural gas; and the provision of water
servicesgas in selective markets. Nearly all of WP&L's&L’s customers are located in south and central Wisconsin. WP&L operates in municipalities pursuant to permits of indefinite duration, which are regulated by Wisconsin law. At DecemberDec. 31, 2000,2003, WP&L supplied electric and gas service to approximately 414,000436,976 and 165,000172,615 (excluding transportation and other) customers, respectively. WP&L also had approximately 19,000provides water customers.services in select markets and various other energy-related products and services including construction management services for wind farms. In 2000, 19992003, 2002 and 1998,2001, WP&L had no single customer for which electric, gas, water and/or gasother sales accounted for 10% or more of WP&L's&L’s consolidated revenues. WPL Transco LLC was formed in Wisconsin in 2000 and is the wholly-
owneda wholly-owned subsidiary of WP&L whichand holds theWP&L’s investment in ATC. WP&L also owns all of the outstanding capital stock of South Beloit, a public utility supplying electric, gas and water service, principally in Winnebago County, Illinois, which was incorporated in 1908. WP&L also owns varying interests in several other subsidiaries and investments whichthat are not material to WP&L's&L’s operations.

ELECTRIC OPERATIONS--As
WP&L is subject to regulation by the PSCW regarding retail utility rates and service, accounts, issuance and use of Decemberproceeds of securities, certain additions and extensions to facilities and in other respects. WP&L is required to file a rate case with the PSCW at least every two years based on a forward-looking test year period.
Electric Operations - As of Dec. 31, 2000,2003, WP&L provided retail electric service to approximately 414,000 electric retail434,941 customers, 600601 communities and 2830 wholesale customers. WP&L's2003 electric utility operations accounted for 80%75% of operating revenues and 90%85% of operating income for the year ended December 31,
2000.income. Electric sales are seasonal to some extent with the annual peak normally occurring in the summer months. In 2000,2003, the maximum peak hour demand for WP&L was 2,5082,782 MW and occurred on AugustAug. 20, 2003.
Gas Operations - As of Dec. 31, 2000.

GAS OPERATIONS--As of December 31, 2000,2003, WP&L provided retail natural gas service to approximately 165,000 gas172,615 (excluding transportation and other) customers in 233232 communities. WP&L's2003 gas utility operations accounted for 19%22% of operating revenues and 9%13% of operating income, for the year ended December 31, 2000.which included providing gas services to retail and transportation customers. WP&L's&L’s gas sales follow a seasonal pattern. There is an annual base load of gas used for cooking, heating and other purposes, with a large heating peak occurring during the winter season.
SELECTED FINANCIAL DATA
2003(1)
2002(1)
2001(1)
2000
1999
(in thousands)
Operating revenues $1,216,981 $989,525 $993,716 $862,381 $752,505
Earnings available for common stock 111,564 77,614 70,180 68,126 67,520
Cash dividends declared on common stock 70,580 59,645 60,449 -- 58,353
Cash flows from operating activities 138,495 223,750 135,886 174,060 163,228
Total assets 2,469,277 2,335,138 2,217,457 2,160,554 2,025,709
Long-term obligations, net 453,509 523,308 523,183 569,309 471,648

YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
(IN THOUSANDS)

Operating revenues........................... $ 862,381 $ 752,505 $ 731,448 $ 794,717 $ 759,275
Earnings available(1) Refer to “Results of Operations” in MD&A for common stock.......... 68,126 67,520 32,264 67,924 79,175
Cash dividends declared on common stock...... -- 58,353 58,341 58,343 66,087
Total assets................................. 1,857,024 1,766,135 1,685,150 1,664,604 1,677,814
Long-term obligations, net................... 569,309 471,648 471,554 420,414 370,634
a discussion of the 2003, 2002 and 2001 results of operations.

The 1998 financial results reflect
Alliant Energy is the recordingsole common shareowner of $17 millionall 13,236,601 shares of pre-tax
merger-related charges.

A-3

MANAGEMENT'SWP&L’s common stock outstanding. As such, earnings per share data is not disclosed herein.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Statements contained in this report (including MD&A) that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to 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 include: weather effects on sales and revenues; general economic and political conditions in WP&L's&L’s service territories; federal and state regulatory or governmentgovernmental actions, including issues associated with the deregulationimpact of the domestic utility
industrypotential energy-related legislation in Congress and the setting of ratesability to obtain adequate and timely rate relief to allow for, among other things, the recovery of costs;operating costs and the earning of reasonable rates of return, as well as the payment of expected levels of dividends; unanticipated construction and acquisition expenditures; unanticipated issues in connection with WP&L’s construction of new generating facilities; issues related to strandedpurchased electric supplies and price thereof, including the ability to recover purchased-power and fuel costs and
the recovery thereof; unanticipatedthrough rates; issues related to the supplyelectric transmission, including recovery of purchased
electricitycosts incurred, and price thereof; unexpected issuesfederal legislation and regulation affecting such transmission; risks related to the operations of and unanticipated issues relating to the sale of WP&L’s interest in Kewaunee; unanticipated costs associated with certainWP&L’s environmental remediation efforts being undertaken byand with environmental compliance generally; developments that adversely impact WP&L;&L’s ability to implement its strategic plan; no material permanent declines in the fair market value of, or expected cash flows from, WP&L’s investments; WP&L’s ability to continue cost controls and operational efficiencies; WP&L’s ability to identify and successfully complete proposed acquisitions and development projects; access to technological developments; employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages; continued access to the capital markets; the ability to successfully complete ongoing tax audits and changesappeals with no material impact on WP&L’s earnings or cash flows; inflation rates; and factors listed in “Other Matters—Other Future Considerations.” WP&L assumes no obligation, and disclaims any duty, to update the forward-looking statements in this report.
STRATEGIC OVERVIEW
November 2002 Plan - In 2003, Alliant Energy (including WP&L) completed the plan it (including WP&L) outlined in November 2002 to strengthen its (including WP&L’s) financial profile. A summary of the strategic actions completed under the plan that directly impact WP&L is as follows:
Asset sales - in 2003, WP&L sold its water utility serving the Beloit area. WP&L continues to pursue the sale of its water utilities serving the Ripon and South Beloit areas.
Common equity offering - in July 2003, Alliant Energy sold 17.25 million shares (net proceeds of $318 million) of its common stock in a public offering and infused $200 million into WP&L in support of its utility generation and reliability initiatives.
Cost control - Alliant Energy (including WP&L) has implemented a comprehensive Lean Six Sigma program, which it expects to help reduce its operating costs and improve the efficiency of its operations.
Updated Strategic Plan - Alliant Energy’s domestic utility business (including WP&L) is its core business and the sole growth platform within its updated strategic plan. As a result, Alliant Energy views its domestic utility business as the area of its business that is expected to provide the larger share of its long-term earnings growth. It will also be the area of the business that Alliant Energy will invest the bulk of its capital in during 2004 and 2005. In addition, Alliant Energy’s Non-regulated Generation business has refined its focus to support the development, financing and construction of generation to meet the needs of Alliant Energy’s domestic utility business.
Alliant Energy’s updated strategy reflects the fact that it has investment opportunities in its domestic utility business that did not exist several years ago. Wisconsin enacted legislation with the goal of assuring reliable
electric energy for Wisconsin, which allows the construction of merchant power plants in the ratestate and streamlines the regulatory approval process for building new generation and transmission facilities. More recently, the PSCW approved a plan proposed by another Wisconsin utility which provides a similar level of inflation.

UTILITY INDUSTRY OUTLOOK

OVERVIEW--Asinvestment certainty by leasing generation from an affiliate. These changes have enabled WP&L to pursue additional generation investments to serve its customers and to provide Alliant Energy with greater certainty regarding the returns on these investments.
In December 2003, Alliant Energy announced its updated domestic utility generation plan, which is expected to add a diversified portfolio of nameplate generation between 2004 and 2010 for WP&L as follows (in MW):
Natural gas-fired generation 300
Wind (purchased-power and/or generation) 100
Coal 200
Other 15
Total 615
WP&L intends to add this new generation to meet increasing customer demand, reduce reliance on purchased-power agreements and mitigate the impacts of potential future plant retirements. WP&L will continue to purchase energy and capacity in the market and intends to remain a net purchaser of both, but at a reduced level assuming the successful completion of these generation projects. WP&L expects that 300 MW of the natural gas-fired generation will be installed as combustion turbines for peaking generation. The plan also reflects continued commitments to WP&L’s energy efficiency and environmental protection programs. WP&L’s capital expenditures associated with this plan are expected to be approximately $360 million over the seven-year period of 2004 to 2010.
In January 2004, Alliant Energy announced that Resources’ Non-regulated Generation business has assumed an option to purchase a site for a 300 MW natural gas-fired power plant outside Sheboygan Falls, Wisconsin. Subject to PSCW approval, Resources’ Non-regulated Generation business would construct and own the approximately $150 million plant (of which $75 million has been expended as of Dec. 31, 2003 to purchase two gas turbines) and lease the facility to WP&L. WP&L will operate the plant and utilize the plant’s output. With the appropriate timely regulatory approvals, Alliant Energy currently intends to have this facility placed in-service in 2005. In addition, Calpine Corporation is currently constructing a 600 MW natural gas-fired combined cycle power plant in Wisconsin at WP&L’s Rock River plant (Riverside). WP&L has entered into a purchased-power agreement for 453 MW of this plant’s output and the plant is expected to be placed in-service prior to the 2004 summer peak demand.
RATES AND REGULATORY MATTERS
Overview - WP&L, which has one utility subsidiary, South Beloit, is currently subject to federal regulation by FERC and state regulation in Wisconsin and Illinois. Such regulatory oversight covers not only current facilities and operations, but also WP&L’s plans for construction and financing of new generation facilities and related activities.
As a public utility company with significant utility assets, WP&L competesconducts its utility operations in an ever-changing utility industry.business environment. Electric energy generation, transmission and distribution are infacing a period of fundamental change resulting from potential legislative, regulatory, economic and technological changes. These changes could impact competition in the electric wholesale and retail markets asin the event customers of electric utilities are being offered alternative suppliers. Such competitive pressures could result in electric utilities losing customers and incurring stranded costs (i.e., assets and other costs rendered unrecoverable as the result of competitive pricing), which would be borne by security holders if the costs cannot be recovered from customers. WP&L is currently subject to regulation by FERC, and state regulation in
Wisconsin and Illinois. FERC regulates competition in the electric wholesale power generation market and each state regulates whether
to permit retail competition, the terms of such retail competitionthat would apply and the recovery of any portion of stranded costs that are ultimately determined to have resulted from retail competition. WP&L cannot predict the timing of a restructured electric industry or the impact on its financial condition or results of operations but
does believe it is well positioned to compete in a deregulated competitive
market. Although WP&L ultimately believes that the electric industry will be
deregulated, theoperations. The pace of deregulationrestructuring in its Wisconsinprimary retail electric service territories will likelyhas been delayed (and may continue to be delayed for a long period of time) due to recent eventsuncertainty and developments in the industry.
Certain Recent Developments - Details of WP&L’s rate cases impacting its results of operations since 2001 are as follows (dollars in millions):
Case
Utility
Type
Filing
Date
Increase
Requested
Interim
Increase
Granted (1)
Interim
Effective
Date
Final
Increase
Granted (1)
Final
Effective
Date
Expected
Final
Effective
Date
Return
on
Common
Equity
Notes
2002 retail E/G/W 8/01 $104 $49 4/02 $82 9/02 N/A 12.3%
2003 retail E/G/W 5/02 123 -- N/A 81 4/03 N/A 12% (2 )
2004 retail E/G/W 3/03 87 -- N/A 14 1/04 N/A 12% (3 )
Wholesale E 2/02 6 6 4/02 3 1/03 N/A N/A (4 )
Wholesale E 3/03 5 5 7/03 5 2/04 N/A N/A
South Beloit
retail - IL G/W 10/03 1 N/A N/A TBD TBD 9/04 TBD
2004 retail
(fuel-only) E 2/04 16 TBD TBD TBD TBD 8/04 N/A (1) Interim rate relief is implemented, subject to refund, pending determination of final rates. The final rate relief granted replaces the amount of interim rate relief granted.
(2) A party representing selected commercial and industrial electric customers had appealed the rate case to a court, seeking remand back to the PSCW for further consideration on issues of revenue increase amount and rate design. In December 2003, the court denied the request for remand and affirmed the PSCW’s earlier decision.
(3) A number of factors contributed to the final rate relief being set lower than the original request, including lower projected fuel and purchased-power costs, reduced operation and maintenance costs, lower purchased-power incentive costs and reduced capital expenditures.
(4) Since the final increase was lower than the interim relief granted, a refund to customers was made in 2003.
A significant portion of the rate increases included in the previous table reflect the recovery of increased costs incurred by WP&L, or costs it expects to incur, thus the total increase in revenues related to California's
restructured electric utility industry.

In 1999, Wisconsin enacted "Reliability 2000" legislation which included, among
other items, the formation of a Wisconsin transmission company (American
Transmission Company,these rate increases have not or ATC) for those Wisconsin utility holding companies who
elected to take advantage of the modified asset cap law and others who elected
to join. ATC received all necessary regulatory approvals and began operations on
January 1, 2001. WP&L, including South Beloit, transferred its transmission
assets (approximate net book value of $177 million) to ATC on January 1, 2001.
WP&L will receive cash of $88 million in 2001 and currently has an $89 million
equity investment in ATC, resulting in no gain or loss for WP&L. WP&L doesare not expect this transferexpected to result in a significant impact on its financial
condition or results of operations because it believes FERC will allow WP&L to
earn a return on the contributed assets

A-4

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)

comparable to the return currently allowed by the PSCW and FERC. In addition to
transferring its transmission assets, WP&L also transferred ownership of its
System Operations Center to ATC. WP&L's ownership percentagecorresponding increase in ATC is
approximately 26 percent and its investment is accounted for under the equity
method. Although no assurance can be given, it is currently anticipated that
ATC's dividend policy will support a return of a significant portion of these
earnings to the equity holders. ATC is expected to realize its revenues from the
provision of transmission services to both participants in ATC as well as
nonparticipants. ATC's current rates are subject to refund pending final
approval by FERC. ATC is a transmission-owning member of the Midwest ISO and the
Mid-America Interconnected Network, Inc. Regional Reliability Council.

net income.
WP&L's transfer of its transmission assets to ATC and its participation in the
Midwest ISO are expected to comply with the provisions of a FERC order requiring
utilities to turn over voluntarily the operational control of their transmission
systems to a regional entity by the end of 2001.

RATES AND REGULATORY MATTERS--As part of its merger approval, FERC accepted a
proposal by WP&L which provides for a four-year freeze on wholesale electric
prices beginning with the effective date of the April 1998 merger forming
Alliant Energy. WP&L also agreed with the PSCW to provide customers a four-year
retail electric and gas price freeze (the ICC granted South Beloit a three-year
rate freeze), excluding the electric FAC and PGA clause, which commenced on the
effective date of the April 1998 merger. In Wisconsin, a re-opening of an
investigation into WP&L's rates during the rate freeze period, for both cost
increases and decreases, may occur only for single events that are not
merger-related and have a revenue requirement impact of $4.5 million or more.
Assuming capture of the merger-related synergies and no significant legislative
or regulatory changes negatively affecting its utility subsidiaries, WP&L does
not expect the merger-related electric and gas price freezes to have a material
adverse effect on its financial condition or results of operations.

In connection with a statewide docket to investigate compliance issues
associated with the EPA's NOx emission reductions, in March 1999, the PSCW
authorized deferral of all incremental NOx compliance costs excluding internal
labor and replacement purchased-power costs. In March 2000, the PSCW issued an
order approving WP&L's NOx compliance plans, including additional investments at
several WP&L generating units. The order also approved a 10-year straight-line
depreciation method for NOx compliance investments. Such depreciation is also
being deferred and WP&L anticipates recovery of all deferred NOx compliance
costs beginning with the first rate changes after the rate freeze expires. The
depreciation lives will be reviewed every two years. Refer to "Liquidity and
Capital Resources--Environmental" for further discussion of the NOx issue.

WP&L's&L’s retail electric rates are based in part on annual forecasted fuel and purchased-power costs. Under PSCW rules, WP&L can seek emergency rate increases if it experiences an extraordinary increase in the cost of fuel or if the annual fuel and purchased-power costs are more than 3 percent3% higher than the estimated costs used to establish rates. If WP&L's earnings exceed its
authorized return on equity, the incremental revenues collected causing the
excessive return are subject to refund.

In December 2000,Such rules were revised effective for 2003 for WP&L requested a $73 million (revisedand significantly reduce the regulatory lag for Wisconsin utilities and customers related to $64 million) annual
retail electric rate increase from the PSCW to cover increasestiming of changes in WP&L's 2001rates for increased or decreased fuel and purchased-power costs. The revised rules require that an interim increase/decrease in rates subject to increased/decreased fuel costs, dueif determined to the continued increasesbe justified, be approved within 21 days of notice to customers. Any such change in natural gas
prices which impact WP&L's generationrates would be effective prospectively, would require a refund with interest if final rates are determined to be lower than interim rates approved, and would not include a provision for collection of retroactive fuel cost variances. The revised rules also include a process whereby Wisconsin utilities can seek deferral treatment of emergency changes in fuel costs between fuel-only or base rate cases. Such deferrals would be subject to review, approval and the increased costs of
purchased-power. The PSCW approved a $46 million interim retail electricrecovery in future fuel-only or base rate increase effective February 9, 2001. A decision on a permanent rate increasecases.
Energy-related legislation is expectedcurrently pending in the second quarter of 2001. The PSCW also grantedU.S. Congress that, among other proposals, would repeal PUHCA. However, it is uncertain when or whether such legislation will be enacted or what impact it would have on WP&L annual retail
electric rate increases of $14.8 million, $14.5 million and

A-5

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND &L.
RESULTS OF OPERATIONS (CONTINUED)
$16.5 million in July 1998, March 1999 and May 2000, respectively, due to higher
fuel and purchased-power costs, some of which have been caused by the
transmission constraints and electric reliability concerns in the Midwest.
Overview - WP&L
does not believe any revenues collected to date are subject to refund.

In November 1999, the PSCW allowed WP&L rate recovery of $6.3 million of its
Year 2000 (Y2K) program expenditures, but it denied rate recovery of the first
$4.5 million. These costs were expensed in 1999. The PSCW's decision to allow
rate recovery was appealed by certain intervenors in Dane County, Wisconsin
district court. In April 2000, the intervenors withdrew their appeal. WP&L began
recovering such costs in May 2000 and is amortizing the deferred costs as the
amounts are recovered in rates.

In February 2000, the PSCW issued an order allowing WP&L to defer certain
incremental costs it incurred after February 16, 2000 relating to the
development of ATC. In December 2000, the PSCW issued an order allowing WP&L to
defer incremental operating costs associated with ATC. Recovery of such costs
will be addressed in WP&L's next retail rate case.

In 2000, the NRC raised several areas of concern with Kewaunee's operations. The
concerns raised by the NRC are estimated to result in additional operating costs
to WP&L in 2001 of approximately $5 million. Additional operating costs to WP&L
over the period of 2002 through 2005 are estimated to be approximately
$20 million and will be included in a future rate request. WP&L submitted a
request to the PSCW for deferral of incremental costs associated with this
issue. The NRC has acknowledged the safety record of Kewaunee and its ability to
continue operations.

WP&L is in the process of pursuing a rate complaint against Union Pacific
Railroad with the STB. WP&L believes Union Pacific Railroad is charging an
excessive rate for transporting low-sulfur coal from the Powder River Basin to
the Edgewater Generating Station located in Sheboygan, Wisconsin. To contest the
rate, WP&L filed a rate case with the STB and upon the expiration of the
existing contract, began moving coal under a tariff rate beginning January 1,
2000. Final briefs were filed in December 2000 and the STB has until
September 2001 to issue a final decision. If the STB rules in WP&L's favor, a
refund to WP&L's customers will need to be considered in conjunction with the
electric FAC in Wisconsin.

WP&L complies with the provisions of SFAS 71, "Accounting for the Effects of
Certain Types of Regulation." SFAS 71 provides that rate-regulated public
utilities record certain costs and credits allowed in the rate making process in
different periods than for non-regulated entities. These are deferred as
regulatory assets or accrued as regulatory liabilities and are recognized in the
Consolidated Statements of Income at the time they are reflected in rates. If a
portion of WP&L's operations no longer complies with SFAS 71, a write-down of
related regulatory assets and possibly other charges would be required, unless
some form of transition cost recovery is established by the appropriate
regulatory body that meets the requirements under generally accepted accounting
principles for continued accounting as regulatory assets during such recovery
period. In addition, WP&L would be required to determine any impairment of other
assets and write-down any impaired assets to their fair value. WP&L believes it
currently meets the requirements of SFAS 71.

RESULTS OF OPERATIONS

OVERVIEW--WP&L's&L’s earnings available for common stock increased $0.6$34.0 million and $35.3$7.4 million in 20002003 and 1999, respectively. The 2000 increase was2002, respectively, primarily due to higher electric margins and a reduced effective income tax rate, largely
offset by increased operation and maintenance, depreciation and amortization and
interest expenses. The 1999 increase was primarily due to the nonrecurrence of
$17.3 million of merger-related expenses in 1998, higher electric and natural gas margins, reduced other

A-6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
operation and maintenance expenses and income realized from weather hedges. Such
increases were partially offset by increased depreciation and amortization
expense (excluding hedge losses in WP&L's nuclear decommissioning trust fund)
and higher interest expense.

ELECTRIC UTILITY OPERATIONS--Electricoperating expenses.
Electric Margins - Electric margins and MWh sales for WP&L for 2000,
1999 and 1998 were as follows:

follows (in thousands):
Revenues and Costs
MWhs Sold
2003
2002
*
2001
**
2003
2002
*
2001
**
Residential $ 316,893 $ 271,875 17% $ 248,128 10% 3,410 3,432 (1% ) 3,318 3%
Commercial 170,342 146,726 16% 138,269 6% 2,167 2,150 1% 2,122 1%
Industrial 243,770 211,310 15% 207,791 2% 4,595 4,454 3% 4,538 (2% )
Total from retail customers 731,005 629,911 16% 594,188 6% 10,172 10,036 1% 9,978 1%
Sales for resale 155,573 125,822 24% 131,187 (4% ) 4,196 3,654 15% 3,524 4%
Other 23,508 31,947 (26% ) 28,075 14% 82 94 (13% ) 61 54%
Total revenues/sales 910,086 787,680 16% 753,450 5% 14,450 13,784 5% 13,563 2%
Electric production
fuel and purchased- power expense 409,742 352,539 16% 338,028 4%
Margin $ 500,344 $ 435,141 15% $ 415,422 5%

REVENUES AND COSTS (IN THOUSANDS) MWHS SOLD (IN THOUSANDS)
-------------------------------------- --------------------------------
2000 1999 * 1998 ** 2000 1999 * 1998 **
-------- -------- --- -------- --- ------ ------ --- ------ ---

Residential................. $229,668 $213,496 8% $198,770 7% 3,151 3,111 1% 2,964 5%

Commercial.................. 127,199 116,947 9% 108,724 8% 2,031 1,980 3% 1,898 4%

Industrial.................. 190,085 171,118 11% 162,771 5% 4,688 4,570 3% 4,493 2%
-------- -------- -------- ------ ------ ------

Total Reflects the % change from ultimate
customers............... 546,952 501,561 9% 470,265 7% 9,870 9,661 2% 9,355 3%

Sales for resale............ 115,715 102,751 13% 128,536 (20%) 3,228 3,252 (1%) 4,492 (28%)

Other....................... 29,524 22,295 32% 15,903 40% 63 54 17% 59 (8%)
-------- -------- -------- ------ ------ ------

Total revenues/sales...... 692,191 626,607 10% 614,704 2% 13,161 12,967 1% 13,906 (7%)
====== ====== ======

Electric production fuels
expense................... 113,208 110,521 2% 120,485 (8%)

Purchased power expense..... 146,939 107,598 37% 113,936 (6%)
-------- -------- --------

Margin.................... $432,044 $408,488 6% $380,283 7%
======== ======== ========
2002 to 2003.

* Reflects the % change from 1999 to 2000. ** Reflects the % change from 1998 to
1999.

** Reflects the % change from 2001 to 2002.
Electric margin increased $23.6$65.2 million, or 6%15%, and $28.2$19.7 million, or 7%5%, during
2000for 2003 and 1999, respectively. The 2000 increase was2002, respectively, primarily due to the implementation of rate increases during 2003 and 2002, including increased revenues to recover a significant portion of WP&L’s increased operating expenses and increased sales from continued modest retail customer growth. Also contributing to retail customers duethe 2003 increase were the impact of WP&L implementing seasonal rates in 2003 for the first time, lower purchased-power and fuel costs impacting margin and higher sales to continued economic growth in WP&L's service
territory, a favorable $10 million change in estimate of utility services
rendered but unbilled at month-end and increased energy conservation revenues.non-retail customers. These items were partially offset by lower energy conservation revenues and the impact of milder weather conditions in 20002003 compared to 1999 and higher purchased-power and fuel expenses.

The 19992002. Also contributing to the 2002 increase was primarily due to separate $15 million annual rate
adjustments implemented at WP&L in July 1998 and March 1999 to recover higher
purchased-power and transmission costs. An increase in retail sales of 3% due towere more favorable weather conditions in 2002 compared to 2001, partially offset by the sluggish economy.
In April 2003, WP&L implemented seasonal electric rates that are designed to result in higher rates for the peak demand period from June 1 through Sept. 30 and economic growth within WP&L's service territory also
contributedlower rates in all other periods during each calendar year. As a result, total annual revenues are not expected to be impacted significantly. However, given the seasonal rates were not implemented in 2003 until April, the impact of seasonal rates increased electric margins by approximately $6 million in 2003 compared to 2002 when no seasonal rates were in effect. As a result, the first quarter of 2004 margins are expected to be negatively impacted in comparison to the increase. Partially offsetting2003 margin for the 1999 increase were lower
sales to off-system and wholesale customers due to transmission constraints and
decreased contractual commitments and $3.2 million of revenues collected in 1998
forsame period by a surcharge related to Kewaunee.

