SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-K/A
For the fiscal year ended December 31, 1996 Commission file number 1-3632
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
INTERSTATE POWER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 42-0329500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main St., P.O. Box 769, Dubuque, IA 52004-0769
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 319-582-5421
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock Par Value $3.50 Per Share ) New York Stock Exchange
) Chicago Stock Exchange
) Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: N O N E
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
As of March 1, 1997 the aggregate market value of the voting stock held
by non-affiliates of the registrant was $281,817,111.
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
Shares Outstanding
March 1, 1997
Common Stock Par Value $3.50 Per Share 9,676,124
Documents incorporated by reference - portions of the Annual Report to
Stockholders for 1996 (Exhibit EX-13) are incorporated by reference in Parts
I, II and IV.
INTERSTATE POWER COMPANY
1996 Form 10-K Annual Report
Table of Contents
Page
Part I
Item 1. Business 1
General 1
Construction Program 1
Electric Operations 1
Sources and Availability of Raw Materials 2
Duration and Effect of Electric Patents and Franchises 3
Electric Seasonal Business 3
Working Capital Items 3
Electric Governmental Regulations 3
Electric Competitive Conditions 4
Other Sources of Power 6
Other Electric Operations 7
Gas Operations 7
Gas Sources and Availability of Raw Materials 8
Duration and Effect of Gas Patents and Franchises 9
Gas Seasonal Business 9
Gas Governmental Regulations 9
Gas Competitive Conditions 10
Dependence of Segment Upon a Single Customer 10
Research and Development 10
Electric and Magnetic Fields 10
Environmental Regulations 11
Employees 13
Accounting Matters 13
Item 2. Properties 13
Electric Properties 13
Generating Stations 14
Gas Properties 15
General Properties 15
Titles 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 16
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 16
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
Item 8. Financial Statements and Supplementary Data 18
Item 9. Disagreements on Accounting and Financial Disclosure 18
Part III
Item 10. Executive Officers of the Registrant 19
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners and
Management 19
Item 13. Certain Relationships and Related Transactions 20
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 20
PART I
ITEM 1. BUSINESS
(General)
Interstate Power Company (the company), is a public utility
incorporated in 1925 under the laws of the State of Delaware. The
company is engaged in the generation, purchase, transmission,
distribution and sale of electricity. It owns property in portions
of twenty-five counties in the northern and northeastern parts of
Iowa, in portions of twenty-two counties in the southern part of
Minnesota, and in portions of four counties in northwestern Illinois.
The company also engages in the distribution and sale of natural gas
in Albert Lea, Minnesota; Clinton, Mason City and Clear Lake, Iowa;
Fulton and Savanna, Illinois and in a number of smaller Minnesota,
Iowa and Illinois communities, and in the transportation of natural
gas within Iowa, Illinois and Minnesota, and in interstate commerce.
For information pertaining to industry segments and lines of business
please refer to pages 27 and 28 of Exhibit EX-13 (the Annual Report
to Stockholders).
(Construction Program)
The table below shows actual construction expenditures for 1996 and
estimated expenditures for the period 1997 through 2001:
(Thousands of Dollars)
1996 Actual $31,000
1997 Est. $36,300
1998 Est. $45,000
1999 Est. $35,500
2000 Est. $38,400
2001 Est. $62,600
Current projections of construction expenditures for the 1997 and
1998 periods do not indicate any need for permanent financing.
Refer to (Environmental Regulations) on page 11 for additional
information on construction expenditures related to compliance with
the regulations of the Clean Air Act of 1990.
(Electric Operations)
Of the 234 communities served with electricity, Dubuque, Iowa, is the
largest with a population of approximately 58,000. Other major
cities served are Albert Lea, Minnesota and Clinton and Mason City,
Iowa. The remainder of the communities served are under 15,000
population, of which 193 are less than 1,000 population. As of
December 31, 1996, the company sells electricity at wholesale to 13
small communities which have municipal distribution systems, 8 of
which are total requirements customers, and 5 of which are partial
requirements customers. During 1996, 6 firm municipal electric
wholesale customers elected to purchase their requirements from other
utilities. In addition, two firm municipal customers have given the
company notice that they intend to purchase their requirements from
other utilities when their contracts expire later in 1997.
The estimated population of the company's service area is 340,000.
Six large industrial customers account for 31% of electric MWH sales.
A diverse mixture of residential, agricultural, and industrial
customers constitute the remainder of the company's 164,900 electric
customers.
There have been no significant changes since the beginning of the
fiscal year in the kind of products produced, services rendered,
markets or method of distribution.
The facilities owned or operated by the company include facilities
for the transmission of electric energy in interstate commerce or the
sale of electric energy at wholesale in interstate commerce.
(Sources and Availability of Raw Materials)
Electricity generated by the company in 1996 was 93.8% from coal as a
fuel, 0.2% from oil and 6.0% from natural gas. In 1997, the sources
of such generation are estimated to be: 96.6% from coal, 0.4% from
middle distillate oils, and 3.0% from natural gas. In 1996, 78.1% of
the company's coal requirements came from long-term contracts. In
1997, the company anticipates that 79.0% of its coal requirements
will be from long-term contracts. These contracts have expiration
dates ranging through August 31, 1999.
The company has a contract for 450,000 tons per year of 0.5% sulfur
Colorado coal for its Kapp #2, a 217 MW unit at Clinton, Iowa. The
contract continues through August 1999, and will allow the company to
comply with sulfur dioxide restrictions mandated by the Clean Air Act
Amendments of 1990.
The company has a contract for 500,000 tons per year for its 260 MW
Lansing #4 unit. Lansing Unit #4 requires low sulfur coal, which is
being purchased in the Powder River Basin of Wyoming. The coal is
shipped by rail and then transloaded to barge at facilities near
Keokuk, Iowa. A contract with Orba-Johnson Transshipment Company,
Inc., covers rail to barge coal transloading. Coal required for
generation at the Neal #4 unit, located near Sioux City, Iowa, and
the Louisa #1 unit, located near Muscatine, Iowa, is contracted for
by the operator, MidAmerican Energy Company, under terms of the Unit
Participation Agreements.
The company will purchase coal on an annual basis for the Dubuque
Power Plant and for Lansing Units #1, #2 and #3.
The company owns 120 coal cars and has an undivided ownership
(21.528%) in 372 coal cars in connection with Neal #4. The company
has an undivided ownership (4%) in 136 cars in connection with Louisa
#1. Coal requirements in 1997 will require using leased cars for the
Louisa #1 coal supply.
The company relies on spot purchases of oil. The company burned
795,043 gallons of No. 2 and No. 6 oil in 1996 and has 6,477,000
gallons of oil storage capacity in which to store adequate reserves
during periods of high demand on refineries.
The company presently has interruptible natural gas available for its
electric generation station at Clinton, Iowa through Natural Gas
Pipeline Company of America. At the Fox Lake and Dubuque plants,
interruptible gas is available through Peoples Natural Gas Company.
There is no assurance that interruptible gas will continue to be
available as fuel for electric generating plants.
(Duration and Effect of Electric Patents and Franchises)
The company owns no patents.
The company has, in the opinion of its legal counsel, all necessary
franchises or other rights from the incorporated communities and
other governmental subdivisions now served, required for the
operation of its properties. With 195 electric franchises in effect
in cities and villages, and with the majority of such franchises
being for a term of 25 years, the renewal of such franchises is a
continuing process. Twenty-three percent (45) of the franchises have
been secured since January 1, 1987.
