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.

display the highest personal and professional ethics, integrity and values.values;

The Committee also believes the following qualities or skills are necessary for one or more directors to possess:

The Nominating and Governance Committee will consider nominees recommended by shareowners in accordance with the Company’sour 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 theour Corporate Secretary of the Company and include appropriate biographical information concerning each proposed nominee. The Corporate Secretary will forward all recommendations to the Committee. The Company’sOur Bylaws also set forth certain requirements for shareowners wishing to nominate director candidates directly for consideration by shareowners. These provisions require such nominations to be made pursuant to timely notice (as specified in the Bylaws) in writing to our Corporate Secretary.

We and the Corporate SecretaryCommittee maintain a file of recommended potential director nominees, which is reviewed 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.

Environmental, Nuclear, Health and Safety Committee

The Environmental, Nuclear, Health and Safety Committee held three joint meetings in 2006. The Committee currently consists of D. C. Oestreich (Chair), S. B. McAllister, J. D. Pyle, C. P. Sanders and A. R. Weiler. Each of the Company.members of the Committee is independent as defined by the NYSE listing standards and SEC rules. The Committee’s responsibilities are to review environmental policy and planning issues of interest to us, including matters involving our company before environmental regulatory agencies and compliance with air, water and waste regulations. The Committee also reviews health and safety-related policies, activities and operational issues as they affect employees, customers and the general public. In addition, the Committee reviews issues related to nuclear generating facilities from which our utility subsidiaries purchase power.

Capital Approval Committee

The Capital Approval Committee held twono meetings in 2003.2006. The Committee currently consists of M. L. Bennett, J. B. EvansA. K. Newhall and D. A. R. Weiler.Perdue. Mr. DavisHarvey is the Chair and a non-voting member of this Committee. The purpose of this Committee is to evaluate certain investment proposals where (1) an iterative bidding process is required, and/or (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.

Executive Committee

The Executive Committee held no meetings in 2006. The Committee currently consists of M. L. Bennett, S. B. McAllister, D. C. Oestreich and A. R. Weiler. Mr. Harvey is the Chair and a non-voting member of this Committee. The purpose of this Committee is to possess all the powers and authorities of the Board of Directors when the Board is not in session, except for the powers and authorities excluded for such a Committee under the Wisconsin Business Corporation Law.

Attendance and Performance Evaluations

The Board of Directors held sixnine joint meetings during 2003.2006. Each director attended at least 75% of the aggregate number of meetings of the Board and Board committees on which he or she served.served, except for Ms. Pyle, who attended 67% due to health related issues.

The Board and each Board committee conduct performance evaluations annually to determine their effectiveness and suggest improvements for consideration and implementation. In addition, the Compensation and Personnel Committee evaluates Mr. Davis’Harvey’s performance as CEOChief Executive Officer on an annual basis.

Board members are not expected to attend the Company’s Annual Meetingour annual meetings of Shareowners. In 2003, noneshareowners. None of the Company’s directors attended theBoard members were present for our 2006 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, free of charge, on the Company’s websiteAlliant Energy Web site atwww.alliantenergy.com/investors under the “Corporate Governance” caption.caption or in print to any shareowner who requests them from our Corporate Secretary.

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. TheseUnder these categorical standards, appear as Appendix the following relationships that currently exist or that have existed, including during the preceding three years, willnot be considered to be material relationships that would impair a director’s independence:

In addition, any relationship that a director (or an “immediate family member” of the director) previously had that constituted an automatic bar to independence under NYSE listing standards will not be considered to be a material relationship that would impair a director’s independence three years after the end of such relationship in accordance with NYSE listing standards.

The Board of Directors also gave consideration to certain other factors in relation to an independence determination. Messrs. Bennett, Hazel, Oestreich and Perdue and Ms. Pyle serve as executive officers and/or directors of companies that are customers of our company or our public utility affiliates. These customer relationships do not constitute a material relationship under the standards cited above or the SEC rules governing related person transactions. Mr. Leach is a shareowner in an electrical supply company which has not done any business with our company or our public utility affiliates in a substantial number of years. However, each of these circumstances was evaluated under the applicable SEC rules and, in the case of Mr. Leach, the Federal Energy Regulatory Commission regulations. The Board determined that these factors did not impair the independence of these directors.

Based on these standards and this evaluation, the Board of Directors has affirmatively determined by resolution that each of the Company’s directors (other than Mr. Davis, the Company’s ChairmanMessrs. Bennett, Hazel, Oestreich, Perdue, Weiler and CEO)Leach and Mses. McAllister, Newhall, Pyle and Sanders has no material relationship with the Companyus 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, Compensation and Personnel, and Nominating and Governance and Compensation and Personnel Committees must consist of all independent directors.

Related Person Transactions

We have adopted a written policy that we will annually disclose information regarding related person transactions that is required by regulations of the SEC to be disclosed, or incorporated by reference, in our Annual Report on Form 10-K. For purposes of the policy:

The term related person means any of our directors or executive officers, or nominee for director, and any member of the “immediate family” of such person.