Refer to "Utility Industry Outlook--Rates and Regulatory Matters" for
information on a WP&L FAC filing in December 2000.

A-7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
GAS UTILITY OPERATIONS--Gassimilar amount.
Gas Margins - Gas margins and Dth sales for WP&L for 2000, 1999 and
1998 were as follows:

follows (in thousands):
Revenues and Costs
Dths Sold
2003
2002
*
2001
**
2003
2002
*
2001
**
Residential $137,060 $94,509 45% $107,673 (12% ) 12,797 12,863 (1% ) 11,754 9%
Commercial 74,594 50,121 49% 58,658 (15% ) 8,539 8,574 -- 7,572 13%
Industrial 9,606 6,980 38% 8,907 (22% ) 1,182 1,303 (9% ) 1,197 9%
Transportation/other 51,117 27,481 86% 31,625 (13% ) 19,796 18,572 7% 16,866 10%
Total revenues/sales 272,377 179,091 52% 206,863 (13% ) 42,314 41,312 2% 37,389 10%
Cost of gas sold 186,285 110,119 69% 153,823 (28% )
Margin $86,092 $68,972 25% $53,040 30%

REVENUES AND COSTS (IN THOUSANDS) DTHS SOLD (IN THOUSANDS)
-------------------------------------- --------------------------------
2000 1999 * 1998 ** 2000 1999 Reflects the % change from 2002 to 2003.
* 1998 **
-------- -------- --- -------- --- ------ ------ --- ------ ---

Residential................. $ 96,204 $ 69,662 38% $ 65,173 7% 12,769 12,070 6% 10,936 10%

Commercial.................. 54,512 35,570 53% 33,898 5% 8,595 7,771 11% 7,285 7%

Industrial.................. 8,581 6,077 41% 5,896 3% 1,476 1,520 (3%) 1,422 7%

Transportation/other........ 5,855 9,461 (38%) 6,770 40% 13,680 13,237 3% 12,948 2%
-------- -------- -------- ------ ------ ------

Total revenues/sales...... 165,152 120,770 37% 111,737 8% 36,520 34,598 6% 32,591 6%
====== ====== ======

Cost of gas sold............ 107,131 64,073 67% 61,409 4%
-------- -------- --------

Margin.................... $ 58,021 $ 56,697 2% $ 50,328 13%
======== ======== ========
* Reflects the % change from 2001 to 2002.

* Reflects the % change from 1999
Gas revenues and cost of gas sold were higher in 2003 and 2001 as compared to 2000. ** Reflects the % change from 19982002 due to 1999.increased natural gas prices. These increases alone had little impact on WP&L’s gas margin given its rate recovery mechanism for gas costs. Gas margin increased $1.3$17.1 million, or 2%25%, and $6.4$15.9 million, or 13%30%, for 2003 and 2002, respectively, primarily due to the impact of rate increases implemented during 20002003 and 1999,2002, improved performance of $3 million from WP&L’s performance-based commodity cost recovery program (benefits are shared by ratepayers and shareowners), and continued modest customer growth. The 2002 increase was also due to the negative impact high gas prices in early 2001 had on gas consumption during that period.
Refer to Note 1(h) of the “Notes to Consolidated Financial Statements” for information relating to utility fuel and natural gas cost recovery.
Other Revenues - Other revenues increased $11.8 million and decreased $10.6 million for 2003 and 2002, respectively. The 20002003 increase was primarily due to increased revenues from WindConnect^™. The 2002 decrease was primarily due to decreased non-commodity products and services revenues. These 2003 and 2002 variances were largely offset by variances in other operation and maintenance expenses.
Other Operating Expenses - Other operation and maintenance expenses increased $52.9 million and $28.7 million for 2003 and 2002, respectively. The 2003 increase was largely due to more favorable
weather conditionsincreases in the 2000 heating season compared to 1999, partially offset
by reduced energy conservation revenues. Due to WP&L's rate recovery mechanisms
for gasamortization of deferred costs the significant increasethat are now being recovered in WP&L's cost of gas sold during 2000
had no adverse impact on gas margin.rates, employee and retiree benefits (primarily compensation, medical and pension costs), WindConnect^™ and nuclear expenses. The 1999 increase was due to increased sales resultingnuclear expenses resulted primarily from customer growth of approximately 2% and more favorable
weather conditions in 1999.

Refer to "Interest Expense and Other" for discussion of income realized from gas
weather hedges in 2000 and 1999 and Note 1(i) of the "Notes to Consolidated
Financial Statements" for discussion of a gas cost adjustment mechanism in place
at WP&L.

OTHER OPERATING EXPENSES--Other operation and maintenance expenses increased
$16.8 million and decreased $21.4 million for 2000 and 1999, respectively. The
2000 increase was primarily due to a planned refueling outage at Kewaunee higher expenses in the energy delivery business unit, increased energy
conservation expense and increased maintenance expenses. The 2000 increases2003. There was no refueling outage in 2002. These items were partially offset by expenses incurred in 1999 relating to WP&L's Y2K program.lower fossil generation expenses. The 1999 decrease2002 increase was primarilylargely due to the nonrecurrence of $11.2 million of
merger-related expenses in 1998 forhigher fossil generation, employee retirements, separations and relocations, reduced expenses in theretiree benefits, energy deliveryconservation, and generation business
units, reduced insurance-related expenses, lower nucleartransmission and distribution expenses, and lower
costs due to merger-related operating efficiencies. The 1999 decreases werehigher regulatory amortization, partially offset by increased costs for energy conservation, employee incentive
compensation, expenses incurred in 1999 relating todecreased non-commodity products and services expenses. A significant portion of these cost increases are being recovered as a result of the Y2K programrate increases implemented during 2003 and employee
benefits expenses.

2002.
Depreciation and amortization expense increased $26.9decreased $3.8 million and decreased
$6.2$12.3 million for 20002003 and 1999,2002, respectively. The 2000 increase was primarily
due to increased earnings in the nuclear decommissioning trust fund of
approximately $20 million, property additions and higher amortization expense.
The 1999 decrease was due to reduced earnings in the nuclear decommissioning
trust fund and the nonrecurrence of the $3.2 million Kewaunee surcharge in 1998.
The 1999 decrease was partially offset by the impact of property additions. The
accounting for earnings on the nuclear decommissioning

A-8

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
trust funds results in no net income impact. Miscellaneous, net income is
increased for earnings on the trust fund, which is offset in depreciation
expense.

INTEREST EXPENSE AND OTHER--Interest expense increased $3.7 million and
$4.4 million in 2000 and 1999, respectively. The 2000 increase was primarily due
to higher interest rates and borrowings outstanding in 2000. The 1999 increase
was primarily due to higher short-term borrowings.

Miscellaneous, net income increased $18.4 million and decreased $3.0 million in
2000 and 1999, respectively. The 2000 increase was primarily due to increased
earnings in the nuclear decommissioning trust fund of approximately
$20 million, partially offset by reduced income of $2 million realized from gas
weather hedges. The 19992003 decrease was primarily due to lower earnings on the
nuclear decommissioning trust fund,software amortizations, partially offset by property additions. The 2002 decrease was largely due to lower decommissioning expense based on reduced retail funding levels, partially offset by higher software amortizations.
Interest Expense and Other - Interest expense decreased $2.3 million and $3.3 million for 2003 and 2002, respectively. The 2003 decrease was largely due to lower average borrowings outstanding. The 2002 decrease was largely due to lower average interest rates on the nonrecurrence of
$6.1outstanding borrowings. Equity income from unconsolidated investments increased $3.7 million of merger-related expenses in 1998for 2003 due to higher earnings at WRPC and $5 million recognized in
1999 associated with the settlement of gas weather hedges. Refer to Note 10(b)
of the "Notes to Consolidated Financial Statements" for additional information
relating to the gas weather hedges.

INCOME TAXES--TheATC.
Income Taxes - The effective income tax rates were 37.5%36.4%, 39.2%35.6% and 41.0%35.9% in 2000, 19992003, 2002 and 1998,2001, respectively. Refer to Note 5 of the "Notes“Notes to Consolidated Financial Statements"Statements” for additional information.
LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW--Given
Overview - Based on expected operating cash flows, coupled with actions Alliant Energy (including WP&L's financing flexibility, including access&L) has taken and expects to both the debttake to strengthen its and equity securities markets, managementWP&L’s balance sheet, WP&L believes it will be able to secure the capital it requires to implement its updated strategic plan. WP&L believes its ability to secure additional capital has been significantly enhanced by the necessary
financing capabilitiessuccessful execution of the strategic actions Alliant Energy announced in placeNovember 2002. Refer to adequately finance its capital requirements“Strategic Overview - November 2002 Plan” for the foreseeable future. further discussion.
WP&L's&L’s capital requirements are primarily attributable to its utility construction and acquisition programs and its debt maturities. WP&L expects&L’s cash flows are expected to meet its future capital requirements with cash
generated from operations and external financing. The level of cash generated
from operations is partially dependent on economic conditions, legislative
activities, environmental matters and timely regulatory recovery of utility
costs. Liquiditycover dividends and capital resources will be affected by costsexpenditures related to infrastructure and reliability investments. WP&L’s capital expenditures associated with environmentalbuilding additional generation are expected to total $360 million through 2010 and regulatory issues. Changes inare expected to be financed largely through external financings, supplemented by internally generated funds.
Cash Flows - Selected information from the utility industry could also
impactConsolidated Statements of Cash Flows was as follows (in thousands):
Cash flows from (used for): 2003
2002
2001
Operating activities $138,495 $223,750 $135,886
Financing activities (11,595 ) (27,685 ) (19,176 )
Investing activities (108,402 ) (187,795 ) (116,832 )
In 2003, WP&L's liquidity and capital resources, as discussed in "Utility Industry
Outlook."

CASH FLOWS--In 2000, WP&L's cash flows used for financing activities increased
$20 million due to the reduction of short-term debt outstanding and a capital
contribution of $30 million in 1999 from Alliant Energy, partially offset by the
issuance of $100 million of senior unsecured debentures in 2000 and no common
stock dividends declared in 2000 due to management of its capital structure. In
1999, WP&L's&L’s cash flows from operating activities decreased $14$85 million primarily due to changes in working capital, partially offset by higher net income primarily due to merger-related expenses in 1998; cashincome. Cash flows used for financing activities decreased $34$16 million primarily due to increased short-term
borrowings in 1999 and the $30 milliona higher capital contribution from Alliant Energy in 2003 compared to 2002, partially offset by changes in the issuanceamount of $60debt issued and retired. Cash flows used for investing activities decreased $79 million primarily due to proceeds from the sale of debenturesWP&L’s water utility serving the Beloit area and lower contributions to its nuclear decommissioning trust fund. In 2002, WP&L’s cash flows from operating activities increased $88 million due to changes in 1998;working capital and cash flows used for investing activities increased $17$71 million primarily due to increased construction expenditures.

ENVIRONMENTAL--WP&L's pollution abatement programs are subjectproceeds received from the transfer of WP&L’s transmission assets to continuing
review and are periodically revised due to changesATC in environmental regulations,
construction plans and escalation of construction costs. While management cannot
precisely forecast the effect of future environmental regulations on operations,
it has taken steps to anticipate the future while also meeting the requirements
of current environmental regulations.

A-9

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
Wisconsin is subject to the Clean Air Act due to its non-attainment status with
respect to the one-hour ozone standard in the Lake Michigan region. The WDNR has
developed a rule that contains a plan for the state to meet the one-hour ozone
attainment standard. The plan focuses on rate of progress requirements that are
specified2001.
State Regulatory Approvals - At Dec. 31, 2003, WP&L was authorized by the Clean Air Act for the years 2002, 2005 and 2007. The rule
requires NOx reductions in counties that are currently in non-attainmentappropriate state regulatory agencies to issue short-term debt of the
one-hour ozone standard$240 million, which includes WP&L's Edgewater power plant.$85 million for general corporate purposes, an additional $100 million should WP&L is
currently evaluating various alternativesno longer sell its utility receivables and an additional $55 million should WP&L need to achieve the proposed reductionsrepurchase its variable rate bonds.
Cash and to reduce the emission levels at various power plants. Based on existing
technology, preliminary estimates indicate that capital investments in the rangeTemporary Cash Investments - As of $30 to $40Dec. 31, 2003, WP&L had approximately $27 million could be required.

Revisions to the Wisconsin Administrative Code have been proposed that could
have a significant impact on WP&L's operation of the Rock River Generating
Station in Beloit, Wisconsin. The proposed revisions will affect the amountcash and temporary cash investments.
Sale of heat that the generating station can discharge into the Rock River. WP&L cannot
presently predict the final outcome of the rule, but believes that, as the rule
is currently proposed, the capital investments and/or modifications required to
meet the proposed discharge limits could be significant.

In 1998, the EPA issued the final report to Congress on the Study of Hazardous
Air Pollutant Emissions (HAPs) from Electric Utility Steam Generating Units
regarding hazardous air pollutant emissions from electric utilities, which
concluded that mercury emissions from coal-fired generating plants were a
concern. The EPA is developing regulations that are expected to be in place by
2004. In December 2000, the EPA made a regulatory determination in favor of
controlling HAPs (including mercury) from electric utilities, which is being
challenged by utility industry groups in two lawsuits filed in February 2001.
Although the control of mercury emissions from generating plants is uncertain at
this time, WP&L believes that the capital investments and/or modifications that
may be required to control mercury emissions could be significant.

Also in December 2000, the WNRB voted to allow the WDNR to proceed with mercury
rulemaking. WP&L and the other Wisconsin Utility Association members have
recommended to WNRB a workable mercury program that protects reliability and
does not disadvantage Wisconsin when federal mercury rules are developed. The
WDNR has indicated its desire to have the proposed rule written by the Spring of
2001. WP&L cannot presently predict the final outcome of the regulation, but
believes that capital investments and/or modifications required could be
significant.

WP&L has been notified by the EPA that it is a PRP with respect to the
MIG/DeWane Landfill Superfund Site. WP&L is participating in the initiation of
an alternate dispute resolution process to allocate liability associated with
the investigation and remediation of the site. Management believes that any
likely action resulting from this matter will not have a material adverse effect
on WP&L's financial condition or results of operations.

In 2000, WP&L was notified by Monroe County, Wisconsin that it does not have
liability for costs associated with the Monroe County Interim Landfill in
Sparta, Wisconsin. Monroe County has decided that it will pay for the
investigation and cleanup of the landfill through community-wide funding.

In December 2000 and February 2001, the EPA requested certain information
relating to the historical operation of WP&L's major coal-fired generating units
in Wisconsin. WP&L has responded to the December 2000 request and is in the
process of preparing its response to the February 2001 request. In some cases
involving similar EPA requests from other electric generating facilities,
penalties and capital

A-10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
expenditures have resulted. WP&L cannot presently predict what impact, if any,
the EPA's request may have on its financial condition or results of operations.
However, any required remedial action resulting from this matter could be
significant.

A global treaty has been negotiated that could require reductions of greenhouse
gas emissions from utility plants. In 1998, the U.S. signed the treaty and
agreed with other countries to resolve all remaining issues by the end of 2000.
That deadline has not been met and significant differences remain between the
U.S. and other countries. At this time, management is unable to predict whether
the U.S. Congress will ratify the treaty. Given the uncertainty of the treaty
ratification and the ultimate terms of the final regulations, management cannot
currently estimate the impact the implementation of the treaty would have on
WP&L's operations.Accounts Receivable - Refer to Note 11(e)4 of the "Notes“Notes to Consolidated Financial Statements"Statements” for further discussioninformation on WP&L’s sale of WP&L's environmental matters.

LONG-TERM DEBT--In March 2000,accounts receivable program.
Short-term Debt - In September 2003, WP&L issued $100completed the syndication of a 364-day revolving credit facility totaling $200 million, of senior unsecured
debentures at a fixed interest rate of 7 5/8%, due 2010. The net proceeds were
primarily usedavailable for direct borrowing or to repay short-term debt.support commercial paper. WP&L has $150 millionthe option to convert the facility into a one-year term loan. It is expected that WP&L will be able to renew or replace the facility on favorable terms when it matures in 2004. The credit facility agreement contains various covenants, including a requirement to maintain a debt-to-capital ratio of long-termless than 58%. At Dec. 31, 2003, WP&L’s debt-to-capital ratio was 29.9%. The debt that will mature prior to December 31, 2005. Depending on market conditions, it
is anticipated that a majoritycomponent of the maturingcapital ratio includes long- and short-term debt will be refinanced with the
issuance(excluding
non-recourse debt and trade payables), capital lease obligations, letters of long-term securities. Refer to Note 8(b)credit and guarantees of the "Notes to
Consolidated Financial Statements" for additional information on long-term debt.

SHORT-TERM DEBT--Inforegoing and unfunded vested benefits under qualified pension plans. The equity component excludes accumulated other comprehensive income (loss).
In addition to funding working capital needs, the availability of short-term financing provides WP&L flexibility in the issuance of long-term securities. The level of short-term borrowing fluctuates based on seasonal corporate needs, the timing of long-term financingfinancings and capital market conditions. At DecemberWP&L did not have any commercial paper outstanding at Dec. 31, 2000, WP&L2003 and information regarding commercial paper during 2003 was authorized by the applicable federal
or state regulatory agency to issue short-term debtas follows (in millions):
Available capacity at Dec. 31, 2003 $ 200.0
Average daily amount outstanding during 2003 29.8
Maximum daily amount outstanding during 2003 84.5
WP&L’s credit facility contains a negative pledge provision, which generally prohibits placing liens on any of $128 million.

WP&L, IESU and IPC participate in a utility money pool that is funded, as
needed, through&L’s property with certain exceptions, including among others, for the issuance of commercial paper bysecured debt under WP&L’s first mortgage bond indentures, non-recourse project financing and purchase money liens.
WP&L’s credit facility contains a material adverse change (MAC) clause. Before each extension of credit (each borrowing under the facility), WP&L must represent and warrant that no MAC has occurred since Dec. 31, 2002. A MAC is defined as a change that would create: (1) a MAC in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of the borrower or the borrower and its subsidiaries taken as a whole; (2) a material impairment of the ability of the borrower to perform its obligations under a credit facility agreement to which it is a party; or (3) a MAC upon the legality, validity, binding effect or enforceability against the borrower of any credit agreement to which it is a party.
WP&L’s credit facility contains a provision that requires, during the term of the facility, any proceeds from asset sales, with certain exclusions, in excess of 5% of WP&L’s consolidated assets in any 12-month period be used to reduce commitments under its facility. Exclusions include, among others, certain intercompany sales and certain sale and lease-back transactions.
Long-term Debt - In September 2003, WP&L retired $70 million of its 8.6% first mortgage bonds due 2027 largely from proceeds of a capital contribution from Alliant Energy. Interest
expense and other fees are allocated based on borrowing amounts. The PSCW has
restricted
Refer to “Contractual Obligations” for the timing of WP&L from lending money to non-utility affiliates and non-Wisconsin
utilities. As&L’s long-term debt maturities. Depending upon market conditions, it is currently anticipated that a result, WP&L can only borrow money frommajority of the utility money pool.

WP&L anticipates that short-termmaturing debt will continue to be available at
reasonable costs due to current ratings by independent utility analysts and
credit rating services.refinanced with the issuance of long-term securities. Refer to Note 8(a)8 of the "Notes“Notes to Consolidated Financial Statements"Statements” for additional information on short-termshort- and long-term debt.

SALE OF ACCOUNTS RECEIVABLE--To
Credit Ratings and Balance Sheet - Access to the capital and credit markets, and costs of obtaining external financing, are dependent on creditworthiness. WP&L is committed to taking the necessary steps required to maintain flexibilityinvestment-grade credit ratings and a strong balance sheet. Refer to “Strategic Overview - November 2002 Plan” for discussion of specific actions taken in this regard. Although WP&L believes the actions taken in 2003 to strengthen its balance sheet will enable it to maintain investment-grade credit ratings, no assurance can be given that it will be able to maintain its existing credit ratings. If WP&L’s credit ratings are downgraded in the future, then WP&L’s borrowing costs may increase and its access to capital structuremarkets may be limited. If access to capital markets becomes significantly constrained, then WP&L’s results of operations and financial condition could be materially adversely affected. WP&L’s current credit ratings and outlook that were affirmed in January 2004 by both Standard & Poor’s and Moody’s are as follows (long-term debt ratings only apply to take advantagesenior debt):
Standard & Poor’s
Moody’s
Secured long-term debt A A1
Unsecured long-term debt BBB+ A2
Commercial paper A-2 P-1
Corporate/issuer A- A2
Outlook Negative Stable
Ratings Triggers - The long-term debt of WP&L is not subject to any repayment requirements as a result of explicit credit rating downgrades or so-called “ratings triggers.” Pre-existing ratings triggers in certain lease agreements were eliminated during 2003. However, WP&L is party to various agreements, including purchased-power agreements, fuel contracts and accounts receivable sale contracts that are dependent on maintaining investment-grade credit ratings. In the event of a downgrade below investment-grade, WP&L may need to provide credit support, such as letters of credit or cash collateral equal to the amount of the exposure, or may need to unwind the contract or pay the underlying obligation. WP&L is party to an accounts receivable sale agreement that provides that a downgrade below investment-grade causes WP&L to become ineligible to sell receivables under the program. In the event of downgrades below investment-grade, management believes the credit facility at WP&L provides sufficient liquidity to cover counterparty credit support or collateral requirements under the various purchased-power, fuel and receivables sales agreements.
Off-Balance Sheet Arrangements - WP&L utilizes off-balance sheet synthetic operating leases to finance certain utility railcars and a utility radio dispatch system. Synthetic leases provide favorable short-termfinancing rates to WP&L while allowing it to maintain operating control of its leased assets. Refer to Note 3 of the “Notes to Consolidated Financial Statements” for future minimum lease payments under, and residual value guarantees by WP&L, of these synthetic leases. WP&L’s credit facility agreement prohibits it from entering into any additional synthetic leases. WP&L uses special purpose entities for its limited recourse utility sale of accounts receivable program whereby WP&L uses proceeds from the sale of the accounts receivable and unbilled revenues to maintain flexibility in its capital structure, take advantage of favorable short-term interest rates and finance a portion of its long-term cash needs. WP&L has filed applications with the SEC and state
regulatory agenciesThe sale of accounts receivables generates a significant amount of short-term financing for approval of a combined accounts receivable sale program
whereby WP&L, IESU and IPC will sell their respective receivables through
wholly-owned special purpose entities to an affiliated financing entity, which
in turn will sell the receivables to an outside investor. The new program would
replace the existing program for WP&L, and would be substantially similar to the
prior program. All necessary approvals are expected by mid-2001.

FINANCIAL COMMITMENTS--Refer&L. Refer to Note 11(d)4 of the "Notes“Notes to Consolidated Financial Statements"Statements” for information.