(Electric Seasonal Business)
The effects of air conditioning in summer and heating in winter have
a seasonal impact. The air conditioning sales in the summer months
are primarily related to the residential and commercial customer
classes, however, the company does not meter air conditioning sales
separately. During the past five years, the highest and lowest
average residential consumption in the peak summer month has been 960
Kwh (August 1995) and 571 Kwh (June 1993), respectively, compared to
806 Kwh (January 1994) and 651 Kwh (February 1992) during the peak
winter month. Refer to the (Electric Governmental Regulations)
section for a discussion of Iowa and Minnesota seasonal rates.
(Working Capital Items)
Three of the company's generating stations are located on the
Mississippi River at Clinton, Dubuque and Lansing, Iowa. The coal
supply for the three plants is delivered by barge during the shipping
season (approximately April 1st to December 1st). Refinements to the
company's fuel delivery process have decreased the amount of
inventory required to carry the company over the winter. Coal
shipments to the company's Neal #4 and Louisa #1 generating stations
are able to continue through the winter as river transportation is
not involved.
(Electric Governmental Regulations)
In August 1993, the company implemented a revised electric tariff
structure. The new tariffs give greater weight to the demand
component of electric usage, and include a provision for a higher
rate during the summer cooling season (June-September), but did not
change the company's overall annual electric revenue.
The company filed an Iowa electric rate increase application in March
1995. The application requested an annual increase of $13.1 million.
Interim rates in an annual amount of $7.1 million were placed in
effect on June 29, 1995. A December 1995 Iowa Utilities Board (IUB)
order allowed an annual increase of $6.6 million.
The company filed a Minnesota electric rate increase application in
June 1995. The application requested an annual increase of $4.6
million (later adjusted by the company to $3.3 million). Interim
rates were not requested. On April 10, 1996, the Commission issued
an order allowing an increase in electric rates of $2.3 million.
Rates reflecting the increase were implemented in August 1996. A
Commission order issued December 16, 1996, allowed the company to
recover approximately an additional $830,000 in 1997 applicable to
the time period from the original order to the date when new rates
were implemented.
Minnesota and Iowa regulations require that utilities conduct energy
efficiency and demand side management programs. Demand side
management expenditures applicable to the Minnesota jurisdiction in
an annual amount of approximately $1.0 million are currently being
recovered through rates. Iowa jurisdiction tariffs which provide for
the recovery of demand side management costs incurred through
December 31, 1992, were placed in effect in October 1994. The Iowa
tariffs provide for the recovery of $6.7 million of costs over a four
year period. The company filed in 1996 for recovery of $18.5 million
of costs incurred from 1993 through 1995. A decision by the IUB is
pending. As of December 31, 1996 and 1995, the amounts deferred were
$29.9 and $23.1 million, respectively.
The company's electric rate tariffs provide for recovery of the cost
of fuel through energy adjustment clauses. These clauses are subject
to revision from time to time by the regulatory authority having
jurisdiction, and are designed to pass on to the consumer the
increases or decreases in the cost of fuel without formal rate
proceedings. Purchased capacity costs are not recovered from
customers through energy adjustment clauses, but rather must be
addressed in base rates in a formal rate proceeding. In the
company's Iowa electric jurisdiction, the company is required to
return to customers any jurisdictional revenue from capacity sales to
other utilities.
(Electric Competitive Conditions)
The Illinois Commerce Commission entered an order in 1993 determining
that the company, and not Jo-Carroll Electric Cooperative, had the
right to provide electric service to a freezer service plant near
East Dubuque, IL. Upon judicial review sought by Jo-Carroll, the
Illinois 15th Judicial Circuit Court in 1994 remanded the proceeding
to the Commission for further hearings. The Commission entered an
order on remand in 1996 further determining that the company, and not
Jo-Carroll, had the right to provide such service. Proceedings
brought by Jo-Carroll for judicial review of the Commission order on
remand are now pending before that court. The company continues to
serve the freezer service plant pursuant to Commission order.
The National Energy Policy Act of 1992 (Act) addresses several
matters designed to promote competition in the electric wholesale
power generation market, including mandated open access to the
electric transmission system. Current initiatives at the federal
level propose to allow customers to purchase energy from alternative
power suppliers and then pay the local utility a fee for delivery of
the energy. As legislation, regulations, and economic changes occur,
electric utilities will be faced with increasing pressure to become
more competitive. The company cannot predict the long-term
consequences of these competitive issues on its results of operation
or financial condition. The company has experienced difficulty in
retaining electric wholesale customers which take service under one
year contracts. To date, 6 of the company's 18 firm municipal
electric wholesale customers have elected to purchase their
requirements from other utilities. The net impact on the company's
financial condition is not expected to be significant as these
municipal customers are required to pay the company a wheeling fee
for use of the company's transmission system to transport power from
other utilities.
The company's industrial rates generally compare favorably with those
of neighboring utilities. For the company's six largest industrial
customers, the aggregate 1996 rate was approximately 3.4 cents per
KWH. This rate also compares favorably with that of potential
independent power producers and electric wholesale generators. The
company's favorable rates mitigate the incentive that these customers
might otherwise have to relocate, self-generate or purchase
electricity from other suppliers. The company anticipates that its
generating cost will decline slightly over the next several years as
long-term coal purchase and transloading contracts expire and are
renegotiated.
The company currently has no competition from the same type of public
utility service in the sale of electricity in any of the incorporated
communities it serves. In the States of Iowa, Illinois and
Minnesota, territorial laws govern the question of possible service
to customers in unincorporated areas, and such laws regulate
competition in such areas.
Laws and statutory regulations in the different states in which
service is rendered provide, under varying terms and conditions, for
municipal ownership of electric generating plants and distribution
systems. Certain franchises under which utility service is rendered
give the municipality the right to purchase the system of the company
within said municipality upon certain terms and conditions. However,
no such purchase option and no right of condemnation of the company's
properties has been exercised and no municipal generating plant or
municipal distribution system has been established in the territory
now served by the company during the past twenty-five years.
The Iowa Utilities Board, the Illinois Commerce Commission and the
Minnesota Public Utilities Commission have each approved tariffs that
allow the company to offer interruptible electric service for
qualifying customers. The availability of this service provides
price incentives to those customers having the ability to interrupt
their connected load. The primary objective of the incentives is to
reduce the system peak. The incentives also serve to retain existing
customers and attract new customers.
(Other Sources of Power)
The company has been a participant in the Mid-Continent Area Power
Pool (MAPP) since March 31, 1972. Membership in the Pool permits
sharing of reserve capacities of the members which affects reductions
in plant facilities investment for MAPP members. The minimum reserve
margin for participants in MAPP has been established at 15%.
A new Restated Agreement was approved by the MAPP membership and
after FERC review became effective November 1, 1996. MAPP is now
comprised of a Regional Transmission Committee (RTC), a Regional
Reliability Committee (RRC), and a Power and Energy Market (PEM).
With open membership MAPP has gained several new members and includes
investor- owned utilities, the United States (Western Area Power
Administration), a Canadian system, public power districts, rural
electric generating and transmission cooperative associations,
municipal electric supply agencies, municipal utilities, and power
marketers operating in Canada and the North Central region of the
United States. The Pool coordinates planning and reliability in
Minnesota, Wisconsin, Montana, Iowa, Nebraska, North Dakota, and
South Dakota. The Pool also provides a marketplace for economic
power supply in these States with an expanding influence in the
surrounding States through new utility and marketer membership. The
MAPP Agreement was filed with the FERC and accepted as an initial
rate filing effective December 1, 1972 and has been in operation
since that time. In 1995, MAPP implemented an intra-pool
transmission service fee. With an effective date of November 1, 1996
the Restated Agreement, in addition to opening membership,
implemented a revised rate schedule for transmission service for
transactions with terms of up to two years. The company has little
historical data to use as a basis for quantifying the potential
maximum intra-pool transmission service fees that are now required
under the Restated MAPP Agreement. Current projections of maximum
charges would be up to three times the level incurred prior to
approval of the Restated Agreement. MAPP is presently working to
develop a region-wide tariff for transactions longer than two years.