A related person transaction is generally a consummated or currently proposed transaction in which we were or are to be a participant and the amount involved exceeds $120,000, and in which the related person had or will have a direct or indirect material interest. A related person transaction doesnot include:

Furthermore, a related person is not deemed to have a material interest in a transaction if the person’s interest arises only (i) from the person’s position as a director of another party to the transaction; (ii) from the ownership by such person and all other related persons, in the aggregate, of less than a 10% equity interest in another person (other than a partnership ) that is a party to the transaction; (iii) from such person’s position as a limited partner in a partnership and all other related persons have an interest of less than 10% of and the person is not a general partner of or hold another position in, the partnership; and

(iv) from both such director position and ownership interest. Pursuant to the policy, each of our executive officers, directors and nominees for director is required to disclose to the Nominating and Governance Committee of the Board of Directors certain information regarding the related person transaction for review, approval or ratification by the Nominating and Governance Committee. Such disclosure to the Nominating and Governance Committee should occur before, if possible, or as soon as practicable after the related person transaction is effected, but in any event as soon as practicable after the executive officer, director or nominee for director becomes aware of the related person transaction.

The Nominating and Governance Committee’s decision whether or not to approve or ratify the related person transaction should be made in light of the Nominating and Governance Committee’s determination as to whether consummation of the transaction is believed by the Committee to not be, or to have been contrary to, the best interests of our company. The Nominating and Governance Committee may take into account the effect of a director’s related person transaction on such person’s status as an independent member of our board of directors and eligibility to serve on board committees under SEC and NYSE rules.

Based on these standards, none of our directors engaged in a related person transaction in 2006 or has a related person transaction currently proposed.

Lead Independent Director; Executive Sessions

The Corporate Governance Principles provide that the chairperson of the Nominating and Governance Committee shallwill 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 currently designated as the Lead Independent Director. Because Mr. Weiler will retire as a Director at the 2007 Annual Meeting, Mr. Bennett is expected to be appointed as the chairperson of the Nominating and Governance Committee and, therefore, assume the role of Lead Independent Director. At every regular jointin-person meeting of the Board of Directors, the independent directors meet in executive session with no member of Companyour 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 PresidingLead Independent Director, by providing such communication in writing to the Company’sour Corporate Secretary, who will post such communications directly to the Company’sour Board of Directors’ website.Web site.

Ethical and Legal Compliance Policy

The Company hasWe have adopted a Code of EthicsConduct that applies to all employees, including its CEO,our Chief OperatingExecutive Officer, Chief Financial Officer and Chief Accounting Officer, as well as itsour Board of Directors. The Company makes itsWe make our Code of EthicsConduct available, free of charge, on the Company’s website,Alliant Energy Web site atwww.alliantenergy.com/investors, under the “Corporate Governance” caption and such Code of Ethics is availableor in print to any shareowner who requests it from the Company’sour Corporate Secretary. The Company intendsWe intend to satisfy the disclosure requirements under Item 105.05 of Form 8-K regarding amendments to, or waivers from, the Code of EthicsConduct by posting such information on its website address stated above under the Corporate Governance caption.Alliant Energy Web site.

COMPENSATION OF DIRECTORS

No retainer fees are paid to Mr. Davis for his service on the Company’s Board of Directors. In 2003, all other directors (the “non-employee directors”), each of whom served on the Boards of the Company, AEC, IP&L and AER, received an annual retainer for service on all four Boards consisting of $47,137 in cash. Of this cash amount, each Director voluntarily elected to use $17,137 to purchase 1,000 shares of AEC common 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.

In 2004, the non-employee directors will each receive a cash retainer of $70,000. The Directors are encouraged to make a voluntary election to use not less than 50% of this cash retainer to purchase shares of AEC common stock pursuant to AEC’s Shareowner Direct Plan or to defer through the AEC Stock account in AEC’s Director’s Deferred Compensation Plan. In 2004, the Chairperson of the Audit Committee will receive an additional $7,500 cash retainer and the Chairpersons of the Nominating and Governance; Compensation and Personnel; and Environmental, Nuclear, Health, and Safety Committees will receive an additional $5,000 cash retainer.

Director’s Deferred Compensation Plan

Under the AEC 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 inThe Wall Street Journal, provided that the return may not be greater than 12% or less than 6%. Amounts deposited to an AEC Stock Account are treated as though invested in the common stock of AEC and will be credited with dividends, which will be treated as if reinvested. The director may elect that the AEC Deferred Compensation Account be paid in a lump sum or in annual installments for up to 10 years beginning in the year of or one, two or three tax years after retirement or resignation from the Board.

Director’s Charitable Award Program

AEC maintains a Director’s Charitable Award Program for the members of its Board of Directors beginning after threeyears 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’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 five 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’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

AEC maintains a split-dollar Director’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 2003 under the Director’s Life Insurance Program were as follows: A. B. Arends—$50, J. B. Evans—$2, K. C. Lyall—$488, J. D. Pyle—$24, W. H. Stoppelmoor—$987 and A. R. Weiler—$50.

In November 2003, the Board of Directors terminated this insurance benefit for any director not already having the required vesting period of three years of service and for all new directors.

OWNERSHIP OF VOTING SECURITIES

All of theour common stock of the Company is held by AEC.Alliant Energy. None of theour directors or officers of the Company own any shares of the Company’sour preferred stock. Listed in the following table are the number of shares of AEC’sAlliant Energy’s common stock beneficially owned as of February 28, 2007 by (1) the executive officers listed in the Summary Compensation Table, (2) all of our director nominees and directors, of the Company, and(3)and (3) all director nominees, directors and executive officers as of Dec. 31, 2006 as a group as of Feb. 27, 2004.group. The directors and executive officers of AEC and the Company as a group owned 1.4%less than 1% of the outstanding shares of AECAlliant Energy common stock on that date. No individual director or officer owned more than 1% of the outstanding shares of AECAlliant Energy common stock on that date.