A-11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
CONSTRUCTION AND ACQUISITION EXPENDITURES--Capital expenditureaggregate proceeds from the sale of accounts receivable. While WP&L does not have any reason to believe this program would be discontinued, if this financing alternative were not available, WP&L anticipates it would have enough short-term borrowing capacity to compensate. Refer to “Ratings Triggers” for the impact of certain credit rating downgrades on WP&L related to the accounts receivable sales program. WP&L has reviewed these entities during its implementation of FIN 46, for those entities that are considered to be special-purpose entities, and investmentdetermined that consolidation of these entities is not required. WP&L continues to evaluate non-special purpose entities that may require consolidation as of March 31, 2004.
Sales of Non-strategic Assets - WP&L is currently pursuing the sales in 2004 of its interest in its Kewaunee facility and its water utilities serving the Ripon and South Beloit areas. The proceeds realized from these asset sales are expected to be available for debt reduction and other general corporate purposes.
Credit Risk - WP&L has limited credit exposure from electric and natural gas sales and non-performance of contractual obligations by its counterparties. WP&L maintains credit risk oversight and sets limits and policies with regards to its counterparties, which management believes minimizes its overall credit risk exposure. However, there is no assurance that such policies will protect WP&L against all losses from non-performance by counterparties.
Construction and Acquisition Expenditures - Capital expenditures, investments and financing plans are continually reviewed, approved and updated as part of WP&L’s ongoing strategic planning and budgeting processes. In addition, material capital expenditures and investments are subject to change as a rigorous cross-functional review prior to approval. Changes in WP&L’s anticipated construction and acquisition expenditures may result from a number of many considerations,
including: changes inreasons including economic conditions; variations in actual sales and load
growth compared to forecasts;conditions, regulatory requirements, of environmental, nuclear and other
regulatory authorities; acquisition and business combination opportunities; the
availability of alternate energy and purchased-power sources; the ability to obtain adequate and timely rate relief; escalationsrelief, the level of WP&L’s profitability, WP&L’s desire to maintain investment-grade credit ratings and reasonable capitalization ratios, variations in construction costs;sales, changing market conditions and conservation and energy efficiency programs.new opportunities. WP&L believes its capital control processes adequately reduce the risks associated with large capital expenditures and investments.
WP&L currently anticipates financingits construction and acquisition expenditures for utility infrastructure and reliability investments to be $228 million in 2004 and $248 million in 2005. WP&L has not yet entered into contractual
commitments relating to the majority of its anticipated capital expenditures. As a result, WP&L does have discretion with regard to the level of capital expenditures eventually incurred and it closely monitors and updates such estimates on an ongoing basis based on numerous economic and other factors. Refer to “Strategic Overview - Updated Strategic Plan” for further discussion of Alliant Energy’s domestic generation plan.
Contractual Obligations - - WP&L’s long-term contractual cash obligations as of Dec. 31, 2003 were as follows (in millions):
2004
2005
2006
2007
2008
Thereafter
Total
Long-term debt (Note 8(b)) $62 $88 $-- $105 $60 $139 $454
Operating leases (Note 3) 63 79 80 80 68 259 629
Purchase obligations (Note 11(b)):
Purchased-power and fuel commitments 67 31 30 28 21 76 253
Other 6 -- -- -- -- -- 6
$198 $198 $110 $213 $149 $474 $1,342
At Dec. 31, 2003, long-term debt as noted in the previous table was included on the Consolidated Balance Sheet and excludes reductions related to unamortized debt discounts. Purchased-power and fuel commitments represent normal business contracts used to ensure adequate purchased-power, coal and natural gas supplies and to minimize exposure to market price fluctuations. Other purchase obligations represent individual commitments incurred during the normal course of business which exceeded $1 million at Dec. 31, 2003. Alliant Energy has entered into various coal and purchased-power commitments that have not yet been directly assigned to WP&L and IP&L. Such commitments are not included in WP&L’s purchase obligations. In connection with its construction expenditures during 2001-2005 through internally generated funds
supplemented, when required, by outside financing.and acquisition program, WP&L also enters into commitments related to such programs on an ongoing basis; these amounts are not reflected in the previous table. Refer to “Construction and Acquisition Expenditures” for additional information. In addition, at Dec. 31, 2003, there were various other long-term liabilities and deferred credits included on the Consolidated Balance Sheet that, due to the nature of the liabilities, the timing of payments cannot be estimated and are therefore excluded from the table. Refer to Note 11(a)6 of the "Notes“Notes to Consolidated Financial Statements"Statements” for informationanticipated 2004 pension and other postretirement benefit funding amounts, which are not included in the previous table.
Environmental - WP&L’s pollution abatement programs are subject to continuing review and are periodically revised due to changes in environmental regulations, construction plans and escalation of construction costs. WP&L continually evaluates the impact of potential future federal, state and local environmental rulemakings on its operations. While the final outcome of these rule makings cannot be predicted, WP&L believes that required capital investments and/or modifications resulting from them could be significant, but expects that prudent expenses incurred by WP&L likely would be recovered in rates from its customers. The environmental rulemaking process continually evolves and the following are major emerging issues that could potentially have a significant impact on WP&L's&L’s operations.
Air Quality - With regard to current environmental rules, WP&L’s Edgewater facility spent $21 million from 1999 to 2003 to improve its combustion performance. This facility now meets the 2008 Wisconsin DNR NOx compliance goal.
WP&L also has responded to multiple data requests from the EPA, related to the historical operation and associated air permitting for certain major Wisconsin coal-fired generating units. Similar requests have been precursor to penalties and capital expenditures requiring installation of air pollution controls at other utilities. However, WP&L has received no response in this regard from the EPA related to information submitted.
The 1990 CAA Amendments mandate preservation of air quality through existing regulations and periodic reviews to ensure adequacy of these provisions based on scientific data. In 1997, the EPA revised National
Ambient Air Quality Standards (NAAQS) for ozone and fine particulate matter. In December 2003, the EPA proposed an Interstate Air Quality Rule related to transport of these emissions that would require significant upgrades to power plants. This rule would reduce the current level of nationwide sulfur dioxide emissions approximately 40% by 2010 and 70% by 2015, and NOx emission levels 50% by 2015. Additional reduction requirements may also be imposed at the state level for those areas that are in non-attainment with NAAQS.
In 2000, the EPA determined that regulation of hazardous air pollutant emissions from coal-fired and oil-fired electric utility steam generating units was necessary. Under an existing settlement agreement, Maximum Achievable Control Technology requirements or alternative regulations must be implemented by Dec. 15, 2004. Accordingly, the EPA has published rules for comment requiring control of mercury from coal-fired and nickel from oil-fired generating units. The impact of these regulations on WP&L’s generating facilities is subject to the control level mandated in the final rules. In 2001, the Wisconsin DNR also independently developed proposed mercury emission control rules that could require reductions from Wisconsin generating facilities of 40% by 2010 and 80% by 2015. These rules have been sent back to the Wisconsin DNR for revision by the Wisconsin legislature due to the pending federal mercury regulations.
WP&L is also currently monitoring various other potential federal, state and local environmental rulemakings and activities, including, but not limited to: litigation of federal New Source Review Reforms; Regional Haze evaluations for Best Available Retrofit Technology; and several other legislative and regulatory proposals regarding the control of emissions of air pollutants and greenhouse gases from a variety of sources, including generating facilities.
Water Quality - In 2002, the EPA published a proposed regulation under the Clean Water Act referred to as “316(b)” that is anticipated to be finalized in 2004. This rule would require existing large power plants with cooling water intake structures to ensure that the location, design, construction, and acquisition expenditures.

capacity of cooling water intake structures reflect the best technology available for minimizing adverse environmental impacts to fish and other aquatic life. WP&L is also currently evaluating proposed revisions to the Wisconsin Administrative Code concerning the amount of heat that WP&L’s generating stations can discharge into Wisconsin waters.
Land and Solid Waste - WP&L is monitoring possible significant land and solid waste regulatory changes. This includes a potential EPA regulation for management of coal combustion product in landfills and surface impoundments that could require installation of monitoring wells at some facilities and an ongoing expanded groundwater monitoring program. Compliance with the polychlorinated biphenols (PCB) Fix-it Rule/Persistent Organic Pollutants Treaty could possibly require replacement of all electrical equipment containing PCB insulating fluid which is a substance known to be harmful to human health. The Wisconsin Department of Commerce is proposing new rules related to flammable, combustible and hazardous liquids stored in above-ground storage tanks in which the main financial impact would be from a secondary containment requirement for all hazardous materials tanks and for hazardous material unloading areas. In addition, in December 2003, at the request of the Wisconsin DNR, WP&L submitted a written plan for facility closure of the Rock River Generating Station landfill and clean-up of the support ponds and all areas where coal combustion waste is present.
Refer to Note 11(e) of the “Notes to Consolidated Financial Statements” for further discussion of environmental matters.
OTHER MATTERS

MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS
Market Risk Sensitive Instruments and Positions - WP&L's&L’s primary market risk exposures are associated with interest rates and commodity prices and equity prices. WP&L has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures.

INTEREST RATE RISK--WP
Interest Rate Risk - WP&L is exposed to risk resulting from changes in interest rates as a result of its issuance of variable-rate debt. debt, utility customer accounts receivable sale program and variable-rate leasing agreements.
WP&L manages its interest rate risk by limiting its variable interest rate exposure and by continuously monitoring the effects of market changes inon interest rates. WP&L has also historically usedperiodically uses interest rate swap and interest rate forward agreements to assist in the management of its interest exposure. In the event of significant interest rate fluctuations, management would take actions to minimize the effect of such changes on WP&L's&L’s results of operations.operations and financial condition. Assuming no change in WP&L's&L’s consolidated financial structure, if variable interest rates were to average 1 percent100 basis points higher (lower) in 2001 compared to 2000, and2004 than in 2000 compared to 1999,2003, interest expense and pre-tax earnings would increase (decrease) by approximately $0.6 million for both time periods. These amounts were$1.2 million. This amount was determined by considering the impact of a hypothetical 1 percent100 basis point increase (decrease) in interest rates on theWP&L’s consolidated variable-rate debt held, bythe amount outstanding under the utility customer accounts receivable sale program and variable-rate lease balances at Dec. 31, 2003.
Commodity Risk - Non-trading - WP&L as of December 31, 2000 and 1999.

COMMODITY RISK--NON-TRADING--WP&L is exposed to the impact of market fluctuations in the commodity price and transportation costs of electricityelectric and natural gas products it markets. WP&L employs established policies and procedures to manage its risks associated with these market fluctuations including the use of various commodity derivatives. WP&L's&L’s exposure to commodity price risks is significantly mitigated by the current rate making structures in place for the recovery of its electric fuel and purchased energy costs as well as its cost of natural gas purchased for resale. Refer to Note 1(i)1(h) of the "Notes“Notes to Consolidated Financial Statements"Statements” for further discussion.
WP&L periodically utilizes gas commodity swap arrangementsderivative instruments to reduce the impact of price fluctuations on electric fuel and purchased energy costs needed to meet its power supply requirements. Under PSCW rules, WP&L can also seek rate increases if it experiences an extraordinary increase in the cost of electric fuel and purchased energy costs or if the annual costs are more than 3% higher than the estimated costs used to establish rates. Such rules were revised effective for 2003 for WP&L and significantly reduce the regulatory lag for Wisconsin utilities and customers related to the timing of changes in rates for increased or decreased fuel and purchased energy costs. Based on these revised rules, WP&L does not anticipate any significant earnings exposure related to fuel and purchased energy costs.
WP&L periodically utilizes natural gas commodity derivative instruments to reduce the impact of price fluctuations on natural gas purchased and injected into storage during the summer months and withdrawn and sold at current market prices during the winter months. The natural gas commodity swaps in place approximate the forecasted storage withdrawal plan during this period. Therefore, market price fluctuations that result in an increase or decrease in the value of the physical commodity are substantially offset by changes in the value of the natural gas commodity swaps. A 10% increase (decrease) in the price of natural gas would not have a significant impact on the combined fair market value of the natural gas in storage and related swap arrangements in place at Dec. 31, 2003. To the extent actual storage withdrawals vary from forecasted withdrawals, WP&L has physical commoditygas price exposure. A 10 percent increase (decrease) in the price
of gas would have an insignificant impact on the combined fair market value of
the gas in storage and related swap arrangements in place as of December 31,
2000 and 1999.

A-12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
EQUITY PRICE RISK--WP
Equity Price Risk - WP&L maintains a trust fundsfund to fund its anticipated nuclear decommissioning costs. As of DecemberAt Dec. 31, 20002003 and 1999, these funds were2002, this fund was invested primarily in domestic equity and debt instruments. Fluctuations in equity prices or interest rates willdo not affect WP&L's&L’s consolidated results of operations as
such fluctuations are recorded in equally offsetting amounts of investment
income and depreciation expense when they are realized.operations. In February 2001, WP&L entered into a four-year hedge on equity assets in its nuclear decommissioning trust fund. In January 2004, WP&L liquidated all of its qualified decommissioning trust fund assets into money market funds as a result of the pending Kewaunee sale. Refer to Notes 1(l)10(c) and 15 of the “Notes to Consolidated Financial Statements” for further discussion.
Refer to Notes 1(j) and 10 of the "Notes“Notes to Consolidated Financial Statements"Statements” for further discussion of WP&L's&L’s derivative financial instruments.

A-13
Accounting Pronouncements - In January 2003, the FASB issued FIN 46 which addresses consolidation by business enterprises of variable interest entities. FIN 46 requires consolidation where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity
at risk to finance its activities without additional subordinated financial support from other parties. WP&L adopted FIN 46, related to those entities that are considered to be special-purpose entities, on Dec. 31, 2003 with no material impact on its financial condition or results of operations. WP&L continues to evaluate tolling arrangements, renewable energy entities and any other non-special purpose entities, to determine if they require consolidation under the revised FIN 46 guidance issued by the FASB in December 2003. WP&L will apply the provisions of the revised guidance as of March 31, 2004.
WP&L adopted SFAS 143 on Jan. 1, 2003, which provides accounting and disclosure requirements for retirement obligations associated with long-lived assets (AROs). Refer to Note 16 of the “Notes to Consolidated Financial Statements” for additional information.
WP&L adopted SFAS 149 for contracts entered into or modified after June 30, 2003, except for certain implementation issues and certain provisions of forward purchase and sale contracts and for hedging relationships designated after June 30, 2003. Refer to Note 10(a) of the “Notes to Consolidated Financial Statements” for additional information.
In May 2003, the FASB issued SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” which requires an issuer to classify outstanding free-standing financial instruments within its scope as a liability on its balance sheet even though the instruments have characteristics of equity. WP&L adopted SFAS 150 on July 1, 2003 with no material impact on its financial condition or results of operations. WP&L continues to evaluate the implications of FSP No. FAS 150-3, “Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” issued in November 2003, which defers the effective date for applying the provisions of SFAS 150 for certain mandatorily redeemable non-controlling interests.
In December 2003, the President signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of retiree health care benefit plans, that provide a benefit that is at least actuarially equivalent to Medicare Part D. As permitted by FSP No. FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” WP&L has elected to defer reflecting the effect of the Act on postretirement net periodic benefit cost and the accumulated postretirement benefit obligation in the Consolidated Financial Statements, since specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require WP&L to change previously reported information. WP&L is currently evaluating the effect of the Act on its other postretirement benefits expense.
WP&L does not expect the various other new accounting pronouncements not mentioned above that were effective in 2003 to have a material impact on its results of operations or financial condition.
Critical Accounting Policies - Based on historical experience and various other factors, WP&L believes the policies identified below are critical to its business and the understanding of its results of operations as they require critical estimates be made based on the assumptions and judgment of management. The preparation of consolidated financial statements requires management to make various estimates and assumptions that affect revenues, expenses, assets, liabilities and the disclosure of contingencies. The results of these estimates and judgments form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and judgments. WP&L’s management has discussed these critical accounting policies with the Audit Committee of its Board of Directors. Refer to Note 1 of the “Notes to Consolidated Financial Statements” for a discussion of WP&L’s accounting policies and the estimates and assumptions used in the preparation of the consolidated financial statements.
Regulatory Assets and Liabilities - WP&L is regulated by various federal and state regulatory agencies. As a result, it qualifies for the application of SFAS 71, which recognizes that the actions of a regulator can provide reasonable assurance of the existence of an asset or liability. Regulatory assets or liabilities arise as a result of a difference between GAAP and the accounting principles imposed by the regulatory agencies. Regulatory assets generally represent incurred costs that have been deferred as they are probable of recovery in customer rates. Regulatory liabilities generally represent obligations to make refunds to customers for various reasons.
WP&L recognizes regulatory assets and liabilities in accordance with the rulings of its federal and state regulators and future regulatory rulings may impact the carrying value and accounting treatment of WP&L’s regulatory assets and liabilities. WP&L periodically assesses whether the regulatory assets are probable of future recovery by considering factors such as regulatory environment changes, recent rate orders issued by the applicable regulatory agencies and the status of any pending or potential deregulation legislation. The assumptions and judgments used by regulatory authorities continue to have an impact on the recovery of costs, the rate of return on invested capital and the timing and amount of assets to be recovered by rates. A change in these assumptions may result in a material impact on WP&L’s results of operations. Refer to Note 1(c) of the “Notes to Consolidated Financial Statements” for further discussion.
Derivative Financial Instruments - WP&L uses derivative financial instruments to hedge exposures to fluctuations in certain commodity prices, volatility in a portion of natural gas sales volumes due to weather and to mitigate the equity price volatility associated with certain investments in equity securities. WP&L does not use such instruments for speculative purposes. To account for these derivative instruments in accordance with the applicable accounting rules, WP&L must determine the fair value of its derivatives. In accordance with SFAS 133, the fair value of all derivative instruments are recognized as either assets or liabilities in the balance sheet with the changes in their value generally recorded as regulatory assets or liabilities. If an established, quoted market exists for the underlying commodity of the derivative instrument, WP&L uses the quoted market price to value the derivative instrument. For other derivatives, WP&L estimates the value based upon other quoted prices or acceptable valuation methods. WP&L also reviews the nature of its contracts for the purchase and sale of non-financial assets to assess whether the contracts meet the definition of a derivative and the requirements to follow hedge accounting as allowed by the applicable accounting rules. The determination of derivative status and valuations involves considerable judgment.
SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. Although SFAS 149 is expected to result in more energy contracts at WP&L qualifying as derivatives, changes in the fair value of these derivatives are generally reported as changes in regulatory assets and liabilities rather than being reported currently in earnings, based on the regulatory treatment. Additionally, WP&L has some commodity purchase and sales contracts that have been designated, and qualify for, the normal purchase and sale exception. Based on this designation, these contracts are not accounted for as derivative instruments.
A number of WP&L’s derivative transactions are based on the fuel and natural gas cost recovery mechanisms in place, as well as other specific regulatory authorizations. As a result, changes in fair market values of such derivatives generally have no impact on WP&L’s results of operations.
Unbilled Revenues - Energy sales to individual customers are based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date of the last meter reading are estimated and the corresponding estimated unbilled revenue is recorded. The unbilled revenue estimate is based on daily system demand volumes, estimated customer usage by class, weather impacts, line losses and the most recent customer rates. Such process involves the use of various estimates, thus significant changes in the estimates could have a material impact on WP&L’s results of operations.
Accounting for Pensions and Other Postretirement Benefits - WP&L accounts for pensions and other postretirement benefits under SFAS 87, “Employers’ Accounting for Pensions” and SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” respectively. Under these rules, certain assumptions are made which represent significant estimates. There are many factors involved in determining an entity’s pension and other postretirement liabilities and costs each period including assumptions regarding employee demographics (including age, life expectancies, and compensation levels), discount rates, assumed rate of returns and funding. Changes made to the plan provisions may also impact current and future pension and other postretirement costs. WP&L’s assumptions are supported by historical data and reasonable projections and are reviewed annually with an outside actuary firm and an investment consulting firm. As of Dec. 31, 2003, WP&L was using a 6% discount rate to calculate benefit obligations and a 9% annual rate of return on investments. In selecting an assumed discount rate, WP&L reviews various corporate Aa bond indices. The 9% annual rate of return is consistent with WP&L’s historical returns and is based on projected long-term equity and bond returns, maturities and asset allocations. Refer to Note 6 of the “Notes to Consolidated Financial Statements” for discussion of the impact of a change in the medical trend rates.
INDEPENDENT AUDITORS’ REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareowners of Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements of capitalization of Wisconsin Power and Light Company (a Wisconsin corporation)
and subsidiaries (the “Company”) as of December 31, 20002003 and 1999,2002, and the related consolidated statements of income, cash flows and changes in common equity for each of the three years in the period ended December 31, 2000.2003. These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States.States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, thesuch consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wisconsin Power and Lightthe Company and subsidiaries as of December 31, 20002003 and 1999,2002, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 2000,2003 in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSENStates of America.
As discussed in Note 16 to the consolidated financial statements, on January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations.”
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
January 29, 2001

A-14
March 3, 2004
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS

2000 ---------

OPERATING REVENUES:

Electric utility.......................................... $692,191

Gas utility............................................... 165,152

Water..................................................... 5,038 --------

862,381 --------

OPERATING EXPENSES:

Electric production fuels................................. 113,208

Purchased power........................................... 146,939

Cost of gas sold.......................................... 107,131

Other operation and maintenance........................... 188,967

Depreciation and amortization............................. 139,911

Taxes other than income taxes............................. 29,163 --------

725,319 --------

OPERATING INCOME............................................ 137,062 --------

INTEREST EXPENSE AND OTHER:

Interest expense.......................................... 44,644

Allowance for funds used during construction.............. (5,365)

Miscellaneous, net........................................ (16,536) --------

22,743 --------

INCOME BEFORE INCOME TAXES.................................. 114,319 --------

INCOME TAXES................................................ 42,918 --------

INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX..................................... 71,401 --------

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX.................................................... 35 --------

NET INCOME.................................................. 71,436 --------

PREFERRED DIVIDEND REQUIREMENTS............................. 3,310 --------

EARNINGS AVAILABLE FOR COMMON STOCK......................... $ 68,126 ======== - --------------------------------------------------------------------

THE ACCOMPANYING NOTES TO

OF INCOME YEAR ENDED DECEMBER 31, 1999 1998 --------- --------- (IN THOUSANDS) $626,607 $614,704 120,770 111,737 5,128 5,007 -------- -------- 752,505 731,448 -------- -------- 110,521 120,485 107,598 113,936 64,073 61,409 172,131 193,578 113,037 119,221 30,240 30,169 -------- -------- 597,600 638,798 -------- -------- 154,905 92,650 -------- -------- 40,992 36,584 (4,511) (3,049) 1,836 (1,129) -------- -------- 38,317 32,406 -------- -------- 116,588 60,244 -------- -------- 45,758 24,670 -------- -------- 70,830 35,574 -------- -------- -- -- -------- -------- 70,830 35,574 -------- -------- 3,310 3,310 -------- -------- $ 67,520 $ 32,264 ======== ======== ---------------------------
Year Ended December 31,
2003
2002
2001
(in thousands)
Operating revenues:
Electric utility $910,086 $787,680 $753,450
Gas utility 272,377 179,091 206,863
Other 34,518 22,754 33,403
1,216,981 989,525 993,716
Operating expenses:
Electric production fuel and purchased power 409,742 352,539 338,028
Cost of gas sold 186,285 110,119 153,823
Other operation and maintenance 292,554 239,679 211,006
Depreciation and amortization 104,896 108,740 121,059
Taxes other than income taxes 31,872 32,874 32,504
1,025,349 843,951 856,420
Operating income 191,632 145,574 137,296
Interest expense and other:
Interest expense 37,873 40,202 43,483
Equity income from unconsolidated investments (20,725 ) (17,022 ) (15,535 )
Allowance for funds used during construction (4,024 ) (2,639 ) (4,753 )
Interest income and other (2,209 ) (615 ) (627 )
10,915 19,926 22,568
Income before income taxes 180,717 125,648 114,728
Income taxes 65,843 44,724 41,238
Net income 114,874 80,924 73,490
Preferred dividend requirements 3,310 3,310 3,310
Earnings available for common stock $111,564 $77,614 $70,180
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

A-15
BALANCE SHEETS
December 31,
ASSETS
2003
2002
(in thousands)
Property, plant and equipment:
Electric plant in service $2,002,006 $1,843,834
Gas plant in service 301,201 286,652
Other plant in service 275,637 275,391
Accumulated depreciation (1,139,599 ) (1,047,715 )
Net plant 1,439,245 1,358,162
Construction work in progress 67,200 96,746
Other, less accumulated depreciaton of $301 and $240 15,717 17,811
1,522,162 1,472,719
Current assets:
Cash and temporary cash investments 27,075 8,577
Accounts receivable:
Customer, less allowance for doubtful accounts of $2,662 and $1,770 78,934 7,977
Associated companies - 1,172
Other, less allowance for doubtful accounts of $422 and $458 24,374 18,191
Income tax refunds receivable 16,795 -
Accumulated deferred income taxes 6,594 8,532
Production fuel, at average cost 17,655 18,980
Materials and supplies, at average cost 22,922 22,133
Gas stored underground, at average cost 24,277 16,679
Regulatory assets 24,225 27,999
Prepaid gross receipts tax 28,341 27,388
Other 7,997 8,599
279,189 166,227
Investments:
Nuclear decommissioning trust funds 233,665 223,734
Investment in ATC and other 144,075 133,043
377,740 356,777
Other assets:
Regulatory assets 95,944 102,674
Deferred charges and other 194,242 236,741
290,186 339,415
Total assets $2,469,277 $2,335,138
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2000 1999
ASSETS -------------- --------------
(IN THOUSANDS)

PROPERTY, PLANT AND EQUIPMENT:
Utility --
Plant in service --
Electric.............................................. $ 2,007,974 $ 1,921,624
Gas................................................... 273,457 258,132
Water................................................. 29,869 27,770
Common................................................ 223,921 218,607
-------------- --------------
2,535,221 2,426,133
Less -- Accumulated depreciation........................ 1,380,723 1,266,366
-------------- --------------
1,154,498 1,159,767
Construction work in progress........................... 59,133 66,784
Nuclear fuel, net of amortization....................... 16,099 15,079
-------------- --------------
1,229,730 1,241,630
Other property, plant and equipment, net of accumulated
depreciation and amortization of $195 and $169,
respectively............................................ 369 608
-------------- --------------
1,230,099 1,242,238
-------------- --------------
CURRENT ASSETS:
Cash and temporary cash investments....................... 2,584 3,555
Accounts receivable:
Customer................................................ 51,769 22,061
Associated companies.................................... 2,211 5,067
Other................................................... 13,865 10,984
Production fuel, at average cost.......................... 17,811 20,663
Materials and supplies, at average cost................... 21,639 20,439
Gas stored underground, at average cost................... 13,876 8,624
Prepaid gross receipts tax................................ 23,088 20,864
Other..................................................... 6,397 9,275
-------------- --------------
153,240 121,532
-------------- --------------
INVESTMENTS:
Nuclear decommissioning trust funds....................... 195,768 166,202
Other..................................................... 14,362 15,272
-------------- --------------
210,130 181,474
-------------- --------------
OTHER ASSETS:
Regulatory assets......................................... 88,721 82,161
Deferred charges and other................................ 174,834 138,730
-------------- --------------
263,555 220,891
-------------- --------------
TOTAL ASSETS................................................ $ 1,857,024 $ 1,766,135
============== ==============
- ---------------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

A-16

CONSOLIDATED BALANCE SHEETS (CONTINUED)

DECEMBER 31,
2000 1999
CAPITALIZATION AND LIABILITIES --------------- ---------------
(IN THOUSANDS)

CAPITALIZATION (SEE CONSOLIDATED STATEMENTS OF
CAPITALIZATION):
Common stock.............................................. $ 66,183 $ 66,183
Additional paid-in capital................................ 229,516 229,438
Retained earnings......................................... 371,602 303,476
Accumulated other comprehensive loss...................... (4,708) --
--------------- ---------------
Total common equity..................................... 662,593 599,097
--------------- ---------------
Cumulative preferred stock................................ 59,963 59,963
Long-term debt (excluding current portion)................ 514,209 414,673
--------------- ---------------
1,236,765 1,073,733
--------------- ---------------

CURRENT LIABILITIES:
Current maturities........................................ -- 1,875
Variable rate demand bonds................................ 55,100 55,100
Notes payable to associated companies..................... 29,244 125,749
Accounts payable.......................................... 120,155 88,245
Accounts payable to associated companies.................. 32,442 25,306
Other..................................................... 36,266 30,283
--------------- ---------------
273,207 326,558
--------------- ---------------

OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Accumulated deferred income taxes......................... 222,819 235,838
Accumulated deferred investment tax credits............... 29,472 31,311
Customer advances......................................... 34,815 34,643
Environmental liabilities................................. 7,564 10,861
Other..................................................... 52,382 53,191
--------------- ---------------
347,052 365,844
--------------- ---------------

COMMITMENTS AND CONTINGENCIES (NOTE 11)

TOTAL CAPITALIZATION AND LIABILITIES........................ $ 1,857,024 $ 1,766,135
=============== ===============
- -----------------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