The company cannot project the effective date nor the level of
charges of that long term tariff.
In addition to the MAPP membership, the company has interchange
agreements with certain Missouri and Illinois utilities through 345
kV transmission systems. Future interconnections are planned to meet
transmission requirements for the next ten years.
In 1992, the company entered into three long-term power purchase
contracts with other utilities. The contracts provide for the
purchase of 255 MW of capacity through April 2001. Energy is
available at the company's option at approximately 100% to 110% of
the monthly production costs for the designated units. The three
power purchase contracts required capacity payments of $24.6 million
in each year 1994 - 1996. Over the remaining life of the contracts,
total capacity payments will be approximately $111 million. The
purchase power contract payments are not for debt service
requirements of the selling utility, nor do they transfer risk or
rewards of ownership.
In Iowa the IUB has concluded that the capacity purchases were
prudent and allowed recovery of costs in rates. The rate structure
approved by the MPUC does not provide for full recovery of purchased
power applicable to the Minnesota jurisdiction. The 1996 rate order
by the MPUC held that the company had 100 MW of excess capacity and
disallowed recovery of approximately $800,000 annually.
The company has not filed for rate recovery of approximately $2.5
million of the purchased power payments in the Illinois and FERC
jurisdictions. The company believes that increased margins from
sales growth in Illinois have largely offset the revenue deficiency.
The company has contracts with several governmental power agencies
whereby the company provides transmission service to their
customer/members. During 1996, the company received $1,419,838 for
transmission service to customers of the Western Area Power
Administration (WAPA), and $1,392,455 from Cooperative Power
Association (CPA) for wheeling power to nine of its member
distribution cooperatives.
The company's contract with CPA also provides for payment by the
company for mutually utilized facilities constructed and owned by
CPA. During 1996, these payments amounted to $321,066.
The company and Southern Minnesota Municipal Power Agency (SMMPA)
have agreed by contract to compensate each other if
over/underinvestment in the shared transmission system occurs.
During 1996, SMMPA made payments to the company in the amount of
$365,886.
The company's contract with Central Iowa Power Cooperative (CIPCO)
provides for compensation to each other if over/underinvestment in
the shared transmission system occurs. During 1996, the company paid
CIPCO $139,302 for underinvestment in the Liberty Substation
property.
(Other Electric Operations)
The 1996 peak of 996,378 KW occurred on August 6, 1996 between 2:00
and 3:00 in the afternoon. At the time of its 1996 peak the company
had a net effective electric capability of 1,310,600 KW. Of this net
effective capability, 903,300 KW was in steam generation, 113,500 KW
was in combustion turbine and the balance was in internal combustion
units and purchases. The previous historical system net peak load
for a sixty-minute period, of 1,010,821 KW, was reached on July 14,
1995.
(Gas Operations)
The company supplies retail gas service in 39 communities and serves
approximately 49,200 gas customers.
There have been no significant changes since the beginning of the
fiscal year in the kind of products produced, markets or methods of
distribution.
(Gas Sources and Availability of Raw Materials)
The company purchases pipeline transportation capacity from Northern
Natural Gas Company (NNG), Natural Gas Pipeline Company of America
(NGPL) and Northern Border Pipeline Company (NBPL). During 1996 the
company purchased gas from six non-traditional suppliers, i.e.
producers, brokers and marketers, at market responsive rates. FERC
Order 636 became effective in 1993. Order 636 unbundled pipeline
supply from its capacity. Subsequent to Order 636, FERC continues to
approve the tariffs of NNG and NGPL, but only with regard to capacity
and storage rates, subject to change as rate cases are filed.
Gas for the company's Mason City, Albert Lea and Savanna service
areas is transported by NNG under capacity contracts for 36,338 Mcf
daily, and for an additional 15,657 Mcf in the November to March time
frame. The majority, 26,999 Mcf, of the above capacities is from the
producing areas of Oklahoma and Texas, etc. These contracts expire
in October, 1999. Gas is supplied by producers, marketers and
brokers, as well as from storage services, to meet the peak heating
season requirements. The company had 15,170 Mcf/d of storage, with
the necessary pipeline capacity, available for the 1995-1996 heating
season.
Gas for its Clinton service area is transported by NGPL under
capacity contracts for 17,750 Mcf annually, with expiration dates of
November 30, 1998, February 28, 1999, and two as of November 30,
2001. This gas is supplied by producers, marketers and brokers. The
company supplements this capacity with storage gas, which has the
pipeline capacity embedded in its FERC approved rate. The company
had 10,000 Mcf/d of storage available for the 1995-1996 heating
season.
During 1996, the company utilized approximately 34.9% of its
annualized daily contract gas available from its firm suppliers. The
company's 1996 total throughput level of 35,706,261 Mcf represents a
1.1% increase over 1995. The total throughput was composed of sales
gas (26.3%) and customer transportation gas (73.7%).
During 1996, twenty-four of Interstate's customers transported a
total of 26,305,197 Mcf of their own gas over the company's pipeline
and distribution systems. This reflects an increase over 1994 and
1995 in the number of customers exercising the transportation option.
In 1994, eighteen of Interstate's customers transported a total of
24,498,793 Mcf, and in 1995, twenty-one customers transported a total
of 26,400,766 Mcf. The customer owned gas was delivered by
interstate pipeline companies for those customers' accounts to
Interstate's town border stations. The company subsequently
delivered the gas to customers under tariffs approved by respective
state commissions.
The company owns propane-air gas plants in Albert Lea, Minnesota and
Clinton and Mason City, Iowa. The daily output capacities are:
5,000 Mcf, 4,000 Mcf and 9,600 Mcf of propane-air mix gas
respectively.
The requirement for gas on the peak winter day of the 1995-1996
season was 126,312 Mcf, including both firm and interruptible
customers. This peak consisted of 40.5% jurisdictional sales gas,
2.4% spot gas, 39.0% customer purchased gas, 15.4% storage gas and
2.7% propane-air from the company's peak-shaving plant. The maximum
daily firm gas sales during the 1995-1996 season were as follows:
Albert Lea 15,770 Mcf; Savanna 3,268 Mcf; Clinton 26,265 Mcf; Mason
City 31,470 Mcf, or 60.8% of the peak winter day throughput.
(Duration and Effect of Gas Patents and Franchises)
The company owns no patents.
The company has, in the opinion of its legal counsel, all necessary
franchises or other rights from the incorporated communities and
other governmental subdivisions now served, required for the
operation of its properties. With 34 gas franchises in effect in
cities and villages, and with the larger majority of such franchises
being for a term of 25 years, the renewal of such franchises is a
continuing process. Thirty-eight percent (13) of the franchises have
been secured since January 1, 1987.
(Gas Seasonal Business)
The effects of heating sales to the residential and commercial
classes of customers have a significant seasonal impact on the
company's business. The heating sales in the winter months account
for 98% of the total annual sales to these classes of customers. The
average consumption for a residential customer during the peak winter
months is 18.8 Mcf compared to the average of 2.5 Mcf during the
summer. The average consumption for a commercial customer during the
peak winter months is 90.5 Mcf compared to the average of 12.9 Mcf
during the summer.