To the Company’sour knowledge, no shareowner beneficially owned 5% or more of any class of the Company’sour preferred stock as of Dec. 31, 2003.2006. The following table sets forth information, as of Dec. 31, 2003,2006, regarding beneficial ownership by the only personpersons known to AECAlliant Energy to own morethanmore than 5% of AEC’sAlliant Energy’s common stock. The beneficial ownership set forth below has been reported on a Schedule 13G filings with the Securities and Exchange CommissionSEC by the beneficial owner.owners.

Amount and Nature of Beneficial Ownership

COMPENSATION OF EXECUTIVE OFFICERSDISCUSSION AND ANALYSIS

Objectives of Compensation Programs:

The following Summary Compensation Table sets forthis a discussion and analysis with respect to the total compensation paid by the Company, AECus, Alliant Energy and AEC’sAlliant Energy’s other subsidiaries to our executive officers.

We are committed to implementing a total compensation program for executive officers that:

We believe these objectives will attract, retain and motivate a highly proficient workforce that will work in the Chief interests of our shareowners and customers.

We adhere to the following compensation principles, which are intended to facilitate the achievement of our business strategies:

Benchmarking

We utilize compensation data from comparable companies to assess our competitiveness in base salary and incentive compensation for all services rendered during 2003, 2002officer level positions and 2001.target the value of each component of compensation to the median level of comparable companies. The companies that we use for comparison consist of companies of similar revenue size as Alliant Energy’s both in the energy and utility industry as well as in general industry. We believe compensation programs at these comparable companies should serve as a benchmark for what constitutes competitive compensation. The comparable companies in the energy and utility industry that we used for benchmarking in 2006 were drawn from Towers Perrin’s 2006 Energy Services Industry Executive Compensation Database, a survey of approximately 100 companies that includes compensation data from nearly all U.S. utilities. The general industry data were obtained from Towers Perrin’s 2006 Executive Compensation Database, a survey of over 820 companies. The data from both databases were adjusted to reflect how the data compare to companies of similar revenue size using regression analysis.

SUMMARY COMPENSATION TABLE

(5)	The table below shows the components of the compensation reflected under this column for 2003:

STOCK OPTIONSCompensation Consultant

The following table sets forth certain information concerning optionsTo assist in establishing our compensation program, our Compensation and Personnel Committee of our Board of Directors, which we refer to purchase shares of AEC common stock granted during 2003 toas the executives named below:

STOCK OPTION GRANTS IN 2003

The following table provides information for the executives named below regarding the numberCommittee and value of exercisable and unexercised options. Nonewhich is comprised of the executives exercised options in fiscal 2003.

OPTION VALUES AT DEC. 31, 2003

LONG-TERM INCENTIVE AWARDS

The following table provides information concerning long-term incentive awards made to the executives named below in 2003.

LONG-TERM INCENTIVE AWARDS IN 2003

CERTAIN AGREEMENTS

Mr. Davis currently has an employment agreement with AEC, pursuant to which he will servesame directors as the ChairmanCompensation and Personnel Committee 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 during the term of the agreement unless otherwise determined by the Board of Directors. Mr. Davis will also serve as the Chief Executive Officer of the Company and each subsidiary of AEC, including the Company, as long as he holds the same position for AEC. Pursuant to the employment agreement, Mr. Davis will be paid an annual base salary of not less than $750,000. Mr. Davis also will 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 AEC 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. Davisof Alliant Energy, engages the services of Towers Perrin as the Committee’s outside compensation consultant. Towers Perrin provides assistance and serves as an eligible retiree atadvisor in evaluating the compensation of our non-management directors, the chief executive officer and the other executive officers; provides market information and trends regarding executive compensation programs; provides benchmarking and competitive market reviews of our executive officer total compensation; assists with the design of our short-and long-term incentive programs and executive retirement programs; and provides technical considerations and actuarial services. We provide for the appropriate funding, as determined by the Committee, for payment of fees and out of pocket expenses to Towers Perrin. The Committee retains the authority to retain and terminate the outside compensation consultant.

Roles of Executives in Establishing Compensation

The Committee reviews and approves all elements of our executive compensation programs. Our chief executive officer provides input to the Committee in the assessment, design and recommendation of executive compensation programs, plans and awards. Annually, the chief executive officer reviews with the Committee market data provided by Towers Perrin to help verify survey job information adequately captures officers’ duties. Based on that data, the chief executive officer recommends to the Committee base salary adjustments and short-and long-term incentive targets in relation to external market data while also considering internal equity considerations and executive officers’ individual performance. The chief executive officer provides recommendations to the Committee for total annual compensation of executive officers. The chief executive officer does not, however, make any recommendation to the Committee regarding his future terminationown compensation. Further, the chief executive officer and other executive officers assess the performance of employment, regardlessthose executive officers reporting to them. The chief executive officer is invited to attend all Committee meetings to provide an update of progress made towards achievement of annual performance goals and to provide management’s views on compensation program design features and components.

Compensation Elements and Design

The major elements of the circumstancesexecutive compensation program are base salary, short-term (annual) incentives, long-term (equity) incentives and other than death. If, priorbenefits. In setting the level for each major component of compensation, we consider an executive officer’s total compensation (which consists of all elements of compensation including employee benefit and perquisite programs), the current market for talent, our historic levels of compensation, company culture, individual and company performance, and internal equity. We aim to strike an appropriate balance among base salary, short-term incentive compensation and long-term incentive compensation. Our goal is to provide an overall compensation package for each executive officer that is competitive with the packages offered to similarly situated executive officers at comparable companies. Total direct compensation of our executive officers includes a pay mix between base salary and incentive pay (both short-term and long-term) that is weighted such that targeted incentive pay accounts for 50-75% of total direct compensation.