A-17
(Continued)
December 31,
CAPITALIZATION AND LIABILITIES
2003
2002
(in thousands, except
share amounts)
Capitalization (See Consolidated Statements of Capitalization):
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 525,603 325,603
Retained earnings 440,286 399,302
Accumulated other comprehensive loss (20,235 ) (24,108 )
Total common equity 1,011,837 766,980
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 336,409 468,208
1,408,209 1,295,151
Current liabilities:
Current maturities 62,000 -
Variable rate demand bonds 55,100 55,100
Commercial paper - 60,000
Accounts payable 80,051 90,869
Accounts payable to associated companies 22,615 22,964
Accrued taxes 6,284 19,353
Regulatory liabilities 13,874 16,938
Other 27,196 29,064
267,120 294,288
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 213,652 200,426
Accumulated deferred investment tax credits 21,471 23,241
Regulatory liabilities 227,956 15,305
Asset retirement obligations 187,358 -
Pension and other benefit obligations 59,042 58,921
Customer advances 34,895 36,555
Cost of removal obligations - 362,321
Other 49,574 48,930
793,948 745,699
Commitments and contingencies (Note 11)
Total capitalization and liabilities $2,469,277 $2,335,138
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
2000 1999 1998
--------------- --------------- ---------------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 71,436 $ 70,830 $ 35,574
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
FLOWS FROM OPERATING ACTIVITIES:
Depreciation and amortization.................... 139,911 113,037 119,221
Amortization of nuclear fuel..................... 5,066 6,094 5,356
Deferred taxes and investment tax credits........ (12,077) (12,618) (7,529)
Other............................................ (16,003) 2,432 (2,089)
OTHER CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable.............................. (29,733) (13,423) 12,845
Accounts payable................................. 39,046 8,482 19,452
Benefit obligations and other.................... (21,797) (11,854) (5,509)
--------------- --------------- ---------------
Net cash flows from operating activities....... 175,849 162,980 177,321
--------------- --------------- ---------------
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Common stock dividends........................... -- (58,353) (58,341)
Preferred stock dividends........................ (3,310) (3,310) (3,310)
Proceeds from issuance of long-term debt......... 100,000 -- 60,000
Reductions in long-term debt..................... (1,875) -- (8,899)
Net change in short-term borrowings.............. (96,505) 48,950 (4,201)
Capital contribution from parent................. -- 30,000 --
Other............................................ (1,242) -- (1,966)
--------------- --------------- ---------------
Net cash flows from (used for) financing
activities................................... (2,932) 17,287 (16,717)
--------------- --------------- ---------------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Utility construction expenditures................ (131,640) (131,915) (117,143)
Nuclear decommissioning trust funds.............. (16,092) (16,092) (14,297)
Other............................................ (26,156) (30,516) (29,845)
--------------- --------------- ---------------
Net cash flows used for investing activities... (173,888) (178,523) (161,285)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
INVESTMENTS...................................... (971) 1,744 (681)
--------------- --------------- ---------------
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF
PERIOD........................................... 3,555 1,811 2,492
--------------- --------------- ---------------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF
PERIOD........................................... $ 2,584 $ 3,555 $ 1,811
=============== =============== ===============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest......................................... $ 40,455 $ 38,330 $ 33,368
=============== =============== ===============
Income taxes..................................... $ 54,676 $ 47,164 $ 31,951
=============== =============== ===============
- --------------------------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

A-18
Year Ended December 31,
2003
2002
2001
(in thousands)
Cash flows from operating activities:
Net income $114,874 $80,924 $73,490
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 104,896 108,740 121,059
Amortization of nuclear fuel 5,691 6,486 4,554
Amortization of deferred energy efficiency expenditures 43,825 21,179 14,361
Deferred tax expense (benefit) and investment tax credits 21,785 (5,562 ) (6,791 )
Equity income from unconsolidated investments, net (20,725 ) (17,022 ) (15,535 )
Distributions from equity method investments 14,021 13,199 8,450
Other (461 ) (1,175 ) (3,033 )
Other changes in assets and liabilities:
Accounts receivable (9,968 ) (1,902 ) 20,408
Sale of accounts receivable (66,000 ) 28,000 (6,000 )
Income tax refunds receivable (16,795 ) - -
Accounts payable (2,647 ) (20,540 ) (23,653 )
Accrued taxes (13,069 ) 17,296 (1,225 )
Other (36,932 ) (5,873 ) (50,199 )
Net cash flows from operating activities 138,495 223,750 135,886
Cash flows used for financing activities:
Common stock dividends (70,580 ) (59,645 ) (60,449 )
Preferred stock dividends (3,310 ) (3,310 ) (3,310 )
Capital contribution from parent 200,000 61,000 35,000
Reductions in long-term debt (70,000 ) - (47,000 )
Net change in short-term borrowings (60,000 ) (30,816 ) 61,572
Other (7,705 ) 5,086 (4,989 )
Net cash flows used for financing activities (11,595 ) (27,685 ) (19,176 )
Cash flows used for investing activities:
Utility construction expenditures (151,635 ) (156,921 ) (147,032 )
Nuclear decommissioning trust funds (2,876 ) (16,092 ) (16,092 )
Proceeds from asset sales 21,337 - 75,600
Other 24,772 (14,782 ) (29,308 )
Net cash flows used for investing activities (108,402 ) (187,795 ) (116,832 )
Net increase (decrease) in cash and temporary cash investments 18,498 8,270 (122 )
Cash and temporary cash investments at beginning of period 8,577 307 429
Cash and temporary cash investments at end of period $27,075 $8,577 $307
Supplemental cash flows information:
Cash paid during the period for:
Interest $39,588 $39,540 $43,237
Income taxes, net of refunds $84,256 $35,875 $54,161
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
DECEMBER 31,
2000 1999
------------ ------------
(IN THOUSANDS, EXCEPT SHARE
AMOUNTS)

COMMON EQUITY:
Common stock -- $5.00 par value -- authorized 18,000,000
shares; 13,236,601 shares outstanding................... $ 66,183 $ 66,183
Additional paid-in capital................................ 229,516 229,438
Retained earnings......................................... 371,602 303,476
Accumulated other comprehensive loss...................... (4,708) --
---------- ----------
662,593 599,097
---------- ----------
CUMULATIVE PREFERRED STOCK:
Cumulative, without par value, not mandatorily redeemable
-- authorized 3,750,000 shares, maximum aggregate stated
value $150,000,000:
$100 stated value -- 4.50% series, 99,970 shares
outstanding.......................................... 9,997 9,997
$100 stated value -- 4.80% series, 74,912 shares
outstanding.......................................... 7,491 7,491
$100 stated value -- 4.96% series, 64,979 shares
outstanding.......................................... 6,498 6,498
$100 stated value -- 4.40% series, 29,957 shares
outstanding.......................................... 2,996 2,996
$100 stated value -- 4.76% series, 29,947 shares
outstanding.......................................... 2,995 2,995
$100 stated value -- 6.20% series, 150,000 shares
outstanding.......................................... 15,000 15,000
$ 25 stated value -- 6.50% series, 599,460 shares
outstanding.......................................... 14,986 14,986
---------- ----------
59,963 59,963
---------- ----------
LONG-TERM DEBT:
First Mortgage Bonds:
1984 Series A, variable rate (5% at December 31, 2000),
due 2014............................................... 8,500 8,500
1988 Series A, variable rate (5.15% at December 31,
2000), due 2015........................................ 14,600 14,600
1990 Series V, 9.3%, due 2025........................... 27,000 27,000
1991 Series A, variable rate (4.85% at December 31,
2000), due 2015........................................ 16,000 16,000
1991 Series B, variable rate (4.85% at December 31,
2000), due 2005........................................ 16,000 16,000
1991 Series C, retired in 2000.......................... -- 1,000
1991 Series D, retired in 2000.......................... -- 875
1992 Series W, 8.6%, due 2027........................... 90,000 90,000
1992 Series X, 7.75%, due 2004.......................... 62,000 62,000
1992 Series Y, 7.6%, due 2005........................... 72,000 72,000
---------- ----------
306,100 307,975
Debentures, 7%, due 2007.................................. 105,000 105,000
Debentures, 5.7%, due 2008................................ 60,000 60,000
Debentures, 7 5/8%, due 2010.............................. 100,000 --
---------- ----------
571,100 472,975
---------- ----------
Less:
Current maturities...................................... -- (1,875)
Variable rate demand bonds.............................. (55,100) (55,100)
Unamortized debt premium and (discount), net............ (1,791) (1,327)
---------- ----------
514,209 414,673
---------- ----------
TOTAL CAPITALIZATION........................................ $1,236,765 $1,073,733
========== ==========
- -----------------------------------------------------------------------------------------

THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

A-19
December 31,
2003
2002
(in thousands, except
share amounts)
Common equity (See Consolidated Balance Sheets) $1,011,837 $766,980
Cumulative preferred stock:
Cumulative, without par value, not mandatorily redeemable - authorized 3,750,000 shares, maximum aggregate stated value $150,000,000:
$100 stated value - 4.50% series, 99,970 shares outstanding 9,997 9,997
$100 stated value - 4.80% series, 74,912 shares outstanding 7,491 7,491
$100 stated value - 4.96% series, 64,979 shares outstanding 6,498 6,498
$100 stated value - 4.40% series, 29,957 shares outstanding 2,996 2,996
$100 stated value - 4.76% series, 29,947 shares outstanding 2,995 2,995
$100 stated value - 6.20% series, 150,000 shares outstanding 15,000 15,000
$25 stated value - 6.50% series, 599,460 shares outstanding 14,986 14,986
59,963 59,963
Long-term debt:
First Mortgage Bonds:
1992 Series X, 7.75%, due 2004 62,000 62,000
1992 Series Y, 7.6%, due 2005 72,000 72,000
1991 Series B, variable rate (1.73% at Dec. 31, 2003), due 2005 16,000 16,000
1984 Series A, variable rate (1.37% at Dec. 31, 2003), due 2014 8,500 8,500
1988 Series A, variable rate (1.29% at Dec. 31, 2003), due 2015 14,600 14,600
1991 Series A, variable rate (1.73% at Dec. 31, 2003), due 2015 16,000 16,000
1992 Series W, 8.6%, retired in 2003 - 70,000
189,100 259,100
Debentures, 7%, due 2007 105,000 105,000
Debentures, 5.7%, due 2008 60,000 60,000
Debentures, 7-5/8%, due 2010 100,000 100,000
454,100 524,100
Less:
Current maturities (62,000 ) -
Variable rate demand bonds (55,100 ) (55,100 )
Unamortized debt discount, net (591 ) (792 )
336,409 468,208
Total capitalization $1,408,209 $1,295,151
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
Common
Stock
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Common
Equity
(in thousands)
2001:
Beginning balance (a) $66,183 $229,516 $371,602 ($4,708 ) $662,593
Earnings available for common stock 70,180 70,180
Minimum pension liability adjustment, net of tax of ($9,552) (14,248 ) (14,248 )
Unrealized holding gains on derivatives, net of tax of $3,932 5,952 5,952
Less: reclassification adjustment for losses included in earnings available for common stock, net of tax of ($1,676) (2,837 ) (2,837 )
Net unrealized gains on qualifying derivatives 8,789 8,789
Total comprehensive income 64,721
Common stock dividends (60,449 ) (60,449 )
Capital contribution from parent 35,000 35,000
Stock options exercised 87 87
Ending balance 66,183 264,603 381,333 (10,167 ) 701,952
2002:
Earnings available for common stock 77,614 77,614
Minimum pension liability adjustment, net of tax of ($6,823) (10,177 ) (10,177 )
Unrealized holding losses on derivatives, net of tax of ($92) (137 ) (137 )
Less: reclassification adjustment for gains included in earnings available for common stock, net of tax of $2,432 3,627 3,627
Net unrealized losses on qualifying derivatives (3,764 ) (3,764 )
Total comprehensive income 63,673
Common stock dividends (59,645 ) (59,645 )
Capital contribution from parent 61,000 61,000
Ending balance 66,183 325,603 399,302 (24,108 ) 766,980
2003:
Earnings available for common stock 111,564 111,564
Minimum pension liability adjustment, net of tax of $2,809 4,190 4,190
Unrealized holding losses on derivatives, net of tax of ($3,543) (5,914 ) (5,914 )
Less: reclassification adjustment for losses included in earnings available for common stock, net of tax of ($3,752) (5,597 ) (5,597 )
Net unrealized losses on qualifying derivatives (317 ) (317 )
Total comprehensive income 115,437
Common stock dividends (70,580 ) (70,580 )
Capital contribution from parent 200,000 200,000
Ending balance $66,183 $525,603 $440,286 ($20,235 ) $1,011,837

ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE COMMON
STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY
-------- ---------- --------- ------------- ---------
(IN THOUSANDS)

1998:
Beginning balance............................ $66,183 $199,170 $320,386 $ -- $585,739
Earnings available for common stock........ 32,264 32,264
Common stock dividends..................... (58,341) (58,341)
Common stock issued........................ 268 268
------- -------- -------- ------- --------
Ending balance............................... 66,183 199,438 294,309 -- 559,930

1999:
Earnings available for common stock........ 67,520 67,520
Common stock dividends..................... (58,353) (58,353)
Capital contribution from parent........... 30,000 30,000
------- -------- -------- ------- --------
Ending balance............................... 66,183 229,438 303,476 -- 599,097

2000:
Comprehensive income:
Earnings available for common stock...... 68,126 68,126
Other(a) Accumulated other comprehensive income (loss):
Unrealized losses on derivatives
qualified as hedges:
Unrealized holding losses arising
during period due to cumulative
effectloss at January 1, 2001 consisted entirely of a change in accounting
principle, net of tax of
($430)........................... (642) (642)
Other unrealized holding losses
arising during period, net of tax
of ($3,634)...................... (5,151) (5,151)
Less: reclassification adjustment
for losses included in net
income, net of tax of ($769)..... (1,085) (1,085)
------- --------
Net unrealized losses on qualifying derivatives......................... (4,708) (4,708)
------- --------
Total comprehensive income............... 63,418
Common stock issued........................ 78 78
------- -------- -------- ------- --------
Ending balance............................... $66,183 $229,516 $371,602 ($4,708) $662,593
======= ======== ======== ======= ========
- ------------------------------------------------------------------------------------------------------------
derivatives.

THE ACCOMPANYING
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.

A-20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) GENERAL--The
(a) General- The consolidated financial statements include the accounts of WP&L and its principal consolidated subsidiaries.subsidiaries WPL Transco LLC and South Beloit. WP&L is a direct subsidiary of Alliant Energy and is engaged principally in the generation, transmission, distribution and sale of electric energy; the purchase, distribution, transportation and sale of natural gas; and the provision of water services.and various other energy-related services including construction management services for wind farms. Nearly all of WP&L's&L’s retail customers are located in south and central Wisconsin. WP&L's principal
The consolidated financial statements reflect investments in controlled subsidiaries are WPL
Transco LLCon a consolidated basis. FIN 46, issued by the FASB in January 2003, requires consolidation where there is a controlling financial interest in a variable interest entity or where the variable interest entity does not have sufficient equity risk to finance its activities without additional subordinated financial support from other parties. All significant intercompany balances and South Beloit.transactions have been eliminated from the consolidated financial statements. The consolidated financial statements are prepared in conformity with accounting principles
generally accepted in the U.S.,GAAP, which give recognition to the rate making and accounting practices of FERC and state commissions having regulatory jurisdiction. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect: a) the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and b) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain prior period amounts have been reclassified on a basis consistent with the current year presentation. The most significant reclassifications relate to the reporting of accumulated costs of removal which are non-legal retirement obligations and accumulated decommissioning costs accrued prior to January 1, 2003. Previously, these costs were included as components of “Accumulated Depreciation” but in accordance with recent SEC guidance are now shown in “Cost of removal obligations” on the Consolidated Balance Sheet at Dec. 31, 2002.
Unconsolidated investments for which WP&L has at least a 20 percent
non-controllingdoes not control, but does have the ability to exercise significant influence over operating and financial policies (generally, 20% to 50% voting interestinterest), are generally accounted for under the equity method of accounting. These investments are stated at acquisition cost, increased or decreased for WP&L's&L’s equity in net income or loss, which is included in "Miscellaneous, net"“Equity income from unconsolidated investments” in the Consolidated Statements of Income and decreased for any dividends received. Investments that do not meet the criteria for consolidation or the equity method of accounting are accounted for under the cost method.

(B) REGULATION--WP
(b) Regulation - WP&L is a public utility company subject to regulation byunder PUHCA, FERC, the PSCW and the ICC.

(C) REGULATORY ASSETS--WP
(c) Regulatory Assets and Liabilities - WP&L is subject to the provisions of SFAS 71, "Accounting
for the Effects of Certain Types of Regulation," which provides that rate-regulated public utilities record certain costs and credits allowed in the rate making process in different periods than for non-regulated entities. These are deferred as regulatory assets or accrued as regulatory liabilities and are recognized in the Consolidated Statements of Income at the time they are reflected in rates. At DecemberAs of Dec. 31, 20002003 and 1999,2002, WP&L had $7 million and $6 million, respectively, of regulatory assets of
$92.4 millionthat were not earning returns. At Dec. 31, 2003 and $85.9 million, respectively,2002, regulatory assets and liabilities were comprised of the following items (in millions):
2000 1999
-------- --------

Tax-related (Note 1(d))..................................... $37.6 $43.4
Energy efficiency program costs............................. 19.8 7.0
Environmental liabilities (Note 11(e))...................... 16.6 19.1
Other....................................................... 18.4 16.4
----- -----
$92.4 $85.9
===== =====
Regulatory
Assets
Regulatory
Liabilities
2003
2002
2003
2002
Tax-related (Note 1(d)) $23.4 $25.0 $17.9 $ 14.6
Energy efficiency program costs 22.9 38.6 -- --
Environmental-related (Note 11(e)) 16.2 19.0 1.0 0.6
Asset retirement obligations (Note 16) 8.3 -- -- --
Cost of removal obligations -- -- 209.9 --
Other 49.4 48.1 13.0 17.0
$ 120.2 $ 130.7 $ 241.8 $ 32.2
WP&L believes it is probable that any differences between expenses for legal AROs calculated under SFAS 143 and expenses recovered currently in rates will be recoverable in future rates, and is deferring the difference of $8.3 million as a regulatory asset. WP&L also collects in rates future removal costs for many assets that do not have an associated legal ARO. WP&L records a liability for the estimated amounts it has collected in rates for these future removal costs less amounts spent on removal activities. At Dec. 31, 2003 and 2002, non-legal removal obligations of $209.9 million and $199.1 million were recorded in “Regulatory liabilities” and “Cost of removal obligations,” respectively, on the Consolidated Balance Sheets.
If a portion of WP&L's&L’s operations becomes no longer subject to the provisions of SFAS 71 as a result of competitive restructuring or otherwise, a write-down of related regulatory assets would be required, unless some form of transition cost recovery is established by the appropriate regulatory body that would meet the requirements under generally accepted accounting principlesGAAP for continued accounting as regulatory assets during such recovery period. In addition, WP&L would be required to determine any impairment of other assets and write-down such assets to their fair value.

A-21

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) INCOME TAXES--WP
(d) Income Taxes - WP&L is subject to the provisions of SFAS 109 and follows the liability method of accounting for deferred income taxes, which requires the establishment of deferred tax assets and liabilities, as appropriate, for all temporary differences between the tax basis of assets and liabilities and the amounts reported in the consolidated financial statements. Deferred taxes are recorded using currently enacted tax rates.
Except as noted below, income tax expense includes provisions for deferred taxes to reflect the tax effects of temporary differences between the time when certain costs are recorded in the accounts and when they are deducted for tax return purposes. As temporary differences reverse, the related accumulated deferred income taxes are reversed to income. Investment tax credits have been deferred and are subsequently credited to income over the average lives of the related property. Other tax credits reduce income tax expense in the year claimed and are generally related to research and development.
The PSCW has allowed rate recovery of deferred taxes on all temporary differences since August 1991. WP&L established a regulatory asset associated with those temporary differences occurring prior to August 1991 that will be recovered in future rates.

Alliant Energy files a consolidated federal income tax return. Under the terms
of an agreement between Alliant Energy and WP&L, WP&L calculates its federal
income tax provisions and makes payments to or receives payments from Alliant
Energy as if it were a separate taxable entity.

(E) TEMPORARY CASH INVESTMENTS--Temporaryrates through 2007.
(e) Temporary Cash Investments - Temporary cash investments are stated at cost, which approximates market value, and are considered cash equivalents for the Consolidated Balance Sheets and the Consolidated Statements of Cash Flows. These investments consist of short-term liquid investments that have maturities of less than 90 days fromdays.
(f) Property, Plant and Equipment - Utility plant is recorded at original cost, which includes overhead, administrative costs and AFUDC. WP&L’s aggregate AFUDC recovery rates for 2003, 2002 and 2001, computed in accordance with the date of acquisition.

(F) DEPRECIATION OF UTILITY PROPERTY, PLANT AND EQUIPMENT--WPprescribed regulatory formula, were 9.5%, 2.6% and 7.9%, respectively.
WP&L uses thea combination of remaining life, straight-line and sum-of-the-years-digits depreciation methodmethods as approved by the PSCW and the ICC. The remaining depreciable life of Kewaunee, of which WP&L is a co-owner, is based on the PSCW approved revised end-of-life of 2010. Depreciation expense related to the decommissioning of Kewaunee is discussed in Note 11(f). The average rates of depreciation for electric and gas properties, of WP&L, consistent with current rate making practices, were as follows:
2000 1999 1998
-------- -------- --------

Electric.................................................... 3.6% 3.6% 3.6%
Gas......................................................... 4.1% 3.9% 3.8%

(G) PROPERTY, PLANT AND EQUIPMENT--Utility plant
2003
2002
2001
Electric 3.7% 3.6% 3.7%
Gas 4.0% 4.1% 4.1%
Nuclear fuel for Kewaunee is recorded at its original cost which includes overhead and administrativeis amortized to expense based upon the quantity of heat produced for electric generation. This accumulated amortization assumes spent nuclear fuel will have no residual value. Estimated future disposal costs and AFUDC. WP&L's aggregate
gross AFUDC recovery rates used for 2000, 1999 and 1998, computed in accordance
with the prescribed regulatory formula, were 10.8%, 5.4% and 5.2%, respectively.

of such fuel are expensed based on KWhs generated.
Other property, plant and equipment is recorded at original cost.cost, the majority of which is depreciated using the straight-line method. Upon retirement or sale of other property and equipment, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in "Miscellaneous, net" in the Consolidated Statements of Income. Ordinary retirements of utility plant including removal costs lessand salvage value are netted and charged to accumulated depreciation upon removal from utility plant accounts and no gain or loss is recognized. (H) OPERATING REVENUES--WPRemoval costs reduce the regulatory liability previously established.
(g) Operating Revenues - Revenues from WP&L are primarily from electric and natural gas sales and deliveries and are recorded under the accrual method of accounting and recognized upon delivery. WP&L accrues revenues for services rendered but unbilled at month-end. In 2000, WP&L recorded an increaseserves as a collection agent for sales or various other taxes and record revenues on a net basis. The revenues do not include the collection of $10 million in the estimate
of utility services rendered but unbilled at month-end due to the implementation
of a refined estimation process.

A-22

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(I) UTILITY FUEL COST RECOVERY--WP&L'saforementioned taxes.
(h) Utility Fuel Cost Recovery - WP&L’s retail electric rates are based in part
on annual forecasted fuel and purchased-power costs. Under PSCW rules, WP&L can seek emergency rate increases if it experiences an extraordinary increase in these costs or if the annual costs are more than 3 percent3% higher than the estimated costs used to establish rates. WP&L has a gas performance incentive which includes a sharing mechanism whereby 40 percent50% of all gains and losses relative to current commodity prices, as well as other benchmarks, are retained by WP&L, with the remainder refunded to or recovered from customers.

(J) NUCLEAR REFUELING OUTAGE COSTS--Operating
(i) Generating Facility Outages - Operating expenses incurred during refueling outages at Kewaunee and the maintenance costs incurred during outages for WP&L’s various other generating facilities are expensed by WP&L as incurred. The next scheduledtiming of the Kewaunee refueling outage at Kewaunee isoutages during 2001-2003 and anticipated to commence in Fall 2001.

(K) NUCLEAR FUEL--Nuclear fuelrefueling outages for Kewaunee is recorded at its original cost and
is amortized to expense based upon the quantity of heat produced for the
generation of electricity. This accumulated amortization assumes spent nuclear
fuel will have no residual value. Estimated future disposal costs of such fuel2004-2006 are expensed based on kilowatt-hours generated.

(L) DERIVATIVE FINANCIAL INSTRUMENTS--WPas follows:
2001
2002
2003
2004
2005
2006
Fall None Spring Fall None Spring
(j) Derivative Financial Instruments - WP&L uses derivative financial instruments to hedge exposures to fluctuations in interest rates, certain commodity prices and volatility in a portion of natural gas sales volumes due to weather. WP&L also utilizes derivatives to mitigate the equity price volatility associated with certain investments in equity securities. WP&L does not use such instruments for speculative purposes. In accordance with SFAS 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities--an Amendment of SFAS 133," theThe fair value of all derivatives are recorded as assets or liabilities on the Consolidated Balance Sheets and gains and losses related to derivatives that are designated as, and qualify as hedges, are recognized in earnings when the underlying hedged item or physical transaction is recognized in income. Gains and losses related to derivatives that do not qualify for, or are not designated in hedge relationships, are recognized in earnings immediately. Based on the fuel and natural gas cost recovery mechanisms in place, as well as other specific regulatory authorizations, changes in fair market values of WP&L’s derivatives generally have no impact on its results of operations. WP&L has a number ofsome commodity purchase and sales contracts for both capacity and energy that have been designated, and qualify for, the normal purchase and sale exception in SFAS 138. Basedand based on this designation, these contracts are not accounted for as derivative instruments.
WP&L is exposed to losses related to financial instruments in the event of counterparties’ non-performance. WP&L has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate its exposure to counterparty credit risk. WP&L is not aware of any material exposure to counterparty credit risk related to its derivative financial instruments. Refer to Note 10 for further discussion of WP&L's&L’s derivative financial instruments.