(Gas Governmental Regulations)
The company filed an Iowa gas rate increase application in August
1995. The application requested an annual increase of $2.2 million.
Interim rates in an annual amount of $1.3 million were placed in
effect on October 20, 1995. An IUB order granting an increase of
$1.1 million was received in August 1996.
The company filed a Minnesota gas rate increase application in May
1995. The application requested an annual increase of $2.4 million,
including a return on common equity of 11.75%. Interim rates in an
annual amount of $1.5 million were placed in effect in June 1995. On
February 29, 1996, the Minnesota Public Utilities Commission (MPUC)
issued an order allowing an increase in gas rates of $2.1 million.
Rates reflecting the increase were implemented in September 1996.
The Minnesota Department of Public Service (DPS) and the Office of
Attorney General (OAG) appealed the Commission's decision. The
appeal was denied by the Minnesota Court of Appeals on February 18,
1997. On March 21, 1997, the DPS and OAG appealed the decision of
the Court of Appeals (and the MPUC) to the Minnesota Supreme Court.
FERC order 636 provides a mechanism under which gas pipelines can
recover transition costs from local distribution companies. The
company estimates its remaining share of transition costs will
aggregate approximately $2.2 million payable in declining annual
installments from 1997 to 2006. The company is recovering transition
costs from customers.
(Gas Competitive Conditions)
The company has no competition from the same type of public utility
service in the sale of gas in any of the incorporated communities
serviced by it. Certain major industrial customers of the company
purchase their own gas supply from others and have that gas
transported by the company as described in the "Gas Sources and
Availability of Raw Materials" section.
One customer recently constructed independent distribution facilities
to bypass the company's system. The company is evaluating its
response to the bypass issue and developing policies to deal with
future competitive conditions which could result from potential
system bypass. The customers most likely to bypass the company's
distribution facilities are transportation customers. During 1996,
four of the 24 gas transportation customers chose to return as
jurisdictional sales customers. At the present time the company has
20 gas transportation customers with total revenues of $2.7 million
(6% of gas revenues and 0.8% of total company revenues). Over 60% of
the $2.7 million of revenues occurs in an area where the potential
for bypass is considered to be minimal. The loss of any one customer
would not have a material adverse impact on the company's financial
condition.
(Dependence of Segment Upon a Single Customer)
In 1996, 1995 and 1994, the company had no single customer or
industry for which electric and/or gas sales accounted for 10% or
more of the company's consolidated revenues. In 1996, the company's
three largest industrial customers accounted for 1,353,162,917 Kwh of
electric sales ($45,844,492) and 23,676,656 Mcf of gas sales and
transportation ($1,991,412). The company's largest gas customer,
which represents 32% of the company's total gas throughput, is
committed by contract for the next five years.
(Research and Development)
The company has no full-time professional employees engaged in
research activities and had no company-sponsored research programs
during 1996, 1995 and 1994. In the public utility industry, research
is commonly and traditionally done by manufacturers of equipment,
trade organizations to which the company belongs, and university
research programs. In 1996 approximately $782,299 was paid for
research activities compared with $1,054,925 in 1995 and $1,072,871
in 1994.
(Electric and Magnetic Fields)
Electric and magnetic fields, a topic that has been an issue for a
number of years, was clarified by a study of the National Research
Council. The committee spent two years analyzing about 500 studies
conducted since 1979, and concluded in its report issued in 1996 that
there was no evidence to clearly prove electric and magnetic fields
are harmful to health. The company expects there will be continuing
national debate as to whether or not electromagnetic fields are
harmful to health.
(Environmental Regulations)
The company is subject to various federal and state government
environmental regulations. The company meets or exceeds the existing
federal and state environmental regulations. The Federal Clean Air
Act Amendments of 1990 requires reductions in sulfur dioxide and
nitrogen oxide emissions from power plants. The most restrictive
provisions relate to sulfur dioxide emissions. Phase 1 of the Clean
Air Act became effective January 1, 1995, while Phase 2 is effective
January 1, 2000. To comply with Phase 1, the company switched to low
sulfur coal and installed low nitrogen oxide burners. Phase 2
regulations will affect approximately 87% of the company's current
generating capacity and will require capital, operating and
maintenance costs beyond those required for Phase 1.
The United States EPA and the states have promulgated discharge
limits necessary to meet water quality standards. A National
Pollutant Discharge Elimination System (NPDES) permit is required for
all discharges. The company has current NPDES permits for all
discharges and meets or is within the range of required discharge
limits.
Early this century, various utilities including the company operated
plants which manufactured gas for cooking and lighting. The
company's facilities ceased operations over 40 years ago when natural
gas pipelines were extended into the upper Midwest. Some of the
former gasification sites contain coal tar waste products which may
present an environmental hazard.
In 1957, the company purchased facilities in Mason City, Iowa, from
Kansas City Power & Light Company (KCPL) which included land
previously used for a coal gasification plant. Coal tar waste was
discovered on the property in 1984. In 1995, a settlement was
reached with KCPL for sharing of costs to remediate the site. As of
year end 1996, remediation of the site is almost complete. The
company's total share of cost from 1984 to 1996 at this site was $3.7
million.
The company formerly operated a manufactured gas plant in Rochester,
Minnesota. Soil remediation was completed in 1995 and post-
remediation groundwater monitoring is underway. From 1991 through
1996, the company incurred costs aggregating $6.8 million applicable
to the Rochester site.
The company has identified an additional seven sites, as described
below, which may contain hazardous waste from former coal
gasification plants and has recorded an estimated liability
applicable to the investigation of those sites. The company is
unable to determine, at this time, the extent, if any, of remediation
necessary at these seven sites.
In Minnesota, the company owned or operated four manufactured gas
plant sites: Albert Lea, Austin, New Ulm and Owatonna. Potentially
hazardous wastes associated with former coal gasification operations
have been identified at each site. The company incurred $0.2 million
in investigation costs for these sites in 1996, and $1.2 million
since the investigation process began.
In 1995 and 1996, the company received accounting orders from the
MPUC which allow the deferral of investigation and remediation costs
applicable to the Minnesota sites and further allows the company to
seek recovery in a rate case.
In addition, the company has identified three other sites: Galena and
Savanna, Illinois, and Clinton, Iowa. Potentially hazardous wastes
associated with former coal gasification operations have been
identified at these sites. Little or no activity is expected at the
Illinois sites in 1997. In 1996, $0.4 million was expensed for
investigation work expected at the Clinton site in 1997.
Previous actions by Iowa and Illinois regulators have permitted
utilities to recover prudently incurred unreimbursed investigation
and remediation costs.
In 1994, the company filed a lawsuit against certain of its insurers
to recover the costs of investigating and remediating the former coal
gasification plants. Seven insurers paid the company a total of $8.6
million in 1995 and 1996 in order to be discharged from the lawsuit.
As of December 31, 1996, $5.8 million is recorded as a deferred
credit pending regulatory disposition. The trial against the
remaining insurers is expected to begin in Iowa in 1997. Neither the
company nor its legal counsel is able to predict the amount of any
additional insurance recovery, and no potential recovery has been
recorded.
Under the Federal Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA), a past waste generator can be designated
by the United States Environmental Protection Agency (U.S. EPA) as a
Potentially Responsible Party (PRP). Certain types of used
transformer oil (primarily those containing polychlorinated
biphenyls, or "PCBs") have been designated as hazardous substances by
the U.S. EPA.