Base Salary

We pay base salaries to assure management with a level of fixed compensation at competitive levels to reflect their professional skills, responsibilities and performance to attract and retain key executives. We adjust base salaries taking into consideration both changes in the market and performance against job expectations. Base salaries represent 15-50% of our executive officers’ total direct compensation.

The Committee generally seeks to set base salaries for all executive officers at approximately the 50th percentile of salaries for similar positions at comparable companies. The Committee will also consider the nature of the position, the responsibilities, skills and experience of the officer, and his or her performance. Adjustments may be made in base salaries to keep current with comparable companies, to recognize outstanding individual performance or to recognize an increase in responsibility.

For 2006, aggregate base salaries for our executive officers were slightly below the median of similarly situated executives at comparable companies. Our below market positioning was due in part to fairly recent promotions of several executives including Mr. Harvey into the chief executive officer role in July 2005. The Committee set his base salary at that time at $700,000, below the median base salary for chief executive officers at comparable companies, in recognition of his recent promotion. When he became Chairman of the Board of Directors in February 2006, the Committee raised Mr. Harvey’s base salary to $750,000 in recognition of his additional responsibilities as Chairman. The Committee set his base salary at $810,000 for 2007.

The Committee adjusted base salaries in 2006 for our other named executive officers as reported in the Summary Compensation Table below based upon the review of market information on salaries of comparable companies. Mr. Protsch’s base salary was increased from $450,000 to $455,000. Ms. Swan’s base salary was increased from $315,000 to $345,000. Mr. Aller’s base salary was increased from $245,000 to $250,000. Mr. Kratchmer’s base salary was increased from $200,000 to $219,000. Each of the executive officers base salary increases were set to target their salaries to the endmedian of similarly situated executive officers at comparable companies with the exception of Mr. Harvey, whose salary was below median as discussed above.

Short-Term Incentives

Our executive officers, including our named executive officers, are eligible to participate in the Management Incentive Compensation Plan, or MICP, which is Alliant Energy’s short-term (annual) incentive plan. The MICP provides executive officers with direct financial incentives in the form of annual cash bonuses tied to the achievement of Alliant Energy financial and strategic goals and individual performance goals. The MICP encourages executive officers to achieve superior annual performance on key financial, strategic and operational goals. By setting annual goals, the Committee endeavors to drive annual performance and align the interests of management with the interests of our shareowners and customers. Our target MICP compensation represents 20-25% of our executive officers’ total direct compensation. This pay mix aligns with our desire to emphasize variable at-risk compensation based on meeting predetermined company, subsidiary, business unit and individual performance goals.

The Committee seeks to set MICP payment levels at the median short-term incentive payments, measured as a percentage of base salary, for comparable positions at comparable companies. MICP targets in 2006 ranged from 90% of base salary for Mr. Harvey to 35% of base salary for other executive officers, with a maximum possible individual payout for all executive officers of two times the target percentage. The 2006 MICP targets were slightly below market due to Mr. Harvey’s recent promotion to chief executive officer. MICP targets represent the percentage of base salary that would be paid to the executive if the targeted company-wide performance goals were met and the targeted individual performance goals were met.

The Committee establishes threshold company-wide goals, which determine the funding level of an incentive pool. Earnings per share from continuing operations of Alliant Energy’s utilities determines the funding level of 85% of the termincentive pool. For 2006, the threshold utility earnings per share was $2.15, the midpoint of our utility earnings per share guidance provided at the beginning of 2006. The utility earnings per share from continuing operations in 2006 was $2.21. If the earnings per share threshold is not met, then no incentives are paid under the MICP. If the earnings per share threshold is met, then the MICP is funded at a level determined by multiplying the corporate score, which is based on how well we did compared to our earnings per share threshold as well as whether we met our cash flow target, by the total aggregate target bonus amounts up to an established maximum funding amount. Cash flow from the utilities and our services company affiliate, Alliant Energy Corporate Services, Inc., determines funding for 15% of the agreement,incentive pool. The cash flow target for 2006 was $450 million and the employmentlevel of Mr. Daviscash flow achieved was $427 million. If the cash flow target is terminatednot met, the Committee is not required to fund the 15% of the incentive pool represented by AECcash flow. The minimum funding level is 20% of the incentive pool target and the maximum funding level is 150%.

The Committee may exercise its discretion and waive the earnings per share threshold or cash flow target if they are not met. For 2006, the Committee exercised its discretion and waived the Alliant Energy cash flow performance measure for 2006 and funded the MICP at 150% of target. The only reason the cash flow performance measure was not attained in 2006 was because in December 2006, management used available cash to make discretionary pension plan contributions, which would

have been required in 2007 through 2009. As a result of the discretionary pension plan contributions, the cash flow performance measure was not met and, without cause (as definedthe waiver, the MICP would have been funded at 127.5%. The Committee granted this waiver in recognition of the employment agreement), or if Mr. Davis terminates his employment fordiscretionary pension plan contributions being voluntary and a good reason (as defined inuse of the employment agreement), or ifcash held by Alliant Energy. As a result of the employment of Mr. Davis is terminatedwaiver, named executive officers received a larger MICP payment than they would have without the waiver. The differences between the MICP payments as a result of the mutual agreementwaiver and what the MICP payments would have been without the waiver were: for Mr. Harvey, $151,875; for Mr. Protsch, $65,213; for Ms. Swan, $36,872; for Mr. Aller, $23,625; and for Mr. Kratchmer, $16,384.