(2) MERGER

In April 1998, WPLH, IES
(k) Pension Plan - For the defined benefit pension plan sponsored by Corporate Services, Alliant Energy allocates pension costs and IPC completed a merger resultingcontributions to WP&L based on labor costs of plan participants and any additional minimum pension liability based on the funded status of the WP&L group.
(l) Asset Valuations - Long-lived assets, excluding regulatory assets, are reviewed for possible impairment whenever events or changes in Alliant Energy.circumstances indicate the carrying value of the assets may not be recoverable.
Impairment is indicated if the carrying value of an asset exceeds its undiscounted future cash flows. An impairment charge is recognized equal to the amount the carrying value exceeds the asset’s fair value. The merger wasfair value is determined by the use of quoted market prices, appraisals, or the use of other valuation techniques such as expected discounted future cash flows. The estimated fair value, less cost to sell assets held for sale, is compared each reporting period to their carrying values. Impairment charges are recorded for assets held for sale if the carrying value of such asset exceeds the estimated fair value less cost to sell.
If events or circumstances indicate the carrying value of investments accounted for under the equity method of accounting may not be recoverable, potential impairment is assessed by comparing the future anticipated cash flows from these investments to their carrying values. If an impairment is indicated, a charge is recognized equal to the amount the carrying value exceeds the investment’s fair value.
(2) UTILITY RATE MATTERS
In February 2004, WP&L received approval from the PSCW to refund $5.3 million to its natural gas customers as relates to its annual performance under the gas performance incentive. The PSCW has not yet audited the refund calculation, but agreed with WP&L’s request to refund approximately 80% of the total refund amount at this time. This refund was completed in February 2004 and the remainder of the refund will be completed after the PSCW completes their audit and issues a poolingruling. At Dec. 31, 2003, WP&L had reserves for all amounts related to these refunds. Refer to Note 1(h) for further discussion of interests.

A-23
WP&L’s fuel cost recovery.
(3) LEASES
WP&L's&L’s operating lease rental expenses, which include certain purchased-power agreements, for 2000, 19992003, 2002 and 19982001 were $7.9$25.9 million, $7.7$24.5 million and $6.4$23.4 million, respectively. The purchased-power agreements total below includes $464 million and $69 million related to the Riverside and RockGen plants, respectively, in Wisconsin. Riverside is expected to be placed in service in 2004. WP&L's&L continues to evaluate Riverside, RockGen and other tolling arrangements, renewable energy entities and any other non-special purpose entities, to determine if they require consolidation under the revised FIN 46 guidance issued by the FASB in December 2003. WP&L will apply the provisions of the revised guidance as of March 31, 2004. The synthetic leases relate to the financing of utility railcars and a utility radio dispatch system. These leases do not meet the consolidation requirements per FIN 46 and were not included on the Consolidated Balance Sheets. WP&L has guaranteed the residual value of its synthetic leases totaling $13 million in the aggregate. The guarantees extend through the maturity of each respective underlying lease with remaining terms up to 12 years. Residual value guarantees have been included in the future minimum lease payments by year are as followsnoted in the following table (in millions):
OPERATING
YEAR LEASES
- ---- ---------

2001........................................................ $ 14.0
2002........................................................ 16.5
2003........................................................ 15.5
2004........................................................ 15.1
2005........................................................ 15.2
Thereafter.................................................. 64.2
------
$140.5
======
2004
2005
2006
2007
2008
Thereafter
Total
Certain purchased-power agreements $ 52.6 $ 69.5 $ 70.9 $ 72.2 $ 64.8 $ 235.0 $ 565.0
Synthetic leases 7.9 7.9 7.8 6.8 2.6 22.8 55.8
Other 2.1 1.7 1.3 1.1 1.0 1.4 8.6
$ 62.6 $ 79.1 $ 80.0 $ 80.1 $ 68.4 $ 259.2 $ 629.4
(4) UTILITYSALE OF ACCOUNTS RECEIVABLE
Utility customer accounts receivable, including unbilled revenues, arise primarily from the sale of electricityelectric and natural gas.gas sales. At DecemberDec. 31, 20002003 and 1999,2002, WP&L was serving a diversified base of residential, commercial and industrial customers and did not have any significant concentrations of credit risk.

An
WP&L participates in a combined utility customer accounts receivable financing arrangement exists through 2001 forsale program whereby WP&L in
which itand IP&L may sell up to a combined maximum amount of $150$250 million (there are no individual subsidiary limits) of their respective accounts receivable to a third-party financial institution on a limited recourse basis. Accounts receivable sold
include receivables arising from sales to customersbasis through wholly-owned and to other public,
municipalconsolidated special purpose entities. Corporate Services acts as a collection agent for the buyer and cooperative utilities, as well as from billings to the co-owners
of the jointly-owned electric generating plants operated by WP&L. WP&L receives a fee for billingcollection services. The agreement expires in April 2006 and collection functions, whichis subject to annual renewal or renegotiation for a longer period thereafter. Under terms of the agreement, the third-party financial institution
purchases the receivables initially for the face amount. On a monthly basis, this sales price is adjusted, resulting in payments to the third-party financial institution of an amount that varies based on interest rates and length of time the sold receivables remain outstanding. Collections on sold receivables are used to purchase additional receivables from WP&L's responsibility,
that approximates fair value.&L and IP&L.
At Dec. 31, 2003 and 2002, WP&L had sold $50 million and $116 million of receivables, respectively. In 2000, 19992003, 2002 and 1998,2001, WP&L received approximately $0.9$0.8 billion, $0.9$1.2 billion and $1.0$1.1 billion, respectively, in aggregate proceeds from this facility.the sale of accounts receivable. WP&L uses proceeds from the sale of accounts receivable and unbilled revenues to maintain flexibility in its capital structure, take advantage of favorable short-term rates and finance a portion of its long-term cash needs. Included in WP&L's Consolidated Statements of Income for 2000, 1999
and 1998, were&L paid fees associated with these sales of $5.0$1.2 million, $2.2 million and $4.0 million in 2003, 2002 and $4.9 million,2001, respectively.
WP&L accounts for the sale of accounts receivable to the third-party financial institution as sales under SFAS 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” which do not require consolidation per the guidelines of FIN 46. Retained receivables are available to the third-party financial institution to pay any fees or expenses due it, and to absorb all credit losses incurred on any of the sold receivables.
(5) INCOME TAXES
The components of federal and state income taxes for WP&L for the years ended
December 31 were as follows (in millions):
2000 1999 1998
-------- -------- --------

Current tax expense......................................... $55.0 $ 58.4 $32.2
Deferred tax expense........................................ (10.2) (10.7) (5.6)
Amortization of investment tax credits...................... (1.9) (1.9) (1.9)
----- ------ -----
$42.9 $ 45.8 $24.7
===== ====== =====

A-24

(5) INCOME TAXES (CONTINUED)
2003
2002
2001
Current tax expense:
Federal $ 29.0 $ 42.8 $ 36.8
State 15.7 9.7 11.2
Deferred tax expense (benefit):
Federal 22.8 (5.0 ) (4.6 )
State 0.6 1.2 (0.4 )
Amortization of investment tax credits (1.6 ) (1.8 ) (1.8 )
Research and development tax credits (0.7 ) (2.2 ) --
$ 65.8 $ 44.7 $ 41.2
Alliant Energy files a consolidated federal income tax return. Under the terms of an agreement between Alliant Energy and its subsidiaries, including WP&L, the subsidiaries calculate their respective federal income tax provisions and make payments to or receive payments from Alliant Energy as if they were separate taxable entities. Separate return amounts are adjusted to reflect state apportionment benefits net of federal tax and the fact that PUHCA prohibits the retention of tax benefits at the parent level. Any difference between the separate return methodology and the actual consolidated return is allocated as prescribed in Alliant Energy’s tax allocation agreement. WP&L realized net benefits of $2.9 million, $0 and $0 related to state apportionment and allocation of parent tax benefits in 2003, 2002 and 2001, respectively.
The overall effective income tax rates shown below forin the years ended
December 31following table were computed by dividing total income tax expense by income before income taxes.
2000 1999 1998
-------- -------- --------

STATUTORY FEDERAL INCOME TAX RATE........................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefits............... 6.0 6.3 7.8
Amortization of investment tax credits.................... (1.6) (1.6) (3.1)
Adjustment of prior period taxes.......................... (0.8) (0.3) --
Merger expenses........................................... -- -- 2.5
Amortization of excess deferred taxes..................... (1.3) (1.3) (2.5)
Other items, net.......................................... 0.2 1.1 1.3
----- ------ -----
OVERALL EFFECTIVE INCOME TAX RATE........................... 37.5% 39.2% 41.0%
===== ====== =====
2003
2002
2001
Statutory federal income tax rate 35.0 % 35.0 % 35.0 %
State income taxes, net of federal benefits 5.8 6.1 6.4
Research and development tax credits (0.3 ) (1.8 ) --
Amortization of excess deferred taxes (0.5 ) (1.4 ) (1.5 )
Adjustment of prior period taxes (0.8 ) (1.1 ) (2.8 )
Amortization of investment tax credits (0.9 ) (1.4 ) (1.6 )
Other items, net (1.9 ) 0.2 0.4
Overall effective income tax rate 36.4 % 35.6 % 35.9 %
The accumulated deferred income tax (assets) and liabilities included on the Consolidated Balance Sheets at DecemberDec. 31 arise from the following temporary differences (in millions):
2000 1999
-------- --------

Property related............................................ $260.5 $271.9
Investment tax credit related............................... (19.7) (21.0)
Other....................................................... (18.0) (15.1)
------ ------
$222.8 $235.8
====== ======
2003
2002
Deferred
Tax
Assets
Deferred
Tax
Liabilities
Net
Deferred
Tax
Assets
Deferred
Tax
Liabilities
Net
Property related ($14.3 ) $216.0 $201.7 ($15.6 ) $216.8 $201.2
Minimum pension liability (13.6 ) -- (13.6 ) (16.4 ) -- (16.4 )
Decommissioning (22.2 ) -- (22.2 ) (25.2 ) -- (25.2 )
Other (6.6 ) 47.8 41.2 (8.5 ) 40.8 32.3
Total ($56.7 ) $263.8 $207.1 ($65.7 ) $257.6 $191.9
2003
2002
Current assets - Accumulated deferred income taxes ($6.6 ) ($8.5 )
Other long-term liabilities and deferred credits - Accumulated deferred income taxes 213.7 200.4
Total deferred tax (assets) and liabilities $207.1 $191.9
(6) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Substantially all of WP&L has two&L’s employees are covered by several non-contributory defined benefit pension plans that cover
substantially all of its employees.plans. Benefits are based on the employees'employees’ years of service and compensation. WP&L also provides certain postretirement health care and life benefits to eligible retirees. In general, the health care plans are contributory with participants'participants’ contributions adjusted annuallyregularly and the life insurance plans are non-contributory. The weighted-averageweighted average assumptions as ofat the measurement date of SeptemberSept. 30 arewere as follows:
QUALIFIED PENSION OTHER POSTRETIREMENT
BENEFITS BENEFITS
------------------------------ ------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------

Discount rate................................... 8.00% 7.75% 6.75% 8.00% 7.75% 6.75%
Expected return on plan assets.................. 9% 9% 9% 9% 9% 9%
Rate of compensation increase................... 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend range........................... N/A N/A N/A 9% 7% 8%
Ultimate trend range.......................... N/A N/A N/A 5% 5% 5%

A-25

(6) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)

Qualified
Pension Benefits
Other
Postretirement Benefits
2003
2002
2001
2003
2002
2001
Discount rate for benefit obligations 6% 6.75% 7.25% 6% 6.75% 7.25%
Discount rate for net periodic cost 6.75% 7.25% 8% 6.75% 7.25% 8%
Expected return on plan assets 9% 9% 9% 9% 9% 9%
Rate of compensation increase 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Medical cost trend on covered charges:
Initial trend rate N/A N/A N/A 9.5% 10.8% 12%
Ultimate trend rate N/A N/A N/A 5% 5% 5%
The expected return on plan assets was determined by analysis of historical and forecasted asset class returns as well as actual returns for the plan over the past 10 years. An adjustment to the returns to account for active management is also made in the analysis. The obligations are viewed as long-term commitments and a long-term approach is used when determining the expected rate of return on assets, which is reviewed on an annual basis.
The components of WP&L's&L’s qualified pension benefits and other postretirement benefits costs arewere as follows (in millions):
OTHER POSTRETIREMENT
QUALIFIED PENSION BENEFITS BENEFITS
------------------------------------ ------------------------------------
2000 1999 1998 2000 1999 1998
-------- -------- -------- -------- -------- --------

Service cost..................................... $ 3.0 $ 3.8 $ 3.2 $ 1.4 $ 1.6 $ 1.7

Interest cost.................................... 8.9 8.9 8.5 3.3 2.7 2.6

Expected return on plan assets................... (12.9) (12.9) (12.8) (1.6) (1.5) (1.5)

Amortization of:

Transition obligation (asset).................. (2.1) (2.1) (2.1) 1.2 1.2 1.3

Prior service cost............................. 0.4 0.4 0.5 -- -- --

Actuarial loss (gain).......................... -- 0.2 -- (0.8) (0.9) (1.1)
------ ------ ------ ----- ----- -----

Total ($ 2.7) ($ 1.7) ($ 2.7) $ 3.5 $ 3.1 $ 3.0
====== ====== ====== ===== ===== =====

During 1998, WP&L recognized an additional $0.6 million of costs in accordance
with SFAS 88, "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," for severance and early
retirement programs. In addition, during 1998, WP&L recognized $3.6 million of
curtailment charges relating to WP&L's other postretirement benefits.

Qualified
Pension Benefits
Other
Postretirement Benefits
2003
2002
2001
2003
2002
2001
Service cost $ 4.0 $ 3.6 $2.8 $ 3.4 $ 2.4 $ 1.6
Interest cost 10.6 10.1 9.2 5.2 4.4 3.6
Expected return on plan assets (13.5 ) (12.2 ) (13.7 ) (1.4 ) (1.6 ) (1.7 )
Amortization of:
Transition obligation (asset) -- (1.7 ) (2.1 ) 1.1 1.1 1.2
Prior service cost 0.4 0.4 0.5 -- -- --
Actuarial loss (gain) 3.5 1.5 -- 0.8 0.1 (0.6 )
$ 5.0 $ 1.7 ($ 3.3 ) $ 9.1 $ 6.4 $ 4.1
The pension benefit costbenefits costs shown abovepreviously (and in the following tables) representsrepresent only the pension benefit costbenefits costs for bargaining unit employees of WP&L covered under the bargaining unit pension plan that is sponsored by WP&L. The benefit obligations and assets associated with WP&L’s non-bargaining employees who are participants in other Alliant Energy plans are reported in Alliant Energy’s Consolidated Financial Statements and are not reported previously. The pension benefit costbenefits (income) costs for WP&L's&L’s non-bargaining employees who are now participants in other Alliant Energy plans was ($1.3)were $1.9 million, ($1.8)$0.3 million and $3.0($1.5) million for 2000, 19992003, 2002 and 1998, respectively, including a special charge of
$3.6 million in 1998 for severance and early retirement window programs.2001, respectively. In addition, Corporate Services provides services to WP&L. The allocated pension benefitbenefits costs associated with these services waswere $2.0 million, $1.7 million and $1.3 million $1.2 millionfor 2003, 2002 and $0.6 million for 2000, 1999 and 1998,2001, respectively. The other postretirement benefit costbenefits costs shown abovepreviously for each period (and in the following tables) representsrepresent the other postretirement benefit costbenefits costs for all WP&L employees. The allocated other postretirement benefit costbenefits costs associated with Corporate Services for WP&L waswere $0.9 million, $0.5 million and $0.3 million $0.4 millionfor 2003, 2002 and $0.2 million for 2000, 1999 and
1998,2001, respectively.
The assumed medical trend rates are critical assumptions in determining the service and interest cost and accumulated postretirement benefit obligation related to postretirement benefitbenefits costs. A one percent1% change in the medical trend rates for 2000,2003, holding all other assumptions constant, would have the following effects (in millions):
1 PERCENT INCREASE 1 PERCENT DECREASE
------------------ ------------------

Effect on total of service and interest cost
components........................................ $0.4 ($0.4)

Effect on postretirement benefit obligation......... $3.0 ($2.9)

A-26

(6) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
1% Increase
1% Decrease
Effect on total of service and interest cost components $ 0.9 ($ 0.8 )
Effect on postretirement benefit obligation 9.4 (8.3 )
A reconciliation of the funded status of WP&L's&L’s plans to the amounts recognized on WP&L'sthe Consolidated Balance Sheets at DecemberDec. 31 is presented belowwas as follows (in millions):
OTHER
QUALIFIED PENSION POSTRETIREMENT
BENEFITS BENEFITS
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------

Change in benefit obligation:

Net benefit obligation at beginning of year............... $117.2 $132.3 $42.4 $40.3

Service cost.............................................. 3.0 3.8 1.4 1.6

Interest cost............................................. 8.9 8.9 3.3 2.7

Plan participants' contributions.......................... -- -- 1.2 1.2

Actuarial loss (gain)..................................... (6.2) (20.8) (1.3) 0.8

Gross benefits paid....................................... (7.0) (7.0) (4.7) (4.2)
------ ------ ------ ------

Net benefit obligation at end of year................... 115.9 117.2 42.3 42.4
------ ------ ------ ------

Change in plan assets:

Fair value of plan assets at beginning of year............ 147.6 137.5 17.9 15.1

Actual return on plan assets.............................. 15.7 17.1 1.5 1.8

Employer contributions.................................... -- -- 3.5 4.0

Plan participants' contributions.......................... -- -- 1.2 1.2

Gross benefits paid....................................... (7.0) (7.0) (4.7) (4.2)
------ ------ ------ ------

Fair value of plan assets at end of year................ 156.3 147.6 19.4 17.9
------ ------ ------ ------

Funded status at end of year................................ 40.4 30.4 (22.9) (24.5)

Unrecognized net actuarial loss (gain)...................... (8.2) 0.8 (15.0) (14.5)

Unrecognized prior service cost............................. 4.3 4.7 (0.2) (0.2)

Unrecognized net transition obligation (asset).............. (3.7) (5.8) 13.8 14.9
------ ------ ------ ------

Net amount recognized at end of year.................... $ 32.8 $ 30.1 ($24.3) ($24.3)
====== ====== ====== ======

Amounts recognized on the Consolidated Balance Sheets
consist of:

Prepaid benefit cost.................................... $ 32.8 $ 30.1 $ 0.9 $ 0.6

Accrued benefit cost.................................... -- -- (25.2) (24.9)
------ ------ ------ ------

Net amount recognized at measurement date............... 32.8 30.1 (24.3) (24.3)
------ ------ ------ ------

Contributions paid after September 30 and prior to
December 31............................................... -- -- 0.6 1.0
------ ------ ------ ------

Net amount recognized at December 31.................... $ 32.8 $ 30.1 ($23.7) ($23.3)
====== ====== ====== ======

A-27

(6) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The
Qualified
Pension
Benefits
Other
Postretirement
Benefits
2003
2002
2003
2002
Change in projected benefit obligation:
Net projected benefit obligation at beginning of year $ 156.0 $ 139.2 $76.6 $60.5
Service cost 4.0 3.6 3.4 2.4
Interest cost 10.6 10.1 5.2 4.4
Plan participants’ contributions -- -- 1.5 1.5
Actuarial loss 17.8 10.3 11.7 13.2
Gross benefits paid (7.4 ) (7.2 ) (5.3 ) (5.4 )
Net projected benefit obligation at end of year 181.0 156.0 93.1 76.6
Change in plan assets:
Fair value of plan assets at beginning of year 153.5 138.8 16.7 17.8
Actual return on plan assets 28.9 (8.1 ) 2.2 (1.4 )
Employer contributions -- 30.0 4.4 4.2
Plan participants’ contributions -- -- 1.5 1.5
Gross benefits paid (7.4 ) (7.2 ) (5.3 ) (5.4 )
Fair value of plan assets at end of year 175.0 153.5 19.5 16.7
Funded status at end of year (6.0 ) (2.5 ) (73.6 ) (59.9 )
Unrecognized net actuarial loss 62.4 63.5 30.5 20.4
Unrecognized prior service cost 3.0 3.4 (0.1 ) (0.1 )
Unrecognized net transition obligation -- -- 10.3 11.5
Net amount recognized at end of year $59.4 $64.4 ($32.9 ) ($28.1 )
Amounts recognized on the Consolidated Balance Sheets consist of:
Prepaid benefit cost $59.4 $64.4 $1.5 $1.5
Accrued benefit cost -- -- (34.4 ) (29.6 )
Net amount recognized at measurement date 59.4 64.4 (32.9 ) (28.1 )
Contributions paid after 9/30 and prior to 12/31 -- -- 0.4 1.0
Net amount recognized at 12/31 $59.4 $64.4 ($32.5 ) ($27.1 )
At Dec. 31, 2003 and 2002, Corporate Services allocated an additional minimum liability of $34.2 million and $41.3 million, respectively. Included in the following table are WP&L’s accumulated benefit obligationobligations, amounts applicable to qualified pension and fair value of plan assets for theother postretirement welfare plansbenefits with accumulated benefit obligations in excess of plan assets, were
$37.1 million and $9.5 millionas well as qualified pension plans with projected benefit obligations in excess of plan assets as of Septemberthe measurement date of Sept. 30 2000(in millions):
Qualified
Pension
Benefits
Other
Postretirement
Benefits
2003
2002
2003
2002
Accumulated benefit obligation $ 165.7 $ 143.1 $ 93.1 $ 76.6
Plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation -- -- 91.5 74.7
Fair value of plan assets -- -- 16.3 13.7
Plans with projected benefit obligations in excess of plan assets:
Projected benefit obligations 181.0 156.0 N/A N/A
Fair value of plan assets 175.0 153.5 N/A N/A
WP&L’s net periodic benefit cost is primarily included in “Other operation and $36.5maintenance” in the Consolidated Statements of Income. WP&L calculates the fair value of plan assets by using the straight market value of assets approach.
Postretirement benefit plans are funded via specific assets within certain retirement plans (401(h) assets) as well as a VEBA trust. The asset allocation of the 401(h) assets mirror the qualified pension plan assets and the asset allocation of the VEBA trust are reflected in the following table under “Other Postretirement Plans.” The asset allocation for WP&L’s qualified pension and other postretirement benefit plans at Sept. 30, 2003 and 2002, and the qualified pension plan target allocation for 2003 were as follows:
Qualified Pension Plans
Other Postretirement Plans
Target
Allocation
Percentage of Plan
Assets
at Sept. 30
Percentage of Plan
Assets
at Sept. 30
Asset Category
2003
2003
2002
2003
2002
Equity securities 50-65% 61% 55% 15% 16%
Debt securities 25-40% 33% 35% 33% 27%
Other 0-5% 6% 10% 52% 57%
100% 100% 100% 100%
WP&L’s plan assets are managed by outside investment managers. WP&L’s investment strategy and its policies employed with respect to pension and postretirement assets is to combine both preservation of principal, and prudent and reasonable risk-taking to protect the integrity of the assets in meeting the obligations to the participants while achieving the optimal return possible over the long-term. It is recognized that risk and volatility are present to some degree with all types of investments; however, high levels of risk are minimized at the total fund level. This is accomplished through diversification by asset class, number of investments, and sector and industry limits when applicable.
For the pension plans, the mix among asset classes is controlled by long-term asset allocation targets. The assets are viewed as long-term with moderate liquidity needs. Historical performance results and future expectations suggest that equity securities will provide higher total investment returns than debt securities over a long-term investment horizon. Consistent with the goals to maximize returns and minimize risk over the long-term, the pension plans have a long-term investment posture more heavily weighted towards equity holdings. The asset allocation mix is monitored quarterly and appropriate action is taken as needed to rebalance the assets within the prescribed range. Assets related to postretirement plans are viewed as long-term. A balanced mix of both equity and debt securities are utilized to maximize returns and minimize risk over the long-term.
Prohibited investment vehicles related to the pension and postretirement plans include, but may not be limited to, direct ownership of real estate, real estate investment trusts, private placements, unregistered or restricted stock, options and futures unless specifically approved, margin trading, oil and gas limited partnerships, commodities, short selling, commercial mortgage obligations and securities of the managers’ firms or affiliate firms.
WP&L estimates that funding for the qualified pension and postretirement benefit plans for 2004 will be $0 and approximately $4 million, respectively.
In December 2003, the President signed into law the Medicare Prescription Drug, Improvement and $8.4 million, respectively,Modernization Act of 2003 (the Act). The Act introduces a prescription drug benefit under Medicare Part D, as well as a federal subsidy to sponsors of September 30, 1999.

retiree health care benefit plans, that provide a benefit that is at least
actuarially equivalent to Medicare Part D. As permitted by FSP No. FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” WP&L has elected to defer reflecting the effect of the Act on postretirement net periodic benefit cost and the accumulated postretirement benefit obligation in the Consolidated Financial Statements, since specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require WP&L to change previously reported information. WP&L is currently evaluating the effect of the Act on its other postretirement benefits expense.
Alliant Energy sponsors several non-qualified pension plans that cover certain current and former officers.key employees. The pension expense allocated to WP&L for these plans was $1.2$1.7 million, $0.8$1.5 million and $0.8$1.0 million in 2000, 19992003, 2002 and 1998,2001, respectively. WP&L has various life insurance policies that cover certain key employees and directors. At Dec. 31, 2003 and 2002, the cash surrender value of these investments was $11 million and $10 million, respectively. A significant number of WP&L employees also participate in defined contribution pension plans (401(k) plans). WP&L's&L’s contributions to the plans, which are based on the participants'participants’ level of contribution, were $2.1 million, $2.0$2.2 million and $2.4$2.1 million in 2000, 19992003, 2002 and 1998,2001, respectively.
(7) COMMON AND PREFERRED STOCK

(A) COMMON STOCK--WP
(a) Common Stock - WP&L has common stock dividend payment restrictions based on its
respective bond indentures, the terms of its outstanding preferred stock and articles of incorporation, and restrictions onstate regulatory limitations. In its December 2003 rate order, the payment ofPSCW stated WP&L may not pay annual common stock dividends, commonly found with preferred stock.
WP&L's common stockincluding pass-through of subsidiary dividends, are restricted to the extent that such dividend
would reduce the common stock equity ratio to less than 25 percent. Also the
PSCW ordered that it must approve the paymentin excess of dividends by WP&L$89 million to Alliant Energy that are in excess of the level forecasted in the rate order
($58.3 million), if such dividends would reduce WP&L's&L’s actual average common equity ratio, on a regulatory financial basis, is or will fall below 52.00 percentthe authorized level of total capitalization. The dividends paid by54.01%. As of Dec. 31, 2003, WP&L to
Alliant Energy since the rate order was issued have not exceededin compliance with all such level.