In 1988, the U.S. EPA designated the company a PRP for the clean-up
of former salvage facilities operated by the Missouri Electric Works,
Inc. (MEW) in Cape Girardeau, Missouri. A portion of the
PCB-contaminated equipment found at the site was formerly owned by
the company. The company has notified the U.S. EPA that it disclaims
responsibility for the site, as the equipment was in proper operating
condition when sold by the company to a third party, which
subsequently made arrangements to transport this equipment to MEW.
The U.S. EPA has not responded to the company's disclaimer. The
company has not recorded any liability for the MEW site, and
management believes that it will be able to successfully defend
itself against any claims applicable to the site.
(Employees)
The company has 914 regular employees consisting of 882 full-time and
32 part-time employees.
(Accounting Matters)
Statements of Position (SOP) 96-1 on environmental liabilities was
issued by the American Institute of Certified Public Accountants in
1996. The company has reviewed the requirements of the SOP and is in
compliance with its provisions.
ITEM 2. PROPERTIES
The principal power plants and other materially important physical
properties of the company are maintained in accordance with sound
operating practices. Their general character and location are
described below:
(Electric Properties)
The company has been a participant in the Mid-Continent Area Power
Pool (MAPP) Agreement since March 31, 1972. As a part of this power
network the company is the owner of a 55.0 mile section of the 345 KV
transmission line extending from St. Louis, Missouri to Minneapolis,
Minnesota; a 15.5 mile section of the 345 KV transmission line
between Minneapolis, Minnesota and Kansas City, Missouri; a 5.0 mile
345 KV transmission line from near Clinton, Iowa to near Cordova,
Illinois; a 49.8 mile 345 KV transmission line from near Clinton,
Iowa to a substation south of Dubuque, Iowa; and three associated
345/161 KV substations.
The company's electric generating stations at year-end consist of six
steam plants, three combustion turbine stations, and five internal
combustion facilities. Pertinent information regarding each electric
generating station is shown on the following page:
INTERSTATE POWER COMPANY GENERATING STATIONS
Net
Generating Units December 31, 1996 Output
Nameplate Capability in KWH
Unit Capacity Year KW KW (000's)
Location Number KW Installed (Gross) (Net) 1996
STEAM:
Dubuque, IA 2 15,000 1929 82,500 78,000 179,734
3 25,000 1952
4 33,000 1959
Clinton, IA 1 15,000 1947 254,900 235,000 934,033
(M.L.Kapp Plt.) 2 212,284 1967
Lansing, IA 1 15,000 1948 337,800 320,000 914,062
2 11,500 1949
3 33,000 1957
4 252,649 1977
Sherburn, MN 1 11,500 1950 113,500 108,000 241,396
(Fox Lake Plt.) 2 11,500 1951
3 75,000 1962
Sioux City, IA 4* 125,924 1979 142,000 134,300 938,881
(Neal Unit #4)
Louisa County, IA 1** 27,400 1983 29,400 28,000 183,306
(Louisa Unit #1)
TOTAL STEAM 960,100 903,300 3,391,412
GAS TURBINE:
Montgomery, MN 1 26,535 1974 22,200 22,200 231
Sherburn, MN 4 26,535 1974 21,300 21,300 255
(Fox Lake Plt.)
Mason City, IA 1 37,520 1991 70,400 70,000 1,314
(Lime Creek Plt.) 2 37,520 1991
TOTAL GAS TURBINE 113,900 113,500 1,800
INTERNAL COMBUSTION:
Dubuque, IA 1 2,000 1966 4,600 4,600 (93)
2 2,000 1966
Hills, MN 1 2,000 1996 4,000 4,000 (140)
2 2,000 1960
Lansing, IA 1 1,000 1970 2,000 2,000 4
2 1,000 1971
New Albin, IA 1 685 1970 700 700 (51)
TOTAL INTERNAL COMBUSTION 11,300 11,300 (280)
TOTAL COMPANY 1,085,300 1,028,100 3,392,932
* Interstate owns 21.528% of a 584,931 KW unit operated by MidAmerican
Energy Company.
** Interstate owns 4.0% of a 685,000 KW unit operated by MidAmerican
Energy Company.
(Gas Properties)
The company owns and operates natural gas distributing systems in
Albert Lea, Minnesota; Savanna, Illinois; Clinton, Mason City and
Clear Lake, Iowa and in a number of smaller Minnesota, Illinois and
Iowa communities. At Albert Lea, the company owns 14 tanks with a
liquid propane storage capacity of 357,000 gallons; at Clinton, there
are 12 tanks with 306,000 gallons capacity and at Mason City, 22
tanks with 561,000 gallons capacity.
During 1996, in response to a request from the company's largest gas
customer to increase their firm contract from 35,000 MMBtu/d to
50,000 MMBtu/d, the company began construction of approximately 13.5
miles of 10" steel pipeline. The project was completed and placed
into service on November 25, 1996.
The company owns 47 gas regulating stations and approximately 992
miles of gas distribution mains.
(General Properties)
The company owns numerous properties in various parts of its
territory which are used for office, service and other purposes. The
most important of these are three General Office buildings in Dubuque
and the district office buildings at Clinton, Decorah, Dubuque, Mason
City and Oelwein, Iowa and Albert Lea, and Winnebago, Minnesota and
the distribution service buildings in each of those locations. The
company, as lessee, leases office space at various locations. The
company also leases a few small parcels of land for storage of poles
and miscellaneous temporary uses.
(Titles)
In the opinion of legal counsel for the company, the company has
satisfactory title to its properties for use in its utility
businesses subject only to permitted liens as defined in the Bond
Indenture and to minor defects and encumbrances customarily found in
cases of like size and character and which do not materially
interfere with the use of such properties.
Properties such as electric transmission and electric and gas
distribution lines are constructed principally on rights-of-way which
are maintained under franchise or held by easement only.
All properties of the company, other than "excepted property" as
defined in the Bond Indenture, are subject to the lien of the
company's Bond Indenture dated as of January 1, 1948, as
supplemented, securing the company's outstanding First Mortgage
Bonds.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to "Electric Governmental Regulations", "Electric
Competitive Conditions" and "Environmental Regulations" under "Item
1. Business" for certain pending legal proceedings and proceedings
known to be contemplated by governmental authorities. Other than
these items, there are no material pending legal proceedings, or
proceedings known to be contemplated by governmental authorities,
other than ordinary routine litigation incidental to the business, to
which the company is a party or of which any of the company's
property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no submission of matters to a vote of security holders
during the fourth quarter of the 1996 year.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(Proposed Merger)
WPL Holdings, Inc. (WPLH), IES Industries, Inc. (IES) and Interstate
Power Company (IPC) have entered into an Agreement and Plan of Merger
dated November 10, 1995, as amended May 22, 1996 and August 16, 1996,
(Merger Agreement), which provides for the combination of all three
companies. The new company will be named Interstate Energy
Corporation (IEC). See Note 15 of "Notes to Consolidated Financial
Statements" for additional information. Detailed pro forma financial
statements for IEC are included at EX-99.1.
IES is a holding company headquartered in Cedar Rapids, Iowa, and is
the parent company of IES Utilities Inc. (IES Utilities) and IES
Diversified Inc. (IES Diversified). IES Utilities supplies electric
and gas service to approximately 336,000 and 176,000 customers,
respectively, in Iowa. IES Diversified and its principal
subsidiaries are primarily engaged in the energy-related,
transportation and real estate development businesses. WPLH is a
holding company headquartered in Madison, Wisconsin, and is the
parent company of Wisconsin Power and Light Company (WP&L) and
Heartland Development Corporation (HDC). WP&L supplies electric and
gas service to approximately 385,000 and 150,000 customers,
respectively, in south and central Wisconsin. HDC and its principal
subsidiaries are engaged in business in three major areas:
environmental, energy and affordable housing services.