Individual performance goals are reviewed and established by the Committee to assist in the determination of Mr. Davisindividual awards under the MICP. The Committee is presented with significant corporate goals for evaluation in conjunction with the establishment of individual performance goals for the chief executive officer and the Boardother named executive officers. The chief executive officer provides recommendations to the Committee in reference to the applicable performance goals that should be implemented for each of Directors, AEC or its affiliates will continuethe named executive officers depending on the strategic and functional responsibility of these officers. The chief executive officer is afforded discretion on the implementation of the performance goals for the other executive officers to keep continuity between the goals of the chief executive officer and those of the other executive officers. The goals are weighted. Individual performance goals are designed to be achievable but substantially challenging.

Mr. Harvey’s performance goals for 2006 specifically included financial goals of earnings per share from utility continuing operations of $2.15, earning a targeted return on equity at each utility and achieving cash flow of $450 million. In addition, Mr. Harvey’s goals included asset sale execution goals consistent with our strategic plan. These financial goals were weighted at 70%. Corporate well-being goals included achieving safety, employee engagement and diversity goals, weighted at 30%. The Committee determined that Mr. Harvey met his goals at a level of 100%.

Mr. Protsch’s goals for 2006 included the same financial goals as Mr. Harvey. In addition, Mr. Protsch had financial goals related to the performance of business units under his control. These financial goals were weighted at 70%. Mr. Protsch also had internal performance goals for the finance divisions he oversees, weighted at 15% in addition to corporate well-being goals weighted at 15%. Mr. Protsch achieved his goals at 98%.

Ms. Swan’s financial goals for 2006 included completion of asset divestitures consistent with our strategic plan, achieving a targeted return on equity for our company, and achieving regulatory outcomes to enhance financial performance of our company. These financial goals were weighted at 70%. She also had customer service and customer satisfaction benchmarks with a 15% weighting and corporate well-being goals, including employee engagement and diversity goals, weighted at 15%. Ms. Swan achieved her goals at 95%.

Mr. Aller’s financial goals for 2006 included earning a targeted return on equity at our Iowa utility affiliate, achieving a specified earnings per share target, meeting benchmarks from certain utility functions, and meeting certain financial targets related to our non-regulated transportation operations. These financial goals were weighted at 60%. Mr. Aller also had goals to achieve specified customer service and reliability standards, weighted at 25%. His corporate well-being goals included diversity, safety, employee engagement and leadership benchmarks, weighted at 15%. Mr. Aller achieved his goals at 105%.

Mr. Kratchmer’s financial goals for 2006 were to execute tax planning strategies and to evaluate and use key process inputs to develop reporting and tracking enhancements. These financial goals were weighted at 40%. He also had an internal customer satisfaction goal to provide appropriate support to the compensationorganization measured by customer satisfaction surveys. This customer goal was weighted at 30%. His corporate well-being goals included implementing and benefits called foradministering a financial employee development program and diversity goals. These goals were weighted at 30%. Mr. Kratchmer achieved his goals at 95%.

The level of individual performance as compared to the individual performance goals is factored into individual award amounts after the pool has been funded. Individual awards may range from 0% to 200% of the targeted payment based on an individual’s achievement of performance goals. The Committee makes judgments about achievement of performance goals by the employment agreement throughchief executive officer. Achievement of performance goals for the later of theend ofother executive officers is judged by the term ofchief executive officer or the agreement or one year after such termination of employment (withexecutive to whom the executive officer reports, in consultation with the Committee.

Long-Term Incentives

Alliant Energy awards long-term incentive compensation based on the maximum potentialachievement of longer-term, multi-year financial goals. We believe long-term incentive compensation aligns executives’ interests with those of Alliant Energy shareowners by

compensating executive officers for long-term achievement of financial goals.Long-term incentive compensation takes the form of equity awards granted under Alliant Energy’s 2002 Equity Incentive Plan. Long-term incentive compensation is targeted at 30-50% of our executive officers’ total direct compensation and, along with anythe MICP, further emphasizes variable at-risk compensation based on meeting predetermined company, subsidiary, business unit and individual performance goals.

Alliant Energy determines the amount of equity awards to our executive officers by setting a dollar value as a percentage of base salary at the level it believes appropriate based on the long-term incentives comparable companies provide, individual performance of the executive officer and internal equity among our executives. Alliant Energy then grants the number of shares of its common stock necessary to reach that dollar value based on the fair market value of its share price on the grant date. The levels in 2006 were 200% for Mr. Harvey, 120% for Mr. Protsch, 100% for Ms. Swan, 60% for Mr. Aller and 50% for Mr. Kratchmer. The long-term incentive targeted payout amounts were benchmarked to the median of comparable companies as to their levels paid.

The long-term incentive awards consist of performance contingent restricted stock and performance shares. We believe the use of these two components of long-term equity compensation paidprovides incentives for our executive officers to produce value for Alliant Energy shareowners and our shareowners over the long-term on both an absolute basis and a relative basis. Performance contingent restricted stock vests if Alliant Energy’s earnings per share grows at a specified level of 5% compounded year-over-year growth, which rewards absolute long-term growth. Performance shares vest and pay-out at varying levels depending on Alliant Energy’s total shareowner return as compared to a specified peer group, which rewards relative long-term growth and total shareowner return.