(B) PREFERRED STOCK--Thedividend restrictions.
(b) Preferred Stock - The carrying value of WP&L's&L’s cumulative preferred stock at Decemberboth Dec. 31, 20002003 and 19992002 was $60 million. The fair market value, based upon the market yield of similar securities and quoted market prices, at DecemberDec. 31, 20002003 and 19992002 was $44$53 million and $49$48 million, respectively.
(8) DEBT

(A) SHORT-TERM DEBT--WP&L, IESU
(a) Short-Term Debt - To provide short-term borrowing flexibility and IPC participate in a utility money pool,
which is funded, as needed, through the issuance ofsecurity for commercial paper by Alliant
Energy. Interest expense and other fees are allocated based on borrowed amounts.
The PSCW has restrictedoutstanding, WP&L from lending money to non-utility affiliates and
non-Wisconsin utilities. Asmaintains committed bank lines of credit, all of which require a result, WP&L can only borrow money from the
utility money pool.fee. Information regarding WP&L's&L’s short-term debt was as follows (dollars in millions):
2000 1999 1998
-------- -------- --------

As of year end:

Notes payable outstanding............................... $-- $-- $50.0

Interest rate on notes payable.......................... N/A N/A 5.4%

Money pool borrowings................................... $29.2 $125.7 $26.8

Interest rate on money pool borrowings.................. 6.6% 5.8% 5.2%

For the year ended:

Average amount of short-term debt (based on
daily outstanding balances)........................... $25.5 $77.1 $48.4

Average interest rate on short-term debt................ 6.2% 5.2% 5.6%

A-28

(8) DEBT (CONTINUED)
(B) LONG-TERM DEBT--Substantially
2003
2002
At Dec. 31:
Commercial paper outstanding $-- $60.0
Discount rates on commercial paper N/A 1.6%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $29.8 $57.4
Average interest rates on short-term debt 1.4% 1.8%
(b) Long-Term Debt - WP&L’s First Mortgage Bonds are secured by substantially all of WP&L'sits utility plant is secured by its
First Mortgage Bonds.plant. WP&L also maintains unsecured indentures relatingrelated to the issuance of unsecured debt securities. WP&L's&L’s debt maturities for 20012004 to 20052008 are $62 million, $88 million, $0, $0,
$0, $62.0$105 million, and $88.0$60 million, respectively. The carrying value of WP&L's&L’s long-term debt (including current maturities and variable rate demand bonds) at DecemberDec. 31, 20002003 and 19992002 was $569$454 million and $472$523 million, respectively. The fair market value, based upon the market yield of similar securities and quoted market prices, at DecemberDec. 31, 20002003 and 19992002 was $584$494 million and $469$574 million, respectively.
(9) INVESTMENTS AND ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of WP&L's&L’s current assets and current liabilities approximates fair value because of the short maturity of such financial instruments. Since WP&L is subject to regulation, any gains or losses related to the difference between the carrying amount and the fair value of its financial instruments may not be realized by WP&L's parent.Alliant Energy. Information relating to various investments held by WP&L at Dec. 31 that are marked to marketmarked-to-market as a result of SFAS 115 "Accounting for Certain Investments in Debt and Equity Securities," werewas as follows (in millions):
DECEMBER 31, 2000 DECEMBER 31, 1999
---------------------- ----------------------
NET
CARRYING/ NET CARRYING/ UNREALIZED
FAIR UNREALIZED FAIR GAINS/
VALUE GAINS VALUE (LOSSES)
--------- ---------- --------- ----------

Available-for-sale securities:

Nuclear decommissioning trust funds:

Equity securities....................................... $ 81 $26 $ 65 $29

Debt securities......................................... 115 2 101 (2)
---- --- ---- ---

Total................................................. $196 $28 $166 $27
==== === ==== ===

NUCLEAR DECOMMISSIONING TRUST FUNDS--As required by SFAS 115, WP&L's debt and
equity security investments in the nuclear decommissioning trust funds are
classified as available-for-sale. As of December
2003
2002
Carrying/
Fair
Value
Unrealized
Gains,
Net of Tax
Carrying/
Fair
Value
Unrealized
Gains,
Net of Tax
Available-for-sale securities:
Nuclear decommissioning trust funds:
Debt securities $137 $3 $131 $5
Equity securities 97 19 93 5
Total $234 $22 $224 $10
Nuclear Decommissioning Trust Funds - At Dec. 31, 2000, $752003, $76 million, $14$37 million and $26$24 million of the debt securities mature in 2001-2010,2004-2010, 2011-2020 and 2021-2035,2021-2040, respectively. The fair market value of the nuclear decommissioning trust funds, was as reported by the trustee, was adjusted for the tax effect of unrealized gains and losses. NetIn 2003, net unrealized holding gains were recorded as part of accumulated provision for depreciation.regulatory liabilities or as an offset to regulatory assets related to AROs (recorded in 2002 as part of cost of removal obligations). The funds realized gains/gains (losses) from the sales of securities of $5.2($6.2) million, ($10.4)$10.3 million and $0.8$2.1 million in 2000, 19992003, 2002 and 1998,2001, respectively (cost of the investments based on specific identification were $202.1was $333.9 million, $94.6$92.2 million and $57.6$147.4 million respectively, and proceeds from the sales were $207.3$327.7 million, $84.2$102.5 million and $58.4$149.5 million, respectively). A-29
In January 2004, WP&L liquidated all of the qualified decommissioning assets into money market funds as a result of the pending Kewaunee sale.
Investment in ATC - At Dec. 31, 2003 and 2002, WP&L had ownership interests in ATC of approximately 25% and 27%, respectively, and accounts for this investment under the equity method. At Dec. 31, 2003 and 2002, the carrying value of WP&L’s investment in ATC was $121 million and $112 million, respectively. Pursuant to various agreements, WP&L receives a range of transmission services from ATC. WP&L provides operation, maintenance, and construction services to ATC. WP&L and ATC also bill each other for use of shared facilities owned by each party. ATC billed WP&L $41.3 million, $38.7 million and $36.4 million in 2003, 2002 and 2001, respectively. WP&L billed ATC $12.4 million, $18.1 million and $18.4 million in 2003, 2002 and 2001, and recorded equity earnings of $16.2 million, $14.3 million and $14.6 million in 2003, 2002 and 2001, respectively.
Unconsolidated Equity Investments- Summary financial information from the financial statements of WP&L’s unconsolidated equity investments in ATC, WRPC and Alliant Energy SPE LLC is as follows (in millions):
2003
2002
2001
Operating revenues $ 232.3 $ 211.7 $ 180.3
Operating income 87.7 75.7 65.8
Net income 72.1 59.5 55.9
As of Dec. 31:
Current assets 41.5 44.7
Non-current assets 947.2 774.4
Current liabilities 67.9 50.8
Non-current liabilities 14.6 7.5
(10) DERIVATIVE FINANCIAL INSTRUMENTS

(A) ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--WP
(a) Accounting for Derivative Instruments and Hedging Activities - WP&L adopted
SFAS 133 as of July 1, 2000. SFAS 133 requires that everyrecords derivative instrument
be recordedinstruments at fair value on the balance sheet as an assetassets or liability measured at its fair
valueliabilities and that changes in the derivative'sderivatives’ fair value be recognized currentlyvalues are generally recorded as regulatory assets or liabilities. At Dec. 31, 2003 and 2002, WP&L had $1.3 million and $2.7 million of derivative assets included in earnings unless specific hedge“Other current assets” and $3.6 million and $7.1 million of derivative liabilities included in “Other current liabilities” on its Consolidated Balance Sheets, respectively.
In April 2003, the FASB issued SFAS 149, which amends and clarifies accounting criteria are met.for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133 requires
that133. Although SFAS 149 is expected to result in more energy contracts at WP&L qualifying as of the date of initial adoption, the difference betweenderivatives, changes in the fair value of derivative instruments recorded on the balance sheet and the previous
carrying amount of thosethese derivatives beare generally reported as changes in net income or other
comprehensive income, as appropriate, as the cumulative effect of a change in
accounting principle in accordance with APB 20, "Accounting Changes." Transition
adjustments relating to WP&L's derivative instruments had no material impact on
net income or the balance sheet.

A limited number of WP&L's fixed price commodity contracts are defined as
derivatives under SFAS 133. The fair values of these derivative instruments have
been recorded asregulatory assets and liabilities rather than being reported currently in earnings, based on the balance sheet and in the
transition adjustment in accordance with the transition provisions of SFAS 133.
Changes in the fair values of these instruments subsequent to July 1, 2000, to
the extent that the derivatives are designated in cash flow hedging
relationships and are effective at mitigating the underlying commodity risk, are
recorded in other comprehensive income. At the date the underlying transaction
occurs, the amounts accumulated in other comprehensive income are reported in
the Consolidated Statements of Income. To the extent that the hedges are not
effective, the ineffective portion of the changes in fair value is recorded
directly in earnings.

As of December 31, 2000,regulatory treatment.
Cash Flow Hedging Instruments - During 2003 and/or 2002, WP&L held various derivative instruments designated as cash flow hedging instruments and other derivatives. The cash flow hedging
instruments are comprised ofinstruments. WP&L utilized natural gas swaps and coal purchase and sales
contracts which are used to manage the price of anticipated coal purchases and
sales. WP&L utilizes gas commodity financial swap arrangements to reduce the impact of price fluctuations on natural gas purchased and injected into storage during the summer months and withdrawn and sold at current market prices during the winter months pursuant to the natural gas cost incentive sharing mechanism with customers in Wisconsin. The gas commodity swaps in place hedgeWP&L also utilized physical coal purchase contracts, some of which did not qualify for the forecasted salesnormal purchase and sale exception, to manage the price of natural gas withdrawn from storage during this period.

anticipated coal purchases and sales.
In 2000,2003 and 2002, $0 and a net gainloss of approximately $0.4$0.2 million, wasrespectively, were recognized in earnings
(recorded in gas revenues) representingrelating to the amount of hedge ineffectiveness.ineffectiveness in accordance with SFAS 133. In 2003 and 2002, WP&L did not exclude any components of the derivative instruments'instruments’ gain or loss from the assessment of hedge effectiveness and there werewas no reclasses into
earnings impact as a result of the discontinuance of hedges. As of DecemberAt Dec. 31, 2000,
the maximum length of time over which2003, WP&L isdid not have any cash flow hedging its exposure to the
variabilityinstruments outstanding.
Other Derivatives Not Designated in future cash flows for forecasted transactions is ten months andHedge Relationships - WP&L estimates that losses of $4.7 million will be reclassified from accumulated
other comprehensive income into earnings within the 12 months between
January 1, 2001 and December 31, 2001 as the hedged transactions affect
earnings.

WP&L's&L’s derivatives that havewere not been designated in hedge relationships include
naturalduring 2003 and/or 2002 included coal and gas swapscontracts. Coal and electricitygas contracts that do not qualify for the normal purchase and sale exception were used to manage the price collars which manage energy costs during
supply/demand imbalances. As of December 31, 2000, these derivatives were
recorded at their fair value as derivative assetsanticipated coal and derivative liabilities on
the Consolidated Balance Sheetsgas purchases and purchased-power expense in the Consolidated
Statements of Income.

A-30

(10) DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
(B) WEATHER DERIVATIVES--WPsales.
(b) Weather Derivatives - WP&L uses weather derivatives to reduce the impact of weather volatility on its natural gas sales volumes. EITF 99-2, "AccountingIn 2003 and 2002, Corporate Services, as agent for Weather Derivatives," requiresWP&L, entered into non-exchange traded options based on heating degree days in which Corporate Services receives payment from the use ofcounterparty if actual heating degree days are less than the strike price in the contract. Corporate Services paid premiums to enter into these contracts, which are amortized to expense over the contract period. WP&L has used the intrinsic value method to account for non-exchange tradedthese weather derivatives. In August 2000,
(c) Nuclear Decommissioning Trust Fund Investments - Historically, WP&L has entered into a
non-exchange traded weather floor with a contract period from November 1, 2000
to March 31, 2001 that requires the counterparty pay WP&L $11,000 per heating
degree-day less than 5,600 during the contract period. The maximum payout amount
by the counterparty on this floor is $7 million. WP&L paid a premium to enter
into this contract, which is being amortized to expense over the contract
period. In August 1999, WP&L entered into a non-exchange traded "weather collar"
with a contract period from November 1, 1999 to March 31, 2000. The maximum
payout amount was $5 million.

(C) NUCLEAR DECOMMISSIONING TRUST FUND INVESTMENTS--WP&L previously entered into
an equity collar that used writtencombinations of options to mitigate the effect of significant market fluctuations on its common stock investments in its nuclear decommissioning trust funds. The program wasderivative transactions are designed to protect the portfolio'sportfolio’s value while allowing the funds to earn a total return modestly in excess of long-term expectations over the two-year hedge period, which was settled in
December 2000. The notional amount of the options was $78 million at
December 31, 1999. The options were reported at fair market value each reporting
period. TheseIn 2003, fair value changes of these instruments did not impact net income as they were recorded as equally offsetting changes in the investment in nuclear decommissioning trust funds and accumulated depreciation. The option liability fair value exceeded the
premium received by $17.8 million at December 31, 1999,regulatory liabilities or, for AROs, as reported by the
trustee.

an offset to regulatory assets (in 2002 as an offset to cost of removal obligations).
(11) COMMITMENTS AND CONTINGENCIES

(A) CONSTRUCTION AND ACQUISITION PROGRAM--WP&L anticipates 2001 utility
(a) Construction and Acquisition Expenditures - Certain commitments have been made in connection with 2004 capital expenditures. During 2004, total construction and acquisition expenditures willare estimated to be approximately $138 million.
During 2002-2005,$228 million (unaudited).
(b) Purchase Obligations - Alliant Energy, through its subsidiaries Corporate Services, WP&L expects to spend approximately $667 million for utility
construction and acquisition expenditures.

(B) PURCHASED-POWER AND TRANSMISSION, COAL AND NATURAL GAS CONTRACTS--Corporate
ServicesIP&L, has entered into purchased-power, and transmission, coal and natural gas supply, transportation and storage contracts as agent for WP&L, IESU and
IPC. The gas supplycontracts. Certain purchased-power commitments are all index-based.considered operating leases and are therefore not included here, but are included in Note 3. Based on the System Coordination and Operating Agreement, Alliant Energy annually allocates purchased-power contracts to the individual utilities.WP&L and IP&L. Such process considers factors such as resource mix, load growth and resource availability. However, for 2004, system-wide purchased-power contracts of $4.4 million (0.2 million MWh) have not yet been directly assigned to WP&L and IP&L since the specific needs of each utility are not yet known. Refer to Note 1517 for additional information. In addition, Corporate Services has entered
into various coal contracts as agent for WP&L, IESU and IPC. ContractCoal contract quantities are allocateddirectly assigned to specific plants at the individual utilitiesWP&L and IP&L based on various factors including projected heat input requirements, combustion compatibility and efficiency. However, for 2001, 2002 and 2003,2004 to 2008, system-wide coal contracts of $21.3$78.7 million (5.1(10.7 million tons), $1.7$55.1 million (0.5(7.6 million tons), $34.0 million (5.4 million tons), $12.5 million (2.1 million tons) and $1.7$6.4 million (0.5(1.0 million tons), respectively, have not yet been allocateddirectly assigned to WP&L and IP&L since the individual utilities due to the need for additional analysisspecific needs of combustion
compatibilityeach utility are not yet known. The natural gas supply commitments are all index-based. Alliant Energy and efficiency. Corporate Services expectsWP&L expect to supplement itstheir coal and natural gas supplies with spot market purchases as needed. The table includes commitments for “take-or-pay” contracts which result in dollar commitments with no associated tons or Dths. At Dec. 31, 2003, WP&L’s minimum A-31

(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
commitments directly assigned to WP&L arewere as follows (dollars and Dths in millions; MWhs and tons in thousands):
NATURAL GAS SUPPLY,
PURCHASED-POWER AND COAL (INCLUDING TRANSPORTATION AND
TRANSMISSION TRANSPORTATION) STORAGE CONTRACTS
--------------------- --------------------- ---------------------
DOLLARS MWHS DOLLARS TONS DOLLARS DTHS
--------- --------- --------- --------- --------- ---------

2001 $53.2 864 $14.0 4,523 $39.6 93
2002 34.3 219 9.8 3,673 26.9 88
2003 21.8 219 5.5 2,957 22.9 79
2004 14.0 219 5.5 2,957 11.2 56
2005 8.0 -- -- -- 11.1 55

(C) INFORMATION TECHNOLOGY SERVICES--Corporate Services has an agreement,
expiring
Purchased-power
Coal
Natural gas
Dollars
MWhs
Dollars
Tons
Dollars
Dths
2004 $ 25.1 730 $ 8.2 -- $ 33.9 2
2005 -- -- 7.6 -- 23.7 --
2006 -- -- 7.6 -- 22.5 --
2007 -- -- 7.6 -- 20.2 --
2008 -- -- 5.9 -- 15.5 --
Thereafter -- -- 35.6 -- 40.0 --
Also, at December 31, 2003, WP&L’s other purchase obligations, which represent individual commitments incurred during the normal course of business which exceeded $1 million at Dec. 31, 2003, were $6.0 million for 2004. This excludes lease obligations which are included in 2004,Note 3.
(c) Legal Proceedings - WP&L is involved in legal and administrative proceedings before various courts and agencies with EDSrespect to matters arising in the ordinary course of business. Although unable to predict the outcome of these matters, WP&L believes that appropriate reserves have been established and final disposition of these actions will not have a material adverse effect on its financial condition or results of operations.
(d) Guarantees - Refer to Note 3 for information technology services.discussion of WP&L's
anticipated operating and capital expenditures under the agreement for 2001 are
estimated to total approximately $2 million. Future costs under the agreement
are variable and are dependent upon WP&L's level of usage of technological
services from EDS.

(D) FINANCIAL COMMITMENTS--During 2000, WP&L committed to transfer all&L’s residual value guarantees of its transmission assets to ATC. This transfer occurred on January 1, 2001, at the
net book value of the assets. WPL Transco LLC, a wholly-owned subsidiary ofsynthetic leases.
(e) Environmental Liabilities - WP&L, will hold the resulting investment in ATC and follow the equity method of
accounting.

(E) ENVIRONMENTAL LIABILITIES--WP&L had recorded the following environmental liabilities, and regulatory assets associated with certain of these liabilities, as of Decemberat Dec. 31 (in millions):
ENVIRONMENTAL LIABILITIES 2000 1999 REGULATORY ASSETS 2000 1999
- ------------------------- ---------- ---------- ----------------- ---------- ----------

MGP sites............ $4.5 $ 7.3 MGP sites...... $11.7 $14.2
NEPA................. 3.6 4.1 NEPA........... 4.4 4.9
Other................ 0.1 0.1 Other.......... 0.5 --
---- ----- ----- -----
$8.2 $11.5 $16.6 $19.1
==== ===== ===== =====
Environmental
Liabilities
Regulatory
Assets
2003
2002
2003
2002
MGP sites $ 5.4 $ 6.9 $ 12.5 $ 13.0
NEPA 2.0 2.5 2.4 3.1
Other -- -- 1.3 2.9
$ 7.4 $ 9.4 $ 16.2 $ 19.0
MGP SITES--WPSites - WP&L has current or previous ownership interests in 14 sites, previously associated with the production of gas for which it may be liable for investigation, remediation and monitoring costs relating to the sites. WP&L has received letters from state environmental agencies requiring no further action at foursix sites.
WP&L is working pursuant to the requirements of various federal and state agencies to investigate, mitigate, prevent and remediate, where necessary, the environmental impacts to property, including natural resources, at and around the sites in order to protect public health and the environment.
WP&L records environmental liabilities based upon periodic studies, most recently updated in the third quarter of 2000,2003, related to the MGP sites. Such amounts are based on the best current estimate of the remaining amount to be incurred for investigation, remediation and monitoring costs for those sites where the investigation process has been or is substantially completed, and the minimum of the estimated cost range for those sites where the investigation is in its earlier stages. It is possible that future cost estimates will be greater than current estimates as the investigation process proceeds and as additional facts become known. The amounts recognized as liabilities are reduced for expenditures made and are adjusted as further information develops or circumstances change. Costs of future A-32

(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
expenditures for environmental remediation obligations are not discounted to their fair value. Management currently estimates the range of remaining costs to be incurred for the investigation, remediation and monitoring of all WP&L's&L’s sites to be approximately $4$5 million to $5$7 million.
Under the current rate making treatment approved by the PSCW, the MGP expenditures of WP&L, net of any insurance proceeds, are deferred and collected from gas customers over a five-yearfour-year period after neweffective with rates are implemented.set to recover such amounts. Regulatory assets have been recorded by WP&L, which reflect the probable future rate recovery, where applicable. Considering the current rate treatment, and assuming no material change therein, WP&L believes that the clean-up costs incurred for these MGP sites will not have a material adverse effect on its financial condition or results of operations. Settlement has been reached with all of WP&L's&L’s insurance carriers regarding reimbursement for its MGP-related costs and all issues have been resolved.
Insurance recoveries available as of both December 31, 2000 and 1999 for WP&L
were $2.1 million. Pursuant to its applicable rate making treatment, WP&L has
recorded its recoveries as an offset against its regulatory assets.

NATIONAL ENERGY POLICY ACT OF 1992--NEPAcosts.
NEPA - NEPA requires owners of nuclear power plants to pay a special assessment into a "Uranium“Uranium Enrichment Decontamination and Decommissioning Fund."” The assessment is based upon uranium enrichment services provided in conjunction with prior nuclear fuel purchases. WP&L recovers theelected to pay its assessment in 15 annual installments. The costs associated with this assessment over the period the costs are assessed.for WP&L is being recovered through fuel costs. The final installment payment is scheduled to be made in fall 2006. WP&L continues to pursue relief from this assessment through litigation.

(F) DECOMMISSIONING OF KEWAUNEE--Pursuant to the most recent electric rate case
order, the PSCW allows WP&L to recover $16 million annually for its share
(f) Decommissioning of the
cost to decommission Kewaunee.Kewaunee - Decommissioning expense is included in "Depreciation“Depreciation and amortization"amortization” in the Consolidated Statements of Income and the cumulative amount for 2003 is included in "Accumulated depreciation"“Regulatory liabilities” or, for AROs, is netted in “Regulatory assets” on the Consolidated Balance SheetsSheets. For 2002, the cumulative amount is included in “Cost of removal obligations.” The PSCW, in an order effective Jan. 1, 2002, eliminated WP&L’s recovery from retail customers for the cost to decommission Kewaunee, due to the extent recovered through rates.trust fund being adequately funded. Additional information relating to the decommissioning of Kewaunee included in the most recent electric
rate orders was as follows (dollars in millions):
Assumptions relating to current rate recovery amounts:
amounts (per
WP&L's&L’s most recent FERC settlement):
WP&L’s share of estimated decommissioning cost............ $212.5
cost $263.2
Year dollars in........................................... 2000
in 2002
Method to develop estimate................................ estimate Site-specific study
Annual inflation rate..................................... 5.83%
rate 6.50%
Decommissioning method.................................... method Prompt dismantling
and removal
Year decommissioning to commence.......................... commence 2013
After-tax return on external investments:
Qualified............................................... 5.62%
Non-qualified........................................... 6.97%
Qualified 6.12%
Non-qualified 5.14%
Current annual rate recovery (FERC) $2.9
External trust fund balance at DecemberDec. 31, 2000............ $195.8
2003 $233.7
After-tax earningslosses on external trust funds in 2000.......... $11.3
2003 ($4.7)

A-33

(11) COMMITMENTS AND CONTINGENCIES (CONTINUED)
WP&L is funding all rate recoveries for decommissioning into external trust funds and funding on a tax-qualified basis to the extent possible. All ofIn 2003, the
rate recovery assumptions are subject to change in future regulatory
proceedings. In accordance with its regulatory requirements, WP&L records the
earnings on the external trust funds as interest income with a corresponding
entry to depreciation expense. The earnings accumulate in the external trust fund balances and as an offset to regulatory assets for ARO related earnings or regulatory liabilities for non-ARO related earnings. Refer to Note 15 for information regarding the pending sale of WP&L’s interest in accumulated depreciation on utility plant.