The proposed merger, which will be accounted for as a pooling of
interests, was approved by the respective Boards of Directors and
shareholders on September 5, 1996. The merger is conditioned on the
receipt of approvals of several federal and state regulatory
agencies. The status of these approvals is as follows:
On January 15, 1997, the Federal Energy Regulatory Commission (FERC)
issued an order in which it accepted several provisions of the IEC
merger application without the need for public hearings.
Specifically, the FERC found that the IEC merger does not pose any
major concerns with respect to market concentration and that the
legal structure proposed by the company does not impair FERC's
ability to regulate. The FERC has set limited issues for hearing,
including generation market power in the transmission-constrained
Wisconsin Upper Michigan System (WUMS) subregion. The FERC has also
ordered the merger partners to negotiate a ratepayer protection
mechanism with those intervenors who are not satisfied with the four
year rate freeze proposed in the application. If an agreement
between the merger partners and the intervenors is not reached, the
FERC will decide the issue. A final decision on the merger is
expected to be issued by the FERC by the end of 1997.
IES and IPC announced in 1996 their intentions to hold retail
electric prices to their current levels until at least January 1,
2000. The companies made the proposal as part of their testimony in
the IEC merger application filed with the Iowa Utilities Board (IUB).
The proposal excludes price changes due to government-mandated
programs, such an energy efficiency cost recovery, or unforeseen
dramatic changes in operations. The IUB approval is expected by the
end of 1997.
In March of 1996, an application requesting approval of the merger
was filed with the Public Service Commission of Wisconsin (PSCW). On
February 13, 1997, the PSCW voted to delay hearings on the proposed
merger. The hearings have been rescheduled for June of 1997 with a
decision anticipated by the end of the third quarter of 1997.
Legislation was introduced in the Wisconsin State Senate in February
1997 which could delay the PSCW approval of the merger. IPC cannot
predict the outcome of such legislation.
In March of 1996, an application requesting approval of the merger
was also submitted to the Illinois Commerce Commission (ICC). The
ICC conducted hearings on November 12, 1996, and final briefs were
filed on December 23, 1996. A decision is pending.
On January 15, 1997, the Minnesota Public Utilities Commission (MPUC)
announced that it had approved the IEC merger without hearings,
subject to a number of technical conditions, which are not opposed by
the merger partners. Included in these conditions is a four year
rate freeze for IEC's electric and gas customers in the state of
Minnesota.
An application to establish IEC as a registered holding company under
the Public Utility Holding Company Act of 1935 (1935 Act) was
submitted to the Securities and Exchange Commission (SEC). The
period for comments by interested parties was closed on November 5,
1996. A decision on the application is pending. The SEC
historically has interpreted the 1935 Act to preclude registered
holding companies, with limited exceptions, from owning both electric
and gas utility systems. Although the SEC has recently recommended
that registered holding companies be allowed to hold both gas and
electric utility operations if the affected states agree, it remains
possible that the SEC may require as a condition to its approval of
the proposed merger that IPC, WPLH and IES divest their gas utility
properties, and possibly certain non-utility ventures of IES and
WPLH, within a reasonable time after the effective date of the
proposed merger.
An impact review of the merger on market power, which is required by
the Hart-Scott-Rodino Antitrust Improvements Act, was completed by
the U.S. Department of Justice (DOJ). All requirements of this
review have been satisfied. If the merger is not consummated before
July 7, 1997, the merger partners will be required to submit new
information to the DOJ. The merger partners do not currently believe
that a new submission to the DOJ will result in a delay in the
consummation of the transaction.
An application was filed with the Nuclear Regulatory Commission (NRC)
to approve the transfer of the licenses of IES's Duane Arnold Energy
Center (DAEC) nuclear facility and WP&L's co-owned Kewaunee Nuclear
Power Plant to IEC. The application, which was filed on October 1,
1996, is pending.
For information pertaining to common stock market data required by
Item 201 of Regulation S-K please refer to page 32 of Exhibit EX-13
(the Annual Report to Stockholders).
ITEM 6. SELECTED FINANCIAL DATA
For information pertaining to selected financial data required by
Item 301 of Regulation S-K please refer to page 31 of Exhibit EX-13
(the Annual Report to Stockholders).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
For information pertaining to management's discussion and analysis
required by Item 303 of Regulation S-K please refer to pages 1
through 8 of Exhibit EX-13 (the Annual Report to Stockholders).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data incorporated by reference
to Exhibit EX-13 (the Annual Report to Stockholders for 1996):
Statements of Income Page 9
Balance Sheets Pages 10 & 11
Statements of Cash Flows Page 12
Statements of Capitalization Page 13
Statements of Retained Earnings Page 14
Notes to Financial Statements Pages 15 - 28
Independent Auditors' Report Page 29
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Name Age Offices Held Past 5 Years
M. R. Chase 58 5-7-91 - Vice President-Power Production
7-1-95 - Executive Vice President
10-1-96 - President & Chief Operating
Officer
1-1-97 - President & Chief Executive
Officer
R. R. Ewers 52 5-1-90 - Vice President-Administrative
Services
7-1-95 - Vice President-Administration
D. E. Hamill 60 9-1-80 - Vice President-Budgets &
Regulatory Affairs
J. C. McGowan 59 2-1-89 - Secretary & Treasurer
R. P. Richards 60 1-1-91 - Vice President-Gas Operations
D. R. Sharp 56 7-1-95 - Vice President-Power Production
1-1-96 - Vice President-Engineering
W. C. Troy 58 5-1-86 - Controller
All officers are elected and serve as such until the next annual
meeting of directors. There are no arrangements or understandings
with respect to election of any person as an officer.
For information pertaining to directors, and other data required by
Items 401 and 405 of Regulation S-K, refer to pages 2 through 5 of
the company's Official Proxy Statement to be filed with the
Securities and Exchange Commission on March 27, 1997.
ITEM 11. EXECUTIVE COMPENSATION
Refer to information on pages 7 through 11 of the company's Official
Proxy Statement filed with the Securities and Exchange Commission to
be filed with the Securities and Exchange Commission on March 27,
1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Refer to information on page 6 of the company's Official Proxy
Statement filed with the Securities and Exchange Commission to be
filed with the Securities and Exchange Commission on March 27, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others:
In 1996 there were no transactions and there are presently proposed
no transactions with management, to which the company or its
subsidiary was or is to be a party, of the character as to which
answer is called for in response to Item 404(a) of Regulation S-K.
Indebtedness of Management:
No director or officer, or nominee for election as a director, or any
associate of any thereof, was indebted to the company or its
subsidiary during 1996, as to which answer is called for in response
to Item 404(b) of Regulation S-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1. The financial statements, including supporting schedules,
are listed in the Index to Financial Statements, Schedules
and Exhibits filed as part of this Annual Report.
2. Exhibits which are filed herewith, including those incor-
porated by reference are listed in the Index to Financial
Statements, Schedules and Exhibits filed as part of this
Annual Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed with the Securities and
Exchange Commission during the last quarter of 1996.
(c) Refer to Index to Exhibits commencing on page 22.
(d) The Unaudited Pro Forma Combined Financial Information of
Interstate Energy Corporation is filed herewith as EX-99.1.
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
The 1996, 1995 and 1994 financial statements, together with the
Independent Auditors' Report thereon of Deloitte & Touche LLP, dated
January 30, 1997, appearing on pages 9 through 29 of Exhibit EX-13
(the 1996 Annual Report to Stockholders), are incorporated in this
Form 10-K Annual Report. The following additional data, as attached
on EX-23 and S-1 should be read in conjunction with the financial
statements in such Exhibit EX-13.