The Committee approves the value of the long-term equity awards prior to the grant date. The grant date of the awards made to our executive officers is the first business day of the year, which maximizes the time period for the incentives associated with the awards. The grant price used for accounting purposes is fair market value of Alliant Energy’s common stock on the grant date.

Long-term equity awards granted in cash),2006 consisted of 60% performance contingent restricted stock and 40% performance shares.

The vesting of the performance contingent restricted stock granted in 2006 is based on Alliant Energy’s earnings per share growth. Specifically, performance contingent restricted stock vests if Alliant Energy achieves earnings per share of $2.68, which represents a 16% growth in earnings per share from 2005, within a four year period. In no case may the restricted stock vest earlier than two years from the grant date, and all unvested stock compensationshares will vest immediately. If Mr. Davis dies or terminates his employment without good reason prior tobe forfeited if the earnings per share target is not met at the end of the termfour-year mark.

The payout of performance shares granted in 2006 is based on Alliant Energy’s total shareowner return over three years. Performance shares will provide a 100% payout, or target payout, if Alliant Energy’s relative total shareowner return over three years is equal to the median performance of a specific peer group selected by the Committee. The S&P Midcap Utilities Index was the peer group used for the 2006 grants of performance shares.

Performance share payouts are capped at 200% of the agreement, AECtarget payout if Alliant Energy’s total shareowner return is at or its affiliates will payabove the 90^th percentile of the total shareowner return of Alliant Energy’s peer group. The payout would be 50% of the target payout if Alliant Energy’s total shareowner return was in the 40^th percentile of the total shareowner return of Alliant Energy’s peer group. There would be no payout if Alliant Energy’s total shareowner return fell below the 40^th percentile of Alliant Energy’s peer group. Performance shares allow the executive to Mr. Davisreceive a payment in shares of Alliant Energy’s common stock or his beneficiariesin cash equal to the number of shares awarded, adjusted by the performance multiplier. If the executive chooses to take the payment in cash, the amount of the payout is determined by multiplying the number of shares earned by the average of the high and low trading prices on a date chosen by the Committee. The Committee chooses this date in advance of issuing the shares.

In 2007, the Committee determined that Alliant Energy achieved the performance levels for the performance shares granted in 2004. Alliant Energy’s relative total shareowner return performance for the three years ended Dec. 31, 2006 was at the 69^th percentile. Due to the total shareowner return goal being achieved, we had a performance share payout of 147.5% of target for the 2004 grant. Also in 2007, following the confirmation from Alliant Energy’s audited financial statements, the Committee determined that the performance contingent restricted stock granted in 2005 vested due to the successful

achievement of Alliant Energy’s long-term goal of earnings per share growth targets after two years. Alliant Energy’s 2005 earnings per share growth goal was $2.13. Alliant Energy’s adjusted earnings per share from continuing operations for the year ended Dec. 31, 2006 was $2.20.

Alliant Energy no longer grants stock options as incentive compensation. We determined that performance contingent restricted stock and performance shares provide equally motivating forms of equity incentive compensation and reduce potential dilution of our shareowners because fewer shares need be granted. Alliant Energy’s last stock options were granted in 2004 and expire in 2014.

Other Benefits

Alliant Energy also offers benefit programs to our executive officers with a focus towards their retirement. These plans include 401(k), deferred compensation and pension benefits. These plans are designed to be competitive in the market in attracting, retaining and motivating key executives and employees by providing competitive retirement benefits. We apply the same market benchmarking approach in designing these programs in that we benchmark to median levels of benefit and design elements. The Committee reviews benefit programs on an annual basis to determine effectiveness and identify any necessary changes. These retirement related benefit plans were all reviewed during 2006 by the Committee with no changes implemented. A brief description of the plans follows.

401(k) Plan

Our salaried employees, including our executive officers, are eligible to participate in the Alliant Energy 401(k) Plan. Alliant Energy matches $0.50 on the dollar for the first six percent of compensation deferred by the employee up to the IRS maximum.

Key Employee Deferred Compensation Plan

The Alliant Energy Key Employee Deferred Compensation Plan, or estate all compensationKEDCP, enables participants to defer up to 100% of base salary and annual incentive awards earned throughon a pre-tax basis and to receive earnings on the deferrals until the date of death or such termination (including previouslydistribution. The KEDCP provides tax deferred savings and post-retirement income to our executive officers. The shares of common stock identified as obligations under the KEDCP are held in a rabbi trust. Alliant Energy offers the KEDCP as part of the executive’s competitive compensation package and pro rata incentive compensation based uponbelieves it is in line with offerings from comparable companies. See “Nonqualified Deferred Compensation” below for more information regarding the maximum potential awards). If Mr. Davis’ employmentKEDCP.

Cash Balance Pension Plan

Our salaried employees, including our executive officers, are eligible to participate in the Alliant Energy Cash Balance Pension Plan. This defined benefit plan is terminated by reasonportable, offers flexible payment options and steady growth of his disability, he will be entitled to suchretirement funds. It is consistent with benefits as may bethat have been provided by AEC’s current disability program. If Mr. Davis is terminatedother comparable companies. See “Pension Benefits” below for cause, AECmore information regarding the Alliant Energy Cash Balance Pension Plan.

