Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This MDA includes information relating to Alliant Energy, IPL and WPL, as well as AEF and Corporate Services. Where appropriate, information relating to a specific entity has been segregated and labeled as such. The following discussion and analysis should be read in conjunction with the Financial Statements and Notes included in this report. Unless otherwise noted, all “per share” references in MDA refer to earnings per diluted share. In addition, this MDA includes certain financial information for 2019 compared to 2018. Refer to MDA in the combined 2018 Form 10-K for details on certain financial information for 2018 compared to 2017.

OVERVIEW

Alliant Energy’s mission is to deliver energy solutions and exceptional service that its customers and communities count on - safely, efficiently and responsibly. The mission is supported by a strategy focused on meeting the evolving expectations of customers while providing an attractive return for investors. This strategy includes the following key elements:

Providing affordable energy solutions to customers - Alliant Energy’s strategy focuses on affordable energy solutions that support retention and growth of its existing customers and attract new customers to its service territories.

Key Highlights in 2019 and 2020 -

•	WPL maintaining flat base rates in 2019 and 2020 by utilizing Federal Tax Reform benefits and lower fuel costs.

•	IPL’s rate settlement, which will provide $35 million of billing credits to Iowa electric customers starting in 2020.

•	Significant fuel cost reductions achieved in 2019 and further reductions in fuel cost expected in 2020 as a result of expansion of renewable generation and operating highly efficient, low cost natural gas facilities.

•	IPL’s energy efficiency plan for 2019 through 2023 approved by the IUB in March 2019, which provides direct financial savings to customers and provides cost-effective options to help electric and gas customers reduce their energy usage.

Making customer-focused investments - Alliant Energy’s strategy drives a capital allocation process focused on: 1) transitioning its generation portfolio to meet the growing interest of customers for cleaner sources of energy, 2) upgrading its electric and gas distribution systems to strengthen safety and resiliency, as well as enable distributed energy solutions in its service territories, and 3) enhancing its customers’ experience with evolving technology and greater flexibility.

Key Highlights in 2019 and 2020 (refer to “Customer Investments” for details) -

•	Completion of construction of IPL’s new wind projects: Upland Prairie (303 MW in March 2019), English Farms (172 MW in March 2019) and Whispering Willow North (201 MW in January 2020).

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•	Progress made with the construction of IPL’s and WPL’s remaining wind projects (approximately 480 MW) that are expected to be placed in service in 2020.

•	Expansion of natural gas-fired generation with the construction of WPL’s 730 MW West Riverside facility, which is expected to be completed in the first half of 2020.

•	WPL’s announcement of plans for development and acquisition of up to 1,000 MW of solar generation by 2023.

•	WPL’s planned expansion of its gas distribution system in Western Wisconsin in 2020.

•	Installation of a selective catalytic reduction system at IPL’s Ottumwa Unit 1 in 2019.

•	Completed implementation of advanced metering infrastructure for IPL customers in 2019.

Growing customer demand - Alliant Energy’s strategy supports expanding electric and gas usage in its service territories by promoting electrification initiatives and economic development in the communities it serves.

Key Highlights