Schedules and other historical financial information not included with
this additional financial data have been omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
Page or Exhibit Reference
Exhibit EX-13
Form (Annual Report to
10-K Stockholders)
Consent of Independent Auditors EX-23
Financial Statements:
Statements of Income for the years ended
December 31, 1996, 1995 and 1994 9
Balance Sheets as of December 31, 1996 and 1995 10 & 11
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 12
Statements of Capitalization as of December 31,
1996 and 1995 13
Statements of Retained Earnings for the years
ended December 31, 1996, 1995 and 1994 14
Notes to Financial Statements 15 - 28
Selected Financial Data 31
Common Stock Market Data 32
Management's Discussion and Analysis 1 - 8
Schedule II: Valuation and Qualifying Accounts
and Provisions S-1
Report of Independent Auditors 28
INDEX TO FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS (CONT'D.)
Exhibit
Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of November 10, 1995, by
and among WPL Holdings, Inc., IES Industries Inc., Interstate
Power Company and AMW Acquisition, Inc. (incorporated by
reference to Exhibit 2.1 to the Form 8-K of Interstate Power
Company, a Delaware corporation, dated November 10, 1995). **
2.2 Amendment No. 1 to the Agreement and Plan of Merger and Stock
Option Agreements, dated May 22, 1996, by and among WPL
Holdings, Inc., IES Industries Inc., Interstate Power Company,
AMW Acquisition, Inc., WPLH Acquisition Co. and Interstate Power
Company (incorporated by reference to Exhibit 2.1 to the Form 8-
K of Interstate Power Company, a Delaware corporation, dated May
22, 1996). **
2.3 Amendment No. 2 to the Agreement and Plan of Merger, as amended,
dated August 16, 1996, by and among WPL Holdings, Inc., IES
Industries, Inc., Interstate Power Company, WPLH Acquisition Co.
and Interstate Power Company (incorporated by reference to
Exhibit 2.1 to the Form 8-K of Interstate Power Company, a
Delaware corporation, dated August 23, 1996). **
3.(i).1 Restated Certificate of Incorporation of Interstate Power
Company as originally filed April 18, 1925 and as amended
effective through October 21, 1993. *
3.(i).2 Certificate of Amendment to the Restated Certificate of
Incorporation of Interstate Power Company, effective March 4,
1997. *
3.(i).3 IPC Development Co. Articles of Incorporation, State of Iowa
dated May 24, 1978 (physically filed in Form 10-K for the Year
Ended December 31, 1978 as EXHIBIT G). **
3.(ii).1 By-Laws of Interstate Power Company as adopted April 20, 1925
and as amended October 1, 1996 (filed in Form 10-Q for the
Quarter Ended September 30, 1996 as EX-3.(ii)). **
3.(ii).2 IPC Development Co. By-Laws adopted May 10, 1978 (physically
filed in Form 10-K for the Year Ended December 31, 1978 as
EXHIBIT H). **
4.1 The Original through the Nineteenth Supplemental Indentures of
Interstate Power Company to The Chase Manhattan Bank and Carl E.
Buckley and C. J. Heinzelmann, as Trustees, dated January 1,
1948 securing First Mortgage Bonds (physically filed in
Registration Statement No. 33-59352 dated March 11, 1993 under
the Securities Act of 1933 as Exhibits (4)(b) through (4)(t)).
**
* Filed Herewith
** Previously Filed
Exhibit
Number Description of Exhibit
4.2 Twentieth Supplemental Indenture of Interstate Power Company to
The Chase Manhattan Bank and C. J. Heinzelmann, as Trustees,
dated May 15, 1993 (physically filed in Registration Statement
No. 33-59352 dated March 11, 1993 under the Securities Act of
1933 as Exhibit (4)(u)). **
4.3 Dividend Reinvestment and Stock Purchase Plan filed on
Form S-3 covering the registration of 500,000 shares of Common
Stock, dated May 11, 1993 (physically filed in Registration
Statement No. 33-62644 under the Securities Act of 1933). **
4.4 Post-Effective Amendment No. 1 to Registration Statement No. 33-
62644, Dividend Reinvestment and Stock Purchase Plan, providing
for expansion of the safekeeping option in the Plan, dated
December 19, 1996 and effective December 31, 1996 (filed in Form
S-3 on December 19, 1996). **
4.5 Guaranty Agreement between Interstate Power Company and Commerce
Union Bank as Trustee dated as of December 1, 1973 (City of
Dubuque, Iowa $4,400,000 Pollution Control Revenue Bonds)
(physically filed in Registration Statement No. 2-50685 as
EXHIBIT 5-GG.1a). **
4.6 Security Agreement dated as of December 1, 1973 between
Interstate Power Company (Guarantor) and Commerce Union Bank
(Trustee) (City of Dubuque, Iowa $4,400,000 Pollution Control
Revenue Bonds) (physically filed in Registration Statement No.
2-50685 as EXHIBIT 5-GG.1b). **
4.7 Guaranty Agreement between Interstate Power Company and Commerce
Union Bank as Trustee dated as of December 1, 1973 (Town of
Lansing, Iowa $3,700,000 Pollution Control Revenue Bonds)
(physically filed in Registration Statement No. 2-50685 as
EXHIBIT 5-GG.2a). **
4.8 Security Agreement dated as of December 1, 1973 between
Interstate Power Company (Guarantor) and Commerce Union Bank
(Trustee) (Town of Lansing, Iowa $3,700,000 Pollution Control
Revenue Bonds) (physically filed in Registration Statement No.
2-50685 as EXHIBIT 5-GG.2b). **
4.9 Guaranty Agreement between Interstate Power Company and Commerce
Union Bank as Trustee dated as of December 1, 1973 (City of
Clinton, Iowa $900,000 Pollution Control Revenue Bonds)
(physically filed in Registration Statement No. 2-50685 as
EXHIBIT 5-GG.3a). **
4.10 Security Agreement dated as of December 1, 1973 between
Interstate Power Company (Guarantor) and Commerce Union Bank
(Trustee) (City of Clinton, Iowa $900,000 Pollution Control
Revenue Bonds) (physically filed in Registration Statement No.