Supplemental Executive Retirement Plan

Our executives who are vice presidents 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,above, including the benefits under theour named executive officers, participate in Alliant Energy’s unfunded Supplemental Executive Retirement Plan, andor SERP. Alliant Energy provides the Executive Tenure Compensation Plan. UnderSERP as an incentive for key executives to remain in our service by providing additional retirement compensation that is payable only if the employment agreement, if any payments thereunder constitute an excess parachute payment underexecutive remains with us until retirement, disability or death. See “Pension Benefits” below for more information regarding 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.SERP.

AECSplit Dollar / Reverse Split Dollar Life Insurance Plan

Certain executive officers, including Messrs. Harvey and Protsch and Ms. Swan, receive individually owned life insurance policies. Alliant Energy pays the premiums for this insurance and these payments are taxable to the individual officers. These specific policies were grandfathered in 1998 and we no longer offer the policies to other executive officers as part of total executive compensation.

Perquisites

Alliant Energy provides our officers, including our named executive officers, with a Flexible Perquisite Program. The program provides a specified amount of funds to our executives to use for benefits, including an annual fixed automobile allowance, financial planning and legal services, a variety of club memberships and long-term care insurance. The

Committee reviews this program on an annual basis as part of our total compensation offering to determine its merits and the use of similar programs by comparable companies. The last review took place at our joint December 2006 Committee meeting at which the Committee determined that the Flexible Perquisite Program was comparable to similar programs at comparable companies and should continue as a component of total executive compensation. The Committee set the Flexible Perquisite Program funding amounts at $26,000 for Mr. Harvey, $20,000 for Mr. Protsch, $17,500 for Ms. Swan, $14,000 for Mr. Aller and $11,000 for Mr. Kratchmer. Our executive officers are also eligible for moderately more generous health and dental insurance, accidental death insurance, disability insurance, vacation, and other similar benefit programs than the balance of our non-bargaining employees.

Post-Termination Compensation

KEESAs

Alliant Energy currently has in effect key executive employment and severance agreements, (the “KEESAs”)or KEESAs, with certainour executive officers, including our named executive officers, and certain of our key employeesemployees. The KEESA is designed to provide economic protection to key executives following a change in control of AEC (including Messrs. Davis, HarveyAlliant Energy so that executives can remain focused on our business without undue personal concern. Alliant Energy recognizes that circumstances may arise in which it may consider a change of control transaction. We believe the security afforded the executives by the KEESA will help the executives to remain focused on business continuity and Protschreduce the distraction of the executive’s reasonable personal concerns regarding future employment. We also believe that the KEESA allows the executive to better consider the best interests of our company and Mses. SwanAlliant Energy and Wegner). its shareowners due to the economic security provided by the KEESA benefits.

The KEESAs provide that each executive officer who is a party thereto is entitled to benefitsare triggered if, within a period of up to three years (depending on which executive is involved) after a change in control of AEC (as definedAlliant Energy for Mr. Harvey, Mr. Protsch or Ms. Swan and two years for Mr. Aller or Mr. Kratchmer, there has occurred both a change in the KEESAs) (the “Employment Period”), the officer’scontrol and loss of employment, is ended through (a) termination by AEC, other than by reason of death or disability or for cause (as defined in the KEESAs); or (b) termination by the officer duecausing KEESA benefits to be subject to a breach of the agreement by AEC or a significant change in the officer’s responsibilities; or (c) in the case of Mr. Davis’ agreement, termination by Mr. Davis following the first anniversary of the change of control.“double trigger.” The benefits provided are (a) a cash termination payment of up tobenefit under the KEESA is three times (depending on which executive is involved) the sum of the officer’s annualbase salary and his or her average annualtarget bonus during the three years before the termination;for Mr. Harvey, Mr. Protsch and (b) continuationMs. Swan and two times base salary and target bonus for up to the end of the Employment Period of equivalent hospital, medical, dental, accidentMr. Aller and

life insurance coverage as in effect at the time of termination. Each KEESAThe KEESAs for executive officers below the level of Executive Vice President of AEC providesMr. Aller and Mr. Kratchmer provide 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 Internal Revenue 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 AECwe may pay 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,Mr. Harvey, andMr. Protsch and Mses.Ms. Swan and Wegner) provide that if any payments thereunder or otherwise constitute an excess parachute payment, AECAlliant Energy will pay to the appropriate officer the amount necessary to offset the excise tax and any additional taxes on this additional payment.

In consideration of the KEESA benefits, the executive agrees not to compete with Alliant Energy for a period of one year after the executive leaves Alliant Energy and to keep in confidence any proprietary information or confidential information for a period of five years after the executive leaves Alliant Energy. Both of these conditions can be waived in writing by Alliant Energy’s board of directors.

See “Potential Payments upon Termination or Change in Control” for more information regarding the KEESAs.

Executive Severance Plan

Alliant Energy also maintains a general executive severance plan for executive officers in the event that an officer’s position has been eliminated or significantly altered by Alliant Energy. The plan provides for a minimum level of severance equal to one times base salary, payment of pro-rated incentive compensation within the discretion of the chief executive officer, up to 18 months of paid COBRA coverage, outplacement services and/or tuition reimbursement of up to $10,000, and access to Alliant Energy’s employee assistance program. All executive officer severance packages are approved by the Alliant Energy Compensation Committee.

Employment Agreements

Alliant Energy no longer has any employment agreements with our executive officers. Alliant Energy entered into an employment agreement with Mr. Davis to ensure the retention of his executive and industry experience during a period of our growth and diversification strategy. Upon Mr. Davis’ employmentretirement on Feb. 1, 2006, this agreement expired. See footnote (9) to the Summary Compensation Table for further explanation of this agreement.