(G) LEGAL PROCEEDINGS--WP&L is involved in legalKewaunee and administrative proceedings
before various courts and agencies with respectNote 16 for information related to matters arising in the ordinary courseimpact of business. Although unable to predict the outcome of these
matters,SFAS 143.
(g) Credit Risk - WP&L has limited credit exposure from electric and natural gas sales and non-performance of contractual obligations by its counterparties. WP&L maintains credit risk oversight and sets limits and policies with regards to its counterparties, which management believes minimizes its overall credit risk exposure. However, there is no assurance that appropriate reserves have been established and final
disposition of these actionssuch policies will not have a material adverse effect on its
financial condition or results of operations.

protect WP&L against all losses from non-performance by counterparties.
(12) JOINTLY-OWNED ELECTRIC UTILITY PLANT
Under joint ownership agreements with other Wisconsin utilities, WP&L has undivided ownership interests in jointly-owned electric generating stations and
related transmission facilities.stations. Each of the respective owners is responsible for the financing of its portion of the construction costs. Kilowatt-hourKWh generation and operating expenses are divided on the same basis as ownership with each owner reflecting its respective costs in its Consolidated Statements of Income. Information relative to WP&L's&L’s ownership interest in these facilities at DecemberDec. 31, 2000 is2003 was as follows (dollars in millions):
ACCUMULATED CONSTRUCTION
OWNERSHIP PLANT IN PROVISION FOR WORK-IN-
FUEL TYPE INTEREST % SERVICE DEPRECIATION PROGRESS
----------- ----------- ------------- ------------- ------------

Columbia Energy Center............... Coal 46.2 $175.4 $103.6 $ 0.5
Edgewater Unit 4..................... Coal 68.2 53.0 33.6 1.6
Edgewater Unit 5..................... Coal 75.0 230.2 98.6 0.3
Kewaunee............................. Nuclear 41.0 136.8 108.1 21.4
------ ------ -----
$595.4 $343.9 $23.8
====== ====== =====

A-34
Fuel
Type
Ownership
Interest %
Plant in
Service
Accumulated
Provision for
Depreciation
Construction
Work In
Progress
Edgewater Unit 5 Coal 75.0 $ 237.0 $ 120.7 $0.8
Columbia Energy Center Coal 46.2 192.5 118.5 2.5
Kewaunee Nuclear 41.0 175.8 127.6 7.7
Edgewater Unit 4 Coal 68.2 66.8 39.5 1.7
$ 672.1 $ 406.3 $ 12.7
Refer to Note 15 for information regarding the pending sale of WP&L’s interest in Kewaunee.
(13) SEGMENTS OF BUSINESS
WP&L is a regulated domestic utility, serving customers in Wisconsin and Illinois, and is broken down intoincludes three segments: a) electric operations; b) gas operations; and c) other, which includes the water business, various other energy-related products and services including construction management services for wind farms and the unallocated portions of the utility business. Various line items in the following tables are not allocated to the electric and gas segments for management reporting purposes and therefore are included in "Other."
Intersegment“Total.” In 2003, 2002 and 2001, gas revenues included $45 million, $22 million and $21 million, respectively, for sales to the electric segment. All other intersegment revenues were not material to WP&L's&L’s operations and there was no single customer whose revenues exceeded 10 percentwere 10% or more of WP&L's&L’s consolidated revenues. Certain financial information relating to WP&L's&L’s significant business segments is presented below:

ELECTRIC GAS OTHER TOTAL
-------- -------- -------- --------
(IN MILLIONS)

2000
Operating revenue........................................... $ 692.2 $165.2 $ 5.0 $ 862.4
Depreciation and amortization expense....................... 122.9 15.9 1.1 139.9
Operating income............................................ 123.2 12.2 1.7 137.1
Interest expense, net of AFUDC.............................. 39.3 39.3
Net income from equity method subsidiaries.................. (0.5) (0.5)
Miscellaneous, net (other than equity income)............... (16.0) (16.0)
Income tax expense.......................................... 42.9 42.9
Net income.................................................. 71.4 71.4
Preferred dividends......................................... 3.3 3.3
Earnings available for common stock......................... 68.1 68.1
Total assets................................................ 1,344.9 226.1 286.0 1,857.0
Investments in equity method subsidiaries................... 4.8 4.8
Construction and acquisition expenditures................... 114.2 15.1 2.3 131.6

1999
Operating revenue........................................... $ 626.6 $120.8 $ 5.1 $ 752.5
Depreciation and amortization expense....................... 97.5 14.5 1.0 113.0
Operating income............................................ 139.3 13.8 1.8 154.9
Interest expense, net of AFUDC.............................. 36.5 36.5
Net income from equity method subsidiaries.................. (0.7) (0.7)
Miscellaneous, net (other than equity income)............... 2.5 2.5
Income tax expense.......................................... 45.8 45.8
Net income.................................................. 70.8 70.8
Preferred dividends......................................... 3.3 3.3
Earnings available for common stock......................... 67.5 67.5
Total assets................................................ 1,310.5 200.3 255.3 1,766.1
Investments in equity method subsidiaries................... 5.2 5.2
Construction and acquisition expenditures................... 111.2 18.2 2.5 131.9

A-35

(13) SEGMENTS OF BUSINESS (CONTINUED)

ELECTRIC GAS OTHER TOTAL
-------- -------- -------- --------
(IN MILLIONS)

1998
Operating revenue........................................... $ 614.7 $111.7 $ 5.0 $ 731.4
Depreciation and amortization expense....................... 104.7 13.6 0.9 119.2
Operating income............................................ 87.4 3.6 1.7 92.7
Interest expense, net of AFUDC.............................. 33.5 33.5
Net income from equity method subsidiaries.................. (0.8) (0.8)
Miscellaneous, net (other than equity income)............... (0.3) (0.3)
Income tax expense.......................................... 24.7 24.7
Net income.................................................. 35.6 35.6
Preferred dividends......................................... 3.3 3.3
Earnings available for common stock......................... 32.3 32.3
Total assets................................................ 1,276.4 195.9 212.9 1,685.2
Investments in equity method subsidiaries................... 5.2 5.2
Construction and acquisition expenditures................... 99.6 16.0 1.5 117.1
was as follows (in millions):
2003 Electric
Gas
Other
Total
Operating revenues $910.1 $272.4 $34.5 $1,217.0
Depreciation and amortization 89.2 14.6 1.1 104.9
Operating income 163.8 25.5 2.3 191.6
Interest expense, net of AFUDC 33.8
Equity income from unconsolidated investments (20.7 )
Miscellaneous, net (2.2 )
Income tax expense 65.8
Net income 114.9
Preferred dividends 3.3
Earnings available for common stock 111.6
Total assets 1,950.5 306.2 212.6 2,469.3
Investments in equity method subsidiaries 133.3 -- -- 133.3
Construction and acquisition expenditures 133.0 17.4 1.2 151.6
2002
Operating revenues 787.7 179.1 22.7 989.5
Depreciation and amortization 91.7 15.9 1.1 108.7
Operating income (loss) 135.1 12.0 (1.5 ) 145.6
Interest expense, net of AFUDC 37.6
Equity income from unconsolidated investments (17.0 )
Miscellaneous, net (0.6 )
Income tax expense 44.7
Net income 80.9
Preferred dividends 3.3
Earnings available for common stock 77.6
Total assets 1,834.7 298.5 201.9 2,335.1
Investments in equity method subsidiaries 121.7 -- -- 121.7
Construction and acquisition expenditures 144.6 10.6 1.7 156.9
2001
Operating revenues 753.5 206.9 33.3 993.7
Depreciation and amortization 104.0 15.8 1.3 121.1
Operating income 129.1 2.5 5.7 137.3
Interest expense, net of AFUDC 38.7
Equity income from unconsolidated investments (15.5 )
Miscellaneous, net (0.6 )
Income tax expense 41.2
Net income 73.5
Preferred dividends 3.3
Earnings available for common stock 70.2
Total assets 1,638.8 249.4 329.3 2,217.5
Investments in equity method subsidiaries 117.3 -- -- 117.3
Construction and acquisition expenditures 127.9 16.8 2.3 147.0
(14) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
(IN MILLIONS)

2000
Operating revenues...................................... $218.8 $193.9 $199.6 $250.1
Operating income........................................ 40.5 25.1 36.9 34.6
Net income.............................................. 21.9 11.3 17.6 20.6
Earnings available for common stock..................... 21.0 10.5 16.8 19.8

1999
Operating revenues...................................... $203.0 $167.1 $186.8 $195.6
Operating income........................................ 46.4 21.9 32.5 54.1
Net income.............................................. 26.3 6.9 14.2 23.4
Earnings available for common stock..................... 25.4 6.1 13.4 22.6
Summation of the individual quarters may not equal annual totals due to rounding.
2003
2002
March 31
June 30
Sept. 30
Dec. 31
March 31
June 30
Sept. 30
Dec. 31
(in millions)
Operating revenues $ 346.9 $ 254.8 $ 318.9 $ 296.3 $ 235.5 $ 220.6 $ 254.0 $ 279.4
Operating income 18.1 35.7 77.8 60.1 30.1 25.7 34.9 54.9
Net income 10.1 19.9 47.4 37.5 15.7 12.8 19.2 33.2
Earnings available for common stock 9.3 19.0 46.6 36.7 14.9 12.0 18.3 32.4
(15) PENDING SALE OF WP&L’S INTEREST IN KEWAUNEE
WP&L has signed a definitive agreement to sell its 41% ownership interest in Kewaunee to Richmond, Va.-based Dominion Energy Kewaunee, Inc. (Dominion), a subsidiary of Dominion Resources, Inc. Joint owner of Kewaunee, WPSC, also agreed to sell its 59% ownership interest in Kewaunee to Dominion. Pending various regulatory approvals, including the PSCW and NRC, the transaction is expected to be completed by fall 2004. WP&L anticipates that, based on an expected Nov. 1, 2004 closing date, it will receive approximately $90 million in cash and retain ownership of the trust assets contained in one of the two decommissioning funds it has established to cover the eventual decommissioning of Kewaunee. The fund that will be retained had an after-tax value of $67.3 million on Dec. 31, 2003. The gross cash proceeds from the sale are expected to slightly exceed WP&L’s carrying value of the assets being sold. WP&L has requested deferral of any gain and related costs from the PSCW. Because any gain realized and the retained decommissioning fund will likely be returned to customers in future rate filings, WP&L does not expect this transaction will have a significant impact on its operating results. Dominion will assume responsibility for the eventual decommissioning of Kewaunee and WP&L is required to provide qualified decommissioning trust assets of at least $160.7 million on an after-tax basis. The after-tax value of the qualified fund was $166.3 million on Dec. 31, 2003. In January 2004, WP&L liquidated all of the qualified decommissioning assets into money market funds as a result of the pending Kewaunee sale. At the closing of the sale, WP&L will enter into a long-term purchased-power agreement with Dominion to purchase energy and capacity equivalent to the amounts received had current ownership continued. The purchased-power agreement, which also will require regulatory approval, will extend through 2013 when the plant’s current operating license will expire.
(16) ASSET RETIREMENT OBLIGATIONS
WP&L adopted SFAS 143 on Jan. 1, 2003, which provides accounting and disclosure requirements for AROs associated with long-lived assets. SFAS 143 requires that when an asset is placed in service the present value of retirement costs for which WP&L has a legal obligation must be recorded as liabilities with an equivalent amount added to the asset cost. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity settles the obligation for its recorded amount or incurs a gain or loss.
The scope of SFAS 143 as it relates to WP&L primarily includes decommissioning costs for Kewaunee. The differences between the estimated decommissioning costs disclosed in Note 11(f) and the recorded SFAS 143 liability are primarily related to fuel management costs, non-nuclear demolition costs and the timing of future cash flows. It also applies to a smaller extent to several other assets including, but not limited to, active ash landfills, water intake facilities, underground storage tanks, groundwater wells, distribution equipment, easements, leases and the dismantlement of certain hydro facilities. Other than Kewaunee, WP&L’s current AROs are not significant. A reconciliation of the changes in WP&L’s AROs is depicted below (in millions):
Balance at Jan. 1, 2003 $ 175
Accretion expense 13
Balance at Dec. 31, 2003 $ 188
If SFAS 143 had been adopted as of Jan. 1, 2001, WP&L would have recorded ARO SFAS 143 liabilities of $175 million at Dec. 31, 2002 and $161 million at Dec. 31, 2001. Refer to Note 15 for information regarding the pending sale of WP&L’s interest in Kewaunee.
At Dec. 31, 2002, prior to the adoption of SFAS 143, WP&L recorded $163.2 million of legal AROs in “Cost of removal obligations” on the Consolidated Balance Sheet.
(17) RELATED PARTY ISSUES

In association with the 1998 merger that resulted in the formation of Alliant
Energy, IESU, PARTIES
WP&L and IPCIP&L have entered into a System Coordination and Operating Agreement which became effective with the merger.Agreement. The agreement, which has been approved by FERC, provides a contractual basis for coordinated planning, construction, operation and maintenance of the interconnected electric generation and transmission (IP&L only) systems of the three utility companies.WP&L and IP&L. In addition, the agreement allows the interconnected system to be operated as a single entity with off-system capacity sales and purchases made to market excess system capability or to meet system capability deficiencies. Such sales and purchases are allocated among the three utility companiesWP&L and IP&L based on procedures included in the agreement. The sales amounts allocated to WP&L were $28.6$42.1 million, $23.8$26.9 million and $23.6$32.1 million for 2000, 19992003, 2002 and 1998,2001, respectively. The purchases allocated to WP&L were $130.7$229.4 million, $101.0$205.8 million and $70.0$209.2 million for 2000, 19992003, 2002 and 1998,2001, respectively. The procedures were approved by both the FERC and all state regulatory bodies having jurisdiction over these sales. Under the agreement, IESU,

A-36

(15) RELATED PARTY ISSUES (CONTINUED)
WP&L and IPCIP&L are fully reimbursed for any generation expense incurred to support athe sale to an affiliate or to a non-affiliate. Any margins on sales to non-affiliates are distributed to the three utilitiesWP&L and IP&L in proportion to each utility'sutility’s share of electric production at the time of the sale.
Pursuant to a service agreement approved by the SEC under PUHCA, WP&L receivedreceives various administrative and general services from an affiliate, Corporate Services. These services are billed to WP&L at cost based on payroll and other expenses incurred by Corporate Services for the benefit of WP&L. These costs totaled $103.4$125.1 million, $96.5$117.7 million and $53.9$107.0 million for 2000, 19992003, 2002 and 1998,2001, respectively, and consisted primarily of employee compensation, benefits and fees associated with various professional services. Corporate Services began
operations in May 1998 upon the consummation of the merger. At DecemberDec. 31, 20002003 and 1999,2002, WP&L had ana net intercompany payable to Corporate Services of $30.6$36.4 million and $24.7$31.1 million, respectively.

A-37
SHAREOWNER INFORMATION

MARKET INFORMATION--The
Market Information - The 4.50% series of preferred stock is listed on the American Stock Exchange, with the trading symbol of WIS_P.WIS_PR. All other series of preferred stock are traded on the over-the-counter market. Seventy-two percent72% of WP&L's&L’s individual preferred shareowners are Wisconsin residents.

DIVIDEND INFORMATION--Preferred
Dividend Information - Preferred stock dividends paid per share for each quarter during 20002003 were as follows:
SERIES DIVIDEND
- ------ ---------

4.40%.......................... $1.10
4.50%.......................... $1.125
4.76%.......................... $1.19
4.80%.......................... $1.20
4.96%.......................... $1.24
6.20%.......................... $1.55
6.50%.......................... $0.40625
Series
Dividend
4.40% $1.10
4.50% $1.125
4.76% $1.19
4.80% $1.20
4.96% $1.24
6.20% $1.55
6.50% $0.40625
As authorized by the WP&L Board of Directors, preferred stock dividend record and payment dates normallyfor 2004 are as follows:

RECORD DATE PAYMENT DATE
- ----------- --------------
Record Date
Payment Date
February 28.................. 27 March 15
May 31....................... 28 June 15
August 31.................... 31 September 15
November 30.................. 30 December 15

STOCK TRANSFER AGENT AND REGISTRAR
Stock Transfer Agent and Registrar
Alliant Energy Corporation
Shareowner Services
P.O. Box 2568
Madison, WI 53701-2568

FORM
Form 10-K INFORMATION--AInformation - A copy of Form 10-K as filed with the SEC will be provided without charge upon request. Requests may be directed to Shareowner Services at the above address.
EXECUTIVE OFFICERS

ERROLL
Erroll B. DAVIS, JR.Davis, Jr., 56, 59, was elected Chairman of the Board effective April 2000 and Chief Executive Officer (CEO) effective April 1998.
William D. Harvey, 54, was elected Chief Operating Officer effective January 2004. He previously served as President and CEO since 1988 and has been a board member since 1984.

WILLIAM D. HARVEY, 51,April 1998.
Barbara J. Swan, 52, was elected President effective April 1998. HeJanuary 2004. She previously served as Senior Vice President since 1993.

A-38

ELIOT G. PROTSCH, 47, was elected Executive Vice President-Energy Delivery
effective October 1998. He previously served as Senior Vice President from 1993
to 1998.

BARBARA J. SWAN, 49, was elected Executive Vice President and General Counsel effectivesince October 1998. She
Eliot G. Protsch, 50, was elected Chief Financial Officer effective January 2004. He previously served as Vice President-General Counsel
from 1994 to 1998.

THOMAS M. WALKER, 53, was elected Executive Vice President and Chief Financial Officer (CFO) effective October 1998. Prior thereto, he served assince September 2003 and Executive Vice President and CFO since 1996 at IES and IESU.

PAMELA J. WEGNER, 53,President-Energy Delivery from October 1998 to September 2003.
Thomas L. Aller, 54, was elected ExecutiveSenior Vice President-Corporate ServicesPresident-Energy Delivery effective October 1998. She previously served as Vice President-Information
Services and Administration from 1994 to 1998.

EDWARD M. GLEASON, 60, was elected Vice President-Treasurer and Corporate
Secretary effective April 1998.January 2004. He previously served as Controller, Treasurer,interim Executive Vice President-Energy Delivery since September 2003 and Corporate Secretary since 1996.

DUNDEANA K. LANGER, 42,Vice President-Investments from 1998 to 2003 at Resources.
Thomas L. Hanson, 50, was elected Vice President-Customer Operations effective
December 2000. She previously served as Vice President-Customer ServicesPresident and Operations since September 1999, Vice President-Customer Services from 1998 to
1999, Assistant Vice President-Field Operations from 1997 to 1998 at IESU and
General Manager-Operations & Director Process Redesign Implementation from 1996
to 1997 at IESU.

DANIEL L. MINECK, 52, was elected Vice President-Performance Engineering and
EnvironmentalTreasurer effective April 1998.2002. He previously served as Assistant Vice
President-Corporate EngineeringManaging Director-Generation Services since 19962001 at IESU.

KIM K. ZUHLKE, 47,Alliant Energy and General Manager-Business and Financial Performance, Generation from 1998 to 2001 at Alliant Energy.
John E. Kratchmer, 41, was elected Vice President-Engineering, Sales & MarketingPresident-Controller and Chief Accounting Officer effective September 1999.October 2002. He previously served as Vice President-Customer
Operations since April 1998 and as Vice President-Customer Services and Sales
from 1993 to 1998.

JOHN E. KRATCHMER, 38, was elected Corporate Controller and Chief Accounting Officer effectivesince October 2000. He previously served as2000 and Assistant Controller since Aprilfrom 1998 to 2000 at Alliant Energy and as Manager of Financial Reporting and
Property from 1996 to 1998 at IES.

NOTE: None of the executive officers listed above is related to any member of
the Board of Directors or nominee for director or any other executive officer.

Mr. Davis has an employment agreement with Alliant Energy pursuant to which his
term of office is established. All other executive officers have no definite
terms of office and serve at the pleasure of the Board of Directors.

ADDITIONAL OFFICERS

LINDA J. WENTZEL, 52, was elected Assistant Corporate Secretary effective
May 1998. She previously served as Executive Administrative Assistant since 1995
at Alliant Energy.

ENRIQUE BACALAO, 51, was elected Assistant Treasurer effective November 1998.
Prior to joining Alliant Energy, he was Vice President, Corporate Banking from
1995 to 1998 at the Chicago Branch of The Industrial Bank of Japan, Limited.

STEVEN F. PRICE, 48, was elected Assistant Treasurer effective April 1998. He
previously served as Assistant Corporate Secretary since 1992.

A-39
Wisconsin Power & Light Company
Shareowner Services
P.O.
PO Box 2568
[WISCONSIN POWER & LIGHT LOGO]

Madison, WI 53701-2568
SHAREOWNER INFORMATION NUMBERS:

NUMBERS
Local Madison, WI: 1-608-252-2110
WI 1-608-458-3110
All Other Areas:Areas 1-800-356-5343
Indicate your vote by an (X) in the appropriate boxes.
ELECTION OF DIRECTORS
Nominee for term For All Withhold For All For All Except(*)
ending in 2006:
(01) Ann K. Newhall
Nominees for terms ending in 2007:
(02) Michael L. Bennett
(03) Jack B. Evans
(04) David A. Perdue
(05) Judith D. Pyle
Please date and sign your name(s) exactly as shown above and mail promptly in the enclosed envelope.
*TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE’S NAME IN THE LIST ABOVE AND MARK AN (X) IN THE “For All Except” BOX.
Signature Date Signature Date
IMPORTANT: When signing as attorney, executor, administrator, trustee or guardian, please give your full title as such. In case of JOINT HOLDERS, all should sign.
Please fold and detach Proxy Card at perforation if appointing a proxy by mail.
To all Wisconsin Power and Light Company shareowners:

Shareowners:
Please take a moment now to vote your shares for the upcoming Annual Meeting of Shareowners.

Below
Above is your 20012004 Wisconsin Power and Light Company proxy card. Please read both sides of the proxyProxy card, note your election, sign and date it. Detach and return it promptly in the enclosed self-addressed envelope. Whether or not you are attending, we encourage you to vote your shares.
You are invited to attend the Annual Meeting of Shareowners on Wednesday, May
30, 2001June 2, 2004, at 1:3:00 p.m. at the Alliant Energy CorporationCorporate Headquarters in the Nile Meeting Room 1A
at 222 West Washington Ave.,4902 N. Biltmore Lane, Madison, Wisconsin.

Please Fold and Detach Proxy Card at Perforation.
- --------------------------------------------------------------------------------

Indicate your vote by an (X) in the appropriate boxes.
FOR ALL WITHHOLD FOR ALL
ELECTION OF DIRECTORS: FOR ALL EXCEPT(*)
/ / / / / /
Nominees for terms
ending in 2004:
(*) TO WITHHOLD AUTHORITY TO VOTE
01 Jack B. Evans FOR ANY INDIVIDUAL NOMINEE, STRIKE
02 Joyce L. Hanes A LINE THROUGH THE NOMINEE'S NAME
03 David A. Perdue IN THE LIST TO THE LEFT AND MARK
04 Judith D. Pyle AN (X) IN THE "For All Except" BOX.

P
R
O
X
Y

PLEASE DATE AND SIGN YOUR NAME(S)
EXACTLY AS SHOWN ABOVE AND MAIL
PROMPTLY IN THE ENCLOSED ENVELOPE.

- ----------------------------------------- Important: When signing as attorney,
Signature Date executor, administrator, trustee or
guardian, please give your full
title as such. In the case of
- ----------------------------------------- JOINT HOLDERS, all should sign.
Signature Date

To access the Alliant Energy Annual Report on the Internet, please open our
site at www.alliant-energy.com. We encourage you to check out our site to
see how easy and convenient it is. Click on the Annual Report button. You
may print or just view this material. Your internet provider may have usage
charges associated with electronic access.

(continued and to be signed and dated on the other side.)
- --------------------------------------------------------------------------------

WISCONSIN POWER &AND LIGHT P.O.COMPANY
PO BOX 2568
[LOGO]
MADISON WI 53701-2568
WISCONSIN POWER &AND LIGHT P.O.COMPANY
PO BOX 2568
MADISON WI 53701-2568

- --------------------------------------------------------------------------------

ANNUAL MEETING OF SHAREOWNERS - MAY 30, 2001
- --------------------------------------------------------------------------------

— JUNE 2, 2004
The undersigned appoints William D. Harvey,Barbara Swan and Edward M. Gleason,F. J. Buri, or either of them, attorneys and proxies with the power of substitution to vote all shares of stock of Wisconsin Power and Light Company (the “Company”), held of record in the name of the undersigned at the close of business on April 3, 2001,13, 2004, at the Annual Meeting of Shareowners of the Company to be held in Room IA at the Alliant Energy
Corporation headquarters, 222 West Washington Ave.,4902 N. Biltmore Lane, Madison, Wisconsin on May
30, 2001June 2, 2004 at 1:3:00 p.m., and at all adjournments thereof, upon all matters that properly come before the meeting, including the matters described in the Company'sCompany’s Notice of Annual-MeetingAnnual Meeting of Shareowners dated April 10, 200116, 2004 and accompanying Proxy Statement, subject to any directions indicated on the reverse side of this card.
This proxy is solicited on behalf of the Board of Directors of Wisconsin Power and Light Company. This proxy when properly executed will be voted in the manner directed herein by the shareowner. If no direction is made, the proxyproxies will vote "FOR"“FOR” the election of all listed director nominees.
To access the Alliant Energy Corporation Annual Report and Proxy Statement on the Internet please open our site at www.alliantenergy.com/annualreports. We encourage you to check out our site to see how easy and convenient it is. Click on the Annual Report button for the Annual Report/Proxy Statement. You may print or just view these materials. Your Internet provider may have usage charges associated with electronic access.


		DAVID A. PERDUE		Director Since ~~[PHOTO] 1998~~ 2001
		Age 68 54		Nominated Term Expires in ~~2004 Ms. Hanes has been a director of Midwest Wholesale, Inc., a products wholesaler in Mason City, Iowa, since 1970 and~~2007
		Mr. Perdue is Chairman of the Board ~~since December 1997, having previously~~and Chief Executive Officer of Dollar General Corporation, a retail sales organization headquartered in Goodlettsville, Tenn. He was elected Chief Executive Officer and a Director in April 2003 and elected Chairman of the Board in June 2003. From July 2002 to March 2003, he was Chairman and Chief Executive Officer of Pillowtex Corporation, a textile manufacturing company located in Kannapolis, N.C. From 1998 to 2002, he was employed by Reebok International Limited, where he served as ~~Chairman~~President of the Reebok Brand from ~~1986~~2000 to ~~1988. She is a director of Iowa Student Loan Liquidity Corp. Ms. Hanes~~2002. Mr. Perdue has served as a ~~director of IPC since 1982 and~~Director of AEC, ~~IES~~IP&L (or predecessor companies) and AER since ~~1998. DAVID A. PERDUE~~ 2001.