2-50685 as EXHIBIT 5-GG.3b). **
* Filed Herewith
** Previously Filed
Exhibit
Number Description of Exhibit
4.11 Registration Statement No. 33-32529 on Form S-8 covering the
registration of $10,000,000 of participation interests,
including the registration of up to 402,010 shares of Common
Stock, par value $3.50 per share, of Interstate Power Company
pursuant to its 401(k) Plan (filed with the Commission on
December 12, 1989). **
4.12 Statement regarding availability upon request of Loan Agreement
and Pollution Control Indenture (filed in Form 10-K for the Year
Ended December 31, 1994 as EX-4). **
10.1 P Gas Portfolio Management and Sales Contract between Interstate
Power Company and MidCon Gas Services Corp. filed under Form SE
as confidential and non-public. *
10.2 Mid-Continent Area Power Pool (MAPP) Restated Agreement dated
January 12, 1996. *
10.3 Mid-Continent Area Power Pool (MAPP) Center Agreement dated
December 2, 1996. *
10.4 Participation Power and Block Energy Agreement between United
Power Association and Interstate Power Company, dated August 7,
1991 (physically filed in Form 10-K for the Year Ended December
31, 1991 as EXHIBIT F). **
10.5 Unit Participation Power Agreement between Iowa Public Service
Company and Interstate Power Company, dated August 12, 1991
(physically filed in Form 10-K for the Year Ended December 31,
1991 as EXHIBIT G). **
10.6 Unit Participation Power Agreement between Minnesota Power and
Interstate Power Company, dated August 14, 1991 (physically
filed in Form 10-K for the Year Ended December 31, 1991 as
EXHIBIT H). **
10.7 Mid-Continent Area Power Pool Agreement Amendment dated January
1, 1991 (physically filed in Form 10-K for the Year Ended
December 31, 1991 as EXHIBIT I). **
10.8 Mid-Continent Area Power Pool Coordination Center Agreement
dated September 18, 1990 (physically filed in Form 10-K for the
Year Ended December 31, 1991 as EXHIBIT J). **
10.9 Coal Transportation Agreement ICC-BN-C-2536 between Interstate
Power Company and Burlington Northern Railroad Company dated
February 21, 1990 (physically filed in Form 10-K for the Year
Ended December 31, 1990 as EXHIBIT D). **
* Filed Herewith
** Previously Filed
Exhibit
Number Description of Exhibit
10.10 Third Amended and Restated Coal Supply Agreement between
Interstate Power Company and AMAX Coal Company and a fully
executed Release and Discharge Agreement for the previous
Agreement and Amendments. Both dated April 9, 1990 (physically
filed in Form 10-K for the Year Ended December 31, 1990 as
EXHIBIT E). **
10.11 Coal Transshipment Agreement by and between Interstate Power
Company and Orba-Johnson Transshipment Company dated December
20, 1979 (physically filed in Form 10-K for the Year Ended
December 31, 1979 as EXHIBIT F, and filed in Form 10-K/A for the
Year Ended December 31, 1995 as EX-10.b). **
10.12 Coal Transloading Agreement between Interstate Power Company and
Orba-Johnson Transshipment Company dated December 20, 1995
(filed in Form 10-K/A for the Year Ended December 31, 1995 as
EX-10.a). **
10.13 Barge Transportation Agreement dated March 1, 1990 between
Orgulf Transport Company and Interstate Power Company for the
shipment of coal from the Orba-Johnson Transshipment Terminal
near Keokuk, Iowa to the Unit 4 power-generating facility at
Lansing, Iowa (physically filed in Form 10-K for the Year Ended
December 31, 1990 as EXHIBIT J). **
10.14 Coal Supply Agreement between Interstate Power Company and
Powderhorn Coal Company filed under Form SE as confidential and
non-public (filed in Form 10-K for the Year Ended December 31,
1994 as EX-10.a). **
12 Statement re Computation of Ratios. *
13 The Company's 1996 Annual Report to Stockholders. *
23 Consent of Independent Auditors. *
27 Financial Data Schedule (required for electronic filing only in
accordance with Item 601 (c) (1) of Regulation S-K). *
99.1 Unaudited Pro Forma Combined Financial Information of
Interstate Energy Corporation. *
99.2 Summary Plan Description for the Interstate Power Company 401(k)
Plan dated November 30, 1993 (filed in Form 10-K for the Year
Ended December 31, 1993 as EX-99.c). **
99.3 Interstate Power Company Irrevocable Trust Agreement dated April
30, 1990 (filed in Form 10-K for the Year Ended December 31,
1993 as EX-99.f). **
* Filed Herewith
** Previously Filed
Exhibit
Number Description of Exhibit
99.4 Interstate Power Company Amended Deferred Compensation Plan as
amended through January 30, 1990 (filed in Form 10-K for the
Year Ended December 31, 1993 as EX-99.e). **
99.5 Interstate Power Company Supplemental Retirement Plan as amended
and restated November 10, 1995 (filed in Form 10-K/A for the
Year Ended December 31, 1995 as EX-99.b). **
* Filed Herewith
** Previously Filed
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
INTERSTATE POWER COMPANY
Date March 20, 1997 By /s/ M. R. CHASE
(M. R. Chase,
President and Chief
Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title
/s/ M. R. CHASE President and Chief Executive
(M. R. Chase) Officer (Principal Executive
Officer and Principal
Financial Officer)
/s/ W. C. TROY Controller (Principal
(W. C. Troy) Accounting Officer)
/s/ W. H. STOPPELMOOR Chairman of the Board
(W. H. Stoppelmoor
/s/ A. B. ARENDS Director
(A. B. Arends)
/s/ J. E. BYRNS Director
(J. E. Byrns)
/s/ A. D. CORDES Director
(A. D. Cordes)
/s/ J. L. HANES Director
(J. L. Hanes)
/s/ G. L. KOPISCHKE Director
(G. L. Kopischke)
Date March 20, 1997
SCHEDULE II
INTERSTATE POWER COMPANY
VALUATION AND QUALIFYING ACCOUNTS AND PROVISIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Thousands of Dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
BALANCE AT CHARGED CHARGED DEDUCTION BALANCE
BEGINNING TO TO OTHER FROM AT END
DESCRIPTION OF YEAR INCOME ACCOUNTS RESERVES OF YEAR
YEAR ENDED DEC. 31, 1996
Valuation account
deducted from caption
of which it applies -
accumulated provision
for doubtful accounts $200 $277 $143 (a) $420 (b) $200
Provision for medical
benefits, injuries
and damages $4,682 $6,469 $1,215 $9,341 (c) $3,025
YEAR ENDED DEC. 31, 1995
Valuation account
deducted from caption
of which it applies -
accumulated provision
for doubtful accounts $200 $169 $144 (a) $313 (b) $200
Provision for medical
benefits, injuries
and damages $4,671 $5,729 $1,081 $6,799 (c) $4,682
YEAR ENDED DEC. 31, 1994
Valuation account
deducted from caption
of which it applies -
accumulated provision
for doubtful accounts $203 $243 $148 (a) $394 (b) $200
Provision for medical
benefits, injuries
and damages $4,105 $7,240 $2,757 $9,431 (c) $4,671
(a) Recoveries on accounts previously written off.
(b) Accounts written off.
(c) Claims and damages paid and expenses in connection therewith.
S-1 (28)
DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' REPORT
Interstate Power Company:
We have audited the financial statements of Interstate Power Company as of
December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, and have issued our report thereon dated January
30, 1997; such financial statements and report are included in your 1996
Annual Report to Stockholders and are incorporated herein by reference.
Our audits also included the financial statement schedule of Interstate
Power Company, listed in Item 14. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects,
the information set forth therein.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Davenport, Iowa
January 30, 1997
INDEX OF EXHIBITS FILED HEREWITH:
EX-3.(i).1 Restated Certificate of Incorporation of Interstate Power
Company as originally filed April 18, 1925 and as amended
effective through October 21, 1993.
EX-3.(i).2 Certificate of Amendment to the Restated Certificate of
Incorporation of Interstate Power Company, effective
March 4, 1997.
EX-10.1 P Gas Portfolio Management and Sales Contract between
Interstate Power Company and MidCon Gas Services Corp.
filed under Form SE as confidential and non-public
EX-10.2 Mid-Continent Area Power Pool (MAPP) Restated Agreement
dated January 12, 1996
EX-10.3 Mid-Continent Area Power Pool (MAPP) Center Agreement
dated December 2, 1996
EX-12 Statement re Computation of Ratios
EX-13 The Company's 1996 Annual Report to Stockholders
EX-23 Consent of Independent Auditors
EX-27 Financial Data Schedule (required for electronic filing
only in accordance with Item 601 (c) (1) of Regulation
S-K)
EX-99.1 Unaudited Pro Forma Combined Financial Information of
Interstate Energy Corporation