Share Ownership Guidelines

Alliant Energy established share ownership guidelines for our executive officers as a way to better align the financial interests of officers with those of shareowners. Under these guidelines, the requisite ownership numbers are 85,000 shares of Alliant Energy common stock for Mr. Harvey, 36,000 shares for Mr. Protsch and Ms. Swan and 12,000 shares for Messrs. Aller and Kratchmer. The executive officers are expected to make continuing progress toward compliance with these guidelines and achieve their designated levels within five years of being appointed as an officer. Alliant Energy monitors each officer’s progression towards achievement of these guidelines on a semi-annual basis.

The share ownership guidelines have an impact upon the payout of awards by Alliant Energy for performance shares. If executives have not yet met their share ownership level, they are required to receive at least 50% of any performance share payout made upon the vesting of the performance shares in shares of Alliant Energy common stock. In addition, once the performance or time-based restrictions lapse on shares of performance contingent or time-based restricted stock, these shares are counted towards achievement of share ownership guidelines. Our chief executive officer retains the right to grant special dispensation for hardship, promotions or new hires. All of our named executive officers have met their share ownership guidelines. Their share holdings are shown in the “Ownership of Voting Securities” table above.

Impact of Regulatory Requirements

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 meeting certain regulatory criteria or is otherwise excluded from the limitation. Based on the Committee’s commitment to link compensation with performance as described above, limits benefitsthe Committee intends to qualify future compensation paid thereunderto our executive officers for deductibility by us under Section 162(m) except in limited appropriate circumstances. All equity compensation plans are accounted for under FAS123(R).

At this time, plan compliance under Internal Revenue Code Section 409A has been extended to January 1, 2008. We have engaged outside legal counsel to assist in conducting a preliminary review and analysis of our executive compensation plans for impending changes as a result of Section 409A. We expect this review to be completed in 2007 and any necessary plan modifications required for compliance to be recommended to the extent that duplicate payments would be provided to him under his KEESA.Committee for approval and implementation effective January 1, 2008.

AEC entered into a Severance AgreementThe Public Service Commission of Wisconsin recently allowed us to recover from customers portions of our incentive compensation payments attributable to customer service and Releasereliability goals. We plan to structure our compensation program to take advantage of this allowed recovery.

Conclusion

The Committee is provided with Mr. Walker in connection with the conclusionappropriate information and reviews all components 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 agreementour chief executive officer’s 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’sother executive officers’ compensation. This includes base salary, short-term incentive compensation; long-term incentive compensation; accumulated realized and unrealized stock option bonus, equity, incentiveand restricted stock gains; the dollar value to the executive and cost to us of all perquisites and other personal benefits; the earnings and accumulated payout obligations under our non-qualified deferred compensation non-qualifiedprogram; the actual projected payout obligations under our supplemental retirement plan, medical, dental, life insurance, retirement, pensionincome plan; and otherpotential severance and change-in-control compensation or benefit plans upon his termination of employment, except that he retained vested rightsscenarios. A tally sheet setting forth all the above components was prepared and reviewed by the Committee affixing dollar amounts 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.various payout scenarios.

RETIREMENTCOMPENSATION AND EMPLOYEE BENEFIT PLANSPERSONNEL COMMITTEE REPORT

To Our Shareowners:

The Compensation and Personnel Committee (the “Committee”) of the Board of Directors of the Company is currently composed of four independent directors. 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 executive officers, evaluates executive officer performance, and considers related matters. It also makes recommendations to the Nominating and Governance Committee regarding compensation for the non-management Directors.

The Committee has reviewed and discussed the Compensation and Discussion and Analysis with our Audit Committee and our management. Based on the Committee’s reviews and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in our Annual Report on Form 10-K for the year ended Dec. 31, 2006, for filing with the SEC.

The Committee believes the existing executive compensation policies and programs provide the appropriate level of competitive compensation for our executive officers. In addition, the Committee believes that the long- and short-term performance incentives effectively align the interests of executive officers and shareowners toward a successful future for our company.

COMPENSATION AND PERSONNEL COMMITTEE

Singleton B. McAllister (Chairperson)

Michael L. Bennett

Darryl B. Hazel

Dean C. Oestreich

SUMMARY COMPENSATION TABLE

The table below summarizes the compensation paid to or earned by our chief executive officer, our chief financial officer, our next three highest paid executive officers and our former chairman for all services rendered to us, Alliant Energy and Alliant Energy’s other subsidiaries in 2006. We refer to such individuals in this proxy statement collectively as our named executive officers.

deferred compensation. The above-market interest was calculated to be equal to the amount by which the interest on deferred compensation in 2006 (7.25%) exceeded 120% of the applicable federal long-term interest rate, with compounding, at the time the interest rate was set (120% of this rate was 5.7%). The following represents the breakdown for each of the change in pension value and above market interest on deferred compensation, respectively, for each named executive officer: Mr. Harvey, $668,000/$21,334; Protsch, $171,000/$20,983; Swan, $122,000/$1,800; Mr. Aller, $188,000/$916; Mr. Kratchmer, $49,000/$1,971; and Mr. Davis, $484,000/$58,920.

GRANTS OF PLAN-BASED AWARDS

The following table sets forth information regarding all incentive plan awards that Alliant Energy granted to our named executive officers in 2006.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth information on outstanding Alliant Energy stock option awards and unvested stock awards held by our named executive officers on Dec. 31, 2006.