Welcome to the Department of Justice, Iowa Attorney General Tom Miller

For immediate release: Wednesday, September 18, 2002.

Contact: John R. Perkins, Consumer Advocate, 515-281-5984

Consumer Advocate Seeks $22 Million Cut in Interstate Power Electric Rates -- Instead of $82 Million Increase Sought by the Company

DES MOINES. Iowa's Office of Consumer Advocate has filed a petition asking the Iowa Utilities Board to reduce electric rates for Interstate Power & Light Company by $22.4 million annually instead of permitting an increase of $82 million annually as requested by the company.

The Board has scheduled a hearing to begin on October 22, and a decision is expected April 15, 2003 that will determine Interstate's electric rates for customers in Cedar Rapids, Marshalltown, Ottumwa, Mason City, Fort Madison, Keokuk and many other Iowa communities.

Interstate filed an $82 million rate increase request on March 29, 2002. On July 29, the Office of Consumer Advocate filed for a $6.3 million annual reduction. The OCA filed an amended petition late yesterday calling for the deeper rate cuts totaling $22.4 million, based on information from Interstate's parent company, Alliant Energy Corporation.

Alliant Energy Corporation is a holding company based in Madison, Wisconsin. It has several wholly-owned subsidiary companies, two of which are Interstate Power & Light, and Alliant Energy Resources. The OCA recently discovered that the parent company had "fully and unconditionally" guaranteed $952 million in long-term debt borrowed by Alliant Energy Resources - which is not a regulated utility like Interstate. Alliant Energy Resources is a subsidiary that has numerous business investments throughout the world, including a resort development in Mexico, stock holdings in McLeodUSA, and investments in utilities markets in Brazil, among other investments.

John R. Perkins, the Consumer Advocate, said the effect of Alliant Energy Corporation's full and unconditional guarantee of the debt of its subsidiary Alliant Energy Resources is to use the assets, revenue stream, and net worth of Interstate to support or guarantee the repayment of the debt of Alliant Energy Resources. According to information Interstate provided OCA in the rate cases pending before the IUB, Alliant Energy Resources lost $28.5 million for the first half of 2002, while Interstate had a net income of almost $27 million for the same first half.

In written testimony filed with the amended rate reduction petition, OCA expert Sheila Parker concluded that the holding company's reliance on Interstate's assets to support this $952 million loan must be reflected in setting electric rates.

Perkins said: "Iowa has a long history of recognizing the impact of a holding company's actions in order to protect the interests of Iowa's electric consumers. When a utility holding company such as Alliant Energy Corporation uses the assets of its regulated subsidiary, Interstate, to guarantee debts of its unregulated subsidiary, Alliant Energy Resources, the use of those assets must be accounted for in the rates charged to customers."

Perkins further noted that in response to OCA's earlier filing seeking a $6 million dollar reduction, Eliot Protsch, president of Interstate, issued a press release on July 29, 2002, alleging OCA did not understand financial markets had changed and that it was difficult for Interstate to raise capital to fund improvements. Perkins said: "Mr. Protsch's observation supports our view that Alliant Energy Corporation's reliance on Interstate's assets to guarantee any default on the debts of its subsidiary, Alliant Energy Resources, may be a problem that affects Interstate's Iowa electric customers. This should be reflected in the rates paid by Iowans, and we argue that rates should be reduced."

The Utilities Board regulates public utility rates in Iowa, and the Office of Consumer Advocate represents the interests of utility customers and the public before the Utilities Board. The OCA is a division of the Iowa Department of Justice.

Some of the communities located in Interstate's north and southeast rate zones are Cedar Rapids, Marshalltown, Marion, Boone, Keokuk, and Fort Madison. Communities located in Interstate's other zones include Burlington, Ottumwa, Newton, Grinnell, Creston, Dubuque, Clinton, and Mason City.

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