		JUDITH D. PYLE		Director Since ~~[PHOTO] 2001~~ 1994
		Age 51 60		Nominated Term Expires in ~~2004 Mr. Perdue~~2007
		Ms. Pyle is President of ~~the Reebok brand for Reebok International Limited,~~Judith Dion Pyle and Associates, a ~~designer, distributor and marketer of footwear, apparel and sports equipment,~~financial services company located in ~~Canton, Massachusetts.~~Middleton, Wis. Prior to ~~joining Reebok~~assuming her current position in ~~1998, Mr. Perdue was Senior Vice President of Operations at Haggar, Inc. He was appointed to serve~~2003, she served as ~~a director of the Company, AEC, IES, IPC and AER as of February 15, 2001.~~


		KATHARINE C. LYALL		Director Since ~~[PHOTO]~~ 1986
		Age 59 62		Term Expires in ~~2002~~ 2005
		Ms. Lyall is President of the University of Wisconsin System in Madison, ~~Wisconsin.~~Wis. In addition to her administrative position, she is a professor of economics at the ~~University.~~University of Wisconsin-Madison. Ms. Lyall has announced that she will retire as President of the University of Wisconsin System no later than Aug. 31, 2004. She serves on the Boards of Directors of ~~the Kemper National Insurance Companies,~~ M&I Corporation and the Carnegie Foundation for the Advancement of Teaching. Ms. Lyall has served as a ~~director~~Director of AEC and AER since 1994 and of ~~IES and IPC~~IP&L (or predecessor companies) since 1998. ~~ROBERT W. SCHLUTZ~~


DATE: ~~MAY 30, 2001~~		Wednesday, June 2, 2004
TIME: 1:		3:00 ~~PM, CENTRAL DAYLIGHT SAVINGS TIME~~ p.m., Central Daylight Time
LOCATION: ~~WISCONSIN POWER AND LIGHT COMPANY ROOM 1A 222 WEST WASHINGTON AVENUE MADISON, WISCONSIN~~		Wisconsin Power and Light Company Nile Conference Room 4902 North Biltmore Lane Madison, Wis.


Questions and ~~Answers....................................... 3~~ Answers		1

Election of ~~Directors....................................... 5 Nominees............................................. 5 Continuing Directors................................. 6~~ Directors		4

Meetings and Committees of the ~~Board........................ 8~~ Board		7

Corporate Governance		9

Compensation of ~~Directors...................................~~ Directors		10

Ownership of Voting ~~Securities.............................. 12~~ Securities		11

Compensation of Executive ~~Officers.......................... 14 Summary Compensation Table........................... 14~~ Officers		13

Stock Options............................................... 16 Stock Option Grants in 2000.......................... 16 Option Values at December 31, 2000................... 17 Long-Term Incentive Awards.................................. 18 Options		15

Long-Term Incentive Awards ~~in 2000................... 18~~		17

Certain Agreements ~~and Transactions......................... 19~~		18

Retirement and Employee Benefit ~~Plans....................... 21~~ Plans		20

Report of the Compensation and Personnel Committee on Executive ~~Compensation...................................... 25~~ Compensation		23

Report of the Audit ~~Committee............................... 28~~ Committee		26

Section 16(a) Beneficial Ownership Reporting ~~Compliance..... 29 Exhibit I --~~Compliance		27

Appendix A – Audit Committee ~~Charter........................ 30~~ Charter		A-1

Appendix ~~A --~~B – Wisconsin Power and Light Company Annual Report ~~A-1~~		B-1


		ANN K. NEWHALL		Director Since ~~[PHOTO] 2000~~ 2003
		Age 52		Nominated Term Expires in ~~2004~~ 2006
		Ms. Newhall is Executive Vice President, Chief Operating Officer, Secretary and a Director of Rural Cellular Corporation, a cellular communications corporation, located in Alexandria, Minn. She has served as Executive Vice President and Chief Operating Officer since August 2000, as Secretary since February 2000 and as a Director since August 1999. Prior to assuming her current positions, she served as Senior Vice President and General Counsel from 1999 to 2000. She was previously a shareholder and President of the Moss & Barnett law firm in Minneapolis, Minn. Ms. Newhall has served as a Director of AEC, IP&L and AER since August 2003. She was originally recommended as a nominee in 2003 by a third-party search firm acting on behalf of the Nominating and Governance Committee.


		MICHAEL L. BENNETT		Director Since 2003
		Age 50		Nominated Term Expires in 2007
		Mr. Bennett has served as President and Chief Executive Officer of Terra Industries Inc., an international producer of nitrogen products and methanol ingredients headquartered in Sioux City, Iowa, since April 2001. From 1997 to 2001, he was Executive Vice President and Chief Operating Officer of Terra Industries Inc. He also serves as Chairman of the Board for Terra Nitrogen Corp., a subsidiary of Terra Industries Inc. Mr. Bennett has served as a Director of AEC, IP&L and AER since August 2003. He was originally recommended as a nominee in 2003 by a third-party search firm acting on behalf of the Nominating and Governance Committee.


		JACK B. EVANS		Director Since 2000
		Age 55		Nominated Term Expires in 2007
		Mr. Evans is a ~~director~~Director and since 1996 has served as President of The Hall-Perrine Foundation, a private philanthropic corporation in Cedar Rapids, Iowa. Previously, Mr. Evans was President and Chief Operating Officer of SCI Financial Group, Inc., a regional financial services firm. Mr. Evans is a ~~director~~Director of Gazette Communications, ~~the Federal Reserve Bank of Chicago and~~ Nuveen Institutional Advisory Corp., and Vice Chairman and a ~~director~~Director of United Fire and Casualty Company. Mr. Evans has served as a ~~director~~Director of AEC, ~~IES, IPC~~IP&L (or predecessor companies) and AER since 2000. Mr. Evans is Chairperson of the Audit Committee. ~~JOYCE L. HANES~~


		ERROLL B. DAVIS, JR.		Director Since ~~[PHOTO]~~ 1984
		Age 56 59		Term Expires in 2003 Mr. Davis has been President of AEC since January 1990 and was elected President and Chief Executive Officer of AEC in July 1990. He was elected Chairman of the Board of AEC in April 2000. 2006
		Mr. Davis joined the Company in ~~August~~ 1978 and ~~was elected~~served as President of the Company ~~in July 1987.~~from 1987 until 1998. He was elected ~~President and~~ Chief Executive Officer of the Company in ~~August~~ 1988. Mr. Davis has served as Chairman of the Board of the Company and AEC since 2000 and as Chief Executive Officer of AEC since 1990. He also served as President of AEC from 1990 through 2003. He has also served as Chief Executive Officer of AER ~~IES~~ and ~~IPC~~IP&L (or predecessor companies) since 1998. He is a member of the Boards of Directors of BP ~~Amoco~~ p.l.c.,; PPG Industries, Inc.,; Electric Power Research ~~Institute~~Institute; and the Edison Electric Institute. Mr. Davis has served as a ~~director~~Director of AEC since 1982, of AER since 1988 and of IES and IPC since 1998. LEE LIU Director Since [PHOTO] 1998 Age 67 Term Expires in 2003 Mr. Liu served as Chairman of the Board of the Company and AEC from April 1998 until April 2000 in accordance with the terms of his employment agreement. He was Chairman of the Board and Chief Executive Officer of IES Industries Inc. (a predecessor to AEC) and Chairman of the Board and Chief Executive Officer of IES prior to 1998. Mr. Liu held a number of professional, management and executive positions after joining Iowa Electric Light and Power Company (later known as IES) in 1957. He is a director of Principal Financial Group and Eastman Chemical Company. Mr. Liu has served as a director of IESIP&L (or predecessor companies) since ~~1981 and of AEC, IPC and AER since~~ 1998.


		SINGLETON B. McALLISTER		Director Since ~~1998 [PHOTO]~~ 2001
		Age 64 51		Term Expires in ~~2003~~ 2005
		Ms. McAllister has been a partner in the public law and policy strategies group of the Washington, D.C. law firm office of Sonnenschein, Nath & Rosenthal, LLP, since 2003. She previously was a partner at Patton Boggs LLP, a Washington, D.C. law firm, from 2001 to 2003. From 1996 until 2001, Ms. McAllister was General Counsel for the United States Agency for International Development. She was also a partner at Reed, Smith, Shaw and McClay where she specialized in government relations and corporate law. Ms. McAllister has served as a Director of AEC, IP&L (or predecessor companies) and AER since 2001.


		ROBERT W. SCHLUTZ		Director Since 1998
		Age 67		Term Expires in 2006
		Mr. Schlutz is President of Schlutz Enterprises, a diversified farming and retailing business in Columbus Junction, Iowa. Mr. Schlutz has served as a ~~director~~Director of ~~IES~~IP&L (or predecessor companies) since 1989 and of AEC ~~IPC~~ and AER since 1998. Mr. Schlutz is ~~the~~ Chairperson of the Environmental, Nuclear, Health and Safety Committee. ~~WAYNE H. STOPPELMOOR~~


		ANTHONY R. WEILER		Director Since 1998 ~~[PHOTO]~~
		Age 66 67		Term Expires in 2003 Mr. Stoppelmoor served as Vice Chairman of the Board of the Company and AEC from April 1998 until April 2000 in accordance with the terms of his consulting agreement. Prior to 1998, he was Chairman, President and Chief Executive Officer of IPC. He retired as President of IPC in 1996 and as Chief Executive Officer in 1997. Mr. Stoppelmoor has served as a director of IPC since 1986 and of AEC, IES and AER since 1998. ANTHONY R. WEILER Director Since 1998 [PHOTO] Age 64 Term Expires in 2002 2005
		Mr. Weiler is Chairman and President of A. R. Weiler Co. LLC, a ~~consultant~~consulting firm for ~~several~~ home furnishings organizations. ~~Prior to assuming his current position Mr. Weiler had been~~He was previously a Senior Vice President ~~for Heilig- Meyers~~of Heilig-Meyers Company, a national furniture retailer headquartered in Richmond, ~~Virginia. Mr. Weiler~~Va. He is a ~~director~~Director of the Retail Home Furnishings Foundation. Mr. Weiler has served as a ~~director~~Director of ~~IES~~IP&L (or predecessor companies) since 1979 and of AEC ~~IPC~~ and AER since 1998. Mr. Weiler is ~~the~~ Chairperson of the Nominating and Governance Committee.


NAME OF BENEFICIAL OWNER ~~OWNED(1) - ------------------------ --------------~~ ~~EXECUTIVES(2)~~	SHARES BENEFICIALLY OWNED⁽¹⁾

Executives⁽²⁾
William D. ~~Harvey......................................... 75,815(3)~~ Harvey	167,236	⁽³⁾
Eliot G. ~~Protsch.......................................... 77,715(3)~~ Protsch	173,717	⁽³⁾
Barbara J. Swan	125,590	⁽³⁾
Pamela J. Wegner	124,470	⁽³⁾
Thomas M. ~~Walker.......................................... 36,893(3) Pamela J. Wegner.......................................... 47,573(3) DIRECTOR NOMINEES~~ Walker	1,478	⁽⁵⁾

Director Nominees
Ann K. Newhall	4,116	⁽³⁾
Michael L. Bennett	1,803	⁽³⁾
Jack B. ~~Evans............................................. 32,402(3) Joyce L. Hanes............................................ 6,250(3)~~ Evans	39,028	⁽³⁾
David A. ~~Perdue........................................... 1,556(3)~~ Perdue	5,558	⁽³⁾
Judith D. ~~Pyle............................................ 9,440 DIRECTORS~~ Pyle	13,605

Directors
Alan B. ~~Arends............................................ 4,629(3)~~ Arends	10,867	⁽³⁾⁽⁴⁾
Erroll B. Davis, Jr....................................... 202,015(3) Rockne G. Flowers......................................... 16,423(4) Lee Liu................................................... 192,773(3) Jr.	556,063	⁽³⁾
Katharine C. Lyall........................................ 11,706 Arnold M. Nemirow......................................... 14,564(3)(4) Milton E. Neshek.......................................... 14,742(3)(4) Lyall	15,941
Singleton B. McAllister	4,251	⁽³⁾
Robert W. ~~Schlutz......................................... 6,729(3)~~ Schlutz.	18,990	⁽³⁾
Wayne H. ~~Stoppelmoor...................................... 128,162(3)~~ Stoppelmoor	14,851	⁽⁴⁾
Anthony R. ~~Weiler......................................... 6,962(3)~~ Weiler	17,022	⁽³⁾

All Executives and Directors as a Group 34 21 people, including those listed ~~above................... 1,263,893(3)~~ above.	1,572,716	⁽³⁾




Name and Principal Position	Year	Annual Compensation						Long-Term Compensation			All Other Compensation⁽⁵⁾

		Base Salary		Bonus		Other Annual Compensation⁽¹⁾		Awards	Payouts

								Securities Underlying Options (Shares)⁽²⁾	LTIP PRINCIPAL POSITION YEAR BASE SALARY BONUS(1) COMPENSATION(2) AWARDS(3) (SHARES)(4) PAYOUTS - ---------------------------------------------------------------------------------------------------------------------- ~~Payouts~~


Erroll B. Davis, Jr. ~~2000 $637,692 $895,200 $11,875 -- 111,912 $196,711~~ Chairman and Chief ~~1999 580,000 440,220 12,526 -- 77,657 84,870~~ Executive Officer 1998 540,000 -- 13,045 -- 36,752 -- - ----------------------------------------------------------------------------------------------------------------------	2003 2002 2001	$	685,000 685,000 683,269	$	0 0 489,364	$	14,949 17,582 11,265	151,687 151,687 108,592	$	0 0 359,605	$	45,253 45,485 50,284


William D. Harvey ~~2000 264,615 206,541 4,234 -- 21,063 47,474~~ Chief Operating Officer	2003 2002 2001		290,000 282,500 274,616		0 0 161,233		5,954 7,707 4,061	26,642 26,642 21,798		0 0 92,209		15,562 17,599 42,944


Barbara J. Swan President 1999 254,423 116,535 4,565 $255,004 17,071 31,365 1998 233,846 -- 4,699 -- 11,406 -- - ----------------------------------------------------------------------------------------------------------------------	2003 2002 2001		265,000 260,000 254,616		0 0 134,258		0 6,716 3,459	24,705 24,705 20,212		0 0 84,985		14,536 16,356 36,172


Eliot G. Protsch ~~2000 264,615 214,942 1,423 -- 21,063 47,474~~ Chief Financial Officer	2003 2002 2001		290,000 282,500 274,616		0 0 143,688		4,825 6,131 893	26,642 26,642 21,798		0 0 92,209		15,605 16,318 38,372


Pamela J. Wegner Executive Vice ~~1999 254,423 152,898 1,909 255,004 17,071 31,365~~ President 1998 233,846 -- 2,443 -- 11,406 -- - ---------------------------------------------------------------------------------------------------------------------- ⁽³⁾	2003 2002 2001		275,000 270,000 264,615		0 0 124,312		7,282 9,263 2,267	25,673 25,673 21,005		0 0 88,597		19,641 19,178 35,371


Thomas M. Walker ~~2000 254,616 190,026 -- -- 20,268 47,474~~⁽⁴⁾	2003 2002 2001		267,692 277,500 264,615		680,000 0 133,852		13,895 17,543 0	25,673 25,673 21,005		0 0 88,597		27,669 27,297 6,207




	Erroll B. Davis, Jr.		William D. Harvey		Barbara J. Swan		Eliot G. Protsch		Pamela J. Wegner		Thomas M. Walker


A.	$	20,550	$	6,000	$	6,000	$	7,450	$	7,375	$	6,000


B.		19,656		8,497		7,576		7,104		10,393		19,830


C.		5,047		1,065		960		1,051		1,873		1,839


Total	$	45,253	$	15,562	$	14,536	$	15,605	$	19,641	$	27,669




Name	Individual Grants						Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term⁽²⁾

	Number of Securities Underlying Options Granted⁽¹⁾	% of Total Options Granted to Employees in Fiscal Year		Exercise or Base Price ($/Share)		Expiration Date	5%		10%


Erroll B. Davis, Jr.	151,687	15.8	%	$	16.82	1/21/13	$	1,604,848	$	4,066,728


William D. Harvey	26,642	2.8	%		16.82	1/21/13		281,872		714,272


Barbara J. Swan	24,705	2.6	%		16.82	1/21/13		261,379		662,341


Eliot G. Protsch	26,642	2.8	%		16.82	1/21/13		281,272		714,272


Pamela J. Wegner	25,673	2.7	%		16.82	1/21/13		271,620		688,293


Thomas M. Walker⁽³⁾	25,673	2.7	%		16.82	11/15/03		0		0




Name	Number of Securities Underlying Unexercised Options at Fiscal Year End		Value of Unexercised In-the-Money Options at Year End⁽¹⁾

	Exercisable	Unexercisable	Exercisable		Unexercisable


Erroll B. Davis, Jr.	388,778	289,009	$	0	$	1,225,631


William D. Harvey	87,403	51,669		0		215,267


Barbara J. Swan	71,426	47,912		0		199,616


Eliot G. Protsch	87,403	51,669		0		215,267


Pamela J. Wegner	73,859	49,790		0		207,438


Thomas M. Walker	0	0		0		0




Name	Number of Shares, Units or Other Rights (#)⁽¹⁾	Performance or Other Period Until Maturation or Payout	Estimated Future Payouts Under Non-Stock Price-Based Plans

			Threshold (#)	Target (#)	Maximum (#)


Erroll B. Davis, Jr.	57,135	1/01/06	28,568	57,135	114,270


William D. Harvey	12,108	1/01/06	6,054	12,108	24,216


Barbara J. Swan	11,007	1/01/06	5,504	11,007	22,014


Eliot G. Protsch	12,108	1/01/06	6,054	12,108	24,216


Pamela J. Wegner	11,416	1/01/06	5,708	11,416	22,832


Thomas M. Walker⁽²⁾	12,263	N/A	N/A	N/A	N/A


Average Annual Compensation	Annual Benefit After Specified Years in Plan
Average Annual Compensation	15		20		25		30+
$ 200,000	$	55,000	$	73,333	$	91,667	$	110,000
300,000		82,500		110,000		137,500		165,000
400,000		110,000		146,667		183,333		220,000
500,000		137,500		183,333		229,167		275,000
600,000		165,000		220,000		275,000		330,000
700,000		192,500		256,667		320,833		385,000
800,000		220,000		293,333		366,667		440,000
900,000		247,500		330,000		412,500		495,000
1,000,000		275,000		366,667		458,333		550,000
1,100,000		302,500		403,333		504,167		605,000


	2002			2003
Audit Fees	$	2,843,000	*	$	2,293,000
Audit-Related Fees		19,000			332,000
Tax Fees		1,125,000			435,000
All Other Fees		297,000			54,000


Contents		Page
Definitions		B-2
The Company		B-3
Selected Financial Data		B-3
Management’s Discussion and Analysis of Financial Condition and Results of Operations		B-4
Independent ~~Public Accountants.................... A-14~~ Auditors’ Report		B-18
Consolidated Financial Statements
Consolidated Statements of ~~Income......................... A-15~~ Income		B-19
Consolidated Balance ~~Sheets............................... A-16~~ Sheets		B-20
Consolidated Statements of Cash ~~Flows..................... A-18~~ Flows		B-22
Consolidated Statements of ~~Capitalization................. A-19~~ Capitalization		B-23
Consolidated Statements of Changes in Common ~~Equity....... A-20~~ Equity		B-24
Notes to Consolidated Financial ~~Statements................ A-21~~ Statements		B-25
Shareowner ~~Information...................................... A-38~~ Information		B-42
Executive ~~Officers.......................................... A-38~~ Officers		B-43


Abbreviation or Acronym		Definition ~~- ----------------------- ----------~~
AFUDC		Allowance for Funds Used During Construction
Alliant Energy		Alliant Energy Corporation ~~APB Accounting Principles Board Opinion~~
ATC		American Transmission Company LLC
ARO		Asset Retirement Obligation
CAA		Clean Air Act
Corporate Services		Alliant Energy Corporate Services, Inc.
DNR		Department of Natural Resources
Dth		Dekatherm ~~EDS Electronic Data Systems Corporation EITF Emerging Issues Task Force~~
EPA ~~United States~~		U.S. Environmental Protection Agency ~~FAC Fuel Adjustment Clause~~
FASB		Financial Accounting Standards Board
FERC		Federal Energy Regulatory Commission
FIN		FASB Interpretation No.
FIN 46		Consolidation of Variable Interest Entities
GAAP		Accounting Principles Generally Accepted in the U.S.
ICC		Illinois Commerce Commission ~~IES IES Industries Inc. IESU IES Utilities Inc. IPC~~
IP&L		Interstate Power and Light Company ~~ISO Independent System Operator~~
Kewaunee		Kewaunee Nuclear Power Plant
KWh		Kilowatt-hour
MD&A ~~Management's~~		Management’s Discussion and Analysis of Financial Condition and Results of Operations
MGP		Manufactured Gas Plants
Moody’s		Moody’s Investors Service
MW		Megawatt
MWh ~~Megawatt-Hour~~		Megawatt-hour
N/A		Not Applicable
NEPA		National Energy Policy Act of 1992
NOx		Nitrogen Oxides
NRC		Nuclear Regulatory Commission ~~PGA Purchased Gas Adjustment PRP Potentially Responsible Party~~
PSCW		Public Service Commission of Wisconsin
PUHCA		Public Utility Holding Company Act of 1935
Resources		Alliant Energy Resources, Inc.
SEC		Securities and Exchange Commission
SFAS		Statement of Financial Accounting Standards
SFAS 71		Accounting for the Effects of Certain Types of Regulation
SFAS 109		Accounting for Income Taxes
SFAS 115		Accounting for Certain Investments in Debt and Equity Securities
SFAS 133		Accounting for Derivative Instruments and Hedging Activities
SFAS 143		Accounting for Asset Retirement Obligations
SFAS 149		Amendment of SFAS 133 on Derivative Instruments and Hedging Activities
South Beloit		South Beloit Water, Gas and Electric Company ~~STB Surface Transportation Board~~
Standard & Poor’s		Standard & Poor’s Rating Services
TBD		To Be Determined
U.S.		United States ~~WDNR Wisconsin Department~~ of ~~Natural Resources WNRB Wisconsin Natural Resources Board~~ America
VEBA		Voluntary Employees’ Beneficiary Association
WP&L		Wisconsin Power and Light Company ~~WPLH WPL Holdings, Inc.~~
WRPC		Wisconsin River Power Company


	2003(1)	2002(1)	2001(1)	2000	1999
	(in thousands)
Operating revenues	$1,216,981	$989,525	$993,716	$862,381	$752,505
Earnings available for common stock	111,564	77,614	70,180	68,126	67,520
Cash dividends declared on common stock	70,580	59,645	60,449	--	58,353
Cash flows from operating activities	138,495	223,750	135,886	174,060	163,228
Total assets	2,469,277	2,335,138	2,217,457	2,160,554	2,025,709
Long-term obligations, net	453,509	523,308	523,183	569,309	471,648


Natural gas-fired generation		300
Wind (purchased-power and/or generation)		100
Coal		200
Other		15

Total		615


	Revenues and Costs										MWhs Sold
	2003		2002		*		2001		**		2003	2002	*		2001	**
Residential	$	316,893	$	271,875	17%		$	248,128	10%		3,410	3,432	(1%	)	3,318	3%
Commercial		170,342		146,726	16%			138,269	6%		2,167	2,150	1%		2,122	1%
Industrial		243,770		211,310	15%			207,791	2%		4,595	4,454	3%		4,538	(2%	)

Total from retail customers		731,005		629,911	16%			594,188	6%		10,172	10,036	1%		9,978	1%
Sales for resale		155,573		125,822	24%			131,187	(4%	)	4,196	3,654	15%		3,524	4%
Other		23,508		31,947	(26%	)		28,075	14%		82	94	(13%	)	61	54%

Total revenues/sales		910,086		787,680	16%			753,450	5%		14,450	13,784	5%		13,563	2%

Electric production fuel and purchased- power expense		409,742		352,539	16%			338,028	4%

Margin	$	500,344	$	435,141	15%		$	415,422	5%


	Revenues and Costs						Dths Sold
	2003	2002	*	2001	**		2003	2002	*		2001	**
Residential	$137,060	$94,509	45%	$107,673	(12%	)	12,797	12,863	(1%	)	11,754	9%
Commercial	74,594	50,121	49%	58,658	(15%	)	8,539	8,574	--		7,572	13%
Industrial	9,606	6,980	38%	8,907	(22%	)	1,182	1,303	(9%	)	1,197	9%
Transportation/other	51,117	27,481	86%	31,625	(13%	)	19,796	18,572	7%		16,866	10%

Total revenues/sales	272,377	179,091	52%	206,863	(13%	)	42,314	41,312	2%		37,389	10%

Cost of gas sold	186,285	110,119	69%	153,823	(28%	)

Margin	$86,092	$68,972	25%	$53,040	30%


Cash flows from (used for):	2003		2002		2001
Operating activities	$138,495		$223,750		$135,886
Financing activities	(11,595	)	(27,685	)	(19,176	)
Investing activities	(108,402	)	(187,795	)	(116,832	)


Available capacity at Dec. 31, 2003	$	200.0
Average daily amount outstanding during 2003		29.8
Maximum daily amount outstanding during 2003		84.5


	Standard & Poor’s	Moody’s
Secured long-term debt	A	A1
Unsecured long-term debt	BBB+	A2
Commercial paper	A-2	P-1
Corporate/issuer	A-	A2
Outlook	Negative	Stable


	2004	2005	2006	2007	2008	Thereafter	Total
Long-term debt (Note 8(b))	$62	$88	$--	$105	$60	$139	$454
Operating leases (Note 3)	63	79	80	80	68	259	629
Purchase obligations (Note 11(b)):
Purchased-power and fuel commitments	67	31	30	28	21	76	253
Other	6	--	--	--	--	--	6

	$198	$198	$110	$213	$149	$474	$1,342