Energy Company Comments on Proposed Public Utility Accounting Regulations

[1] Alliant Energy Corporation hereby respectfully submits comments in response to the request for comments within the preamble to the Proposed Regulations relating to the application of the normalization rules to the provision to the utility customers of reserves for accumulated deferred income taxes ("ADFIT"), excess deferred federal income taxes ("EDFIT") and accumulated deferred investment tax credits ("ADITC") associated with electric transmission property upon the formation of rate-regulated transmission partnerships.

[2] Alliant Energy Corporation is a registered public utility holding company serving 958,052 electric utility customers in Iowa, southern and central Wisconsin, northern and northwestern Illinois and southern Minnesota at December 31, 2002. The primary first tier subsidiaries of Alliant Energy Corporation include two rate-regulated utilities: Interstate Power & Light (IP&L) and Wisconsin Power & Light (WP&L). WP&L and several other rate-regulated utilities became members of American Transmission Company, LLC ("ATC") on January 1, 2001, upon the transfer of its transmission assets to ATC in exchange for equity. IP&L is considering a contribution of transmission assets in exchange for a partnership interest in TRANSLink in 2003.

Proper Disposition of Tax Reserves for Regulated Transmission Assets

[3] The fact pattern of WP&L and ATC, a fact pattern which we expect will be common across the industry in coming years, is as follows:

• The partnership or limited liability company is created solely as a transmission company.

• Its owners contribute transmission assets currently subject to rate-of-return, cost-of-service regulation by a state public utility commission on a bundled basis with generation and distribution assets.

• The Federal Energy Regulatory Commission regulates the partnership's rates on a cost-of-service, rate-of-return basis.

• The transaction is subject to section 721 of the Code.

• The transmission assets are public utility property before the transfer and, but for the lack of explicit published guidance, are considered public utility property after the transfer.

• After the asset transfer, the transmission assets are no longer included in the rate base of the transferee and the associated depreciation is no longer included in the cost of service of the transferee. Instead, the transferee includes transmission charges of the transferor in its cost of service. This is consistent with the historic practice of including transmission charges of unrelated companies in cost of service.

• Prior to the transfer of the transmission assets, the transferor accounted for EDFIT associated with the transmission assets in accordance with the average rate assumption method and accounted for ADITC associated with such property in accordance with former section 46(f)(2) ("Option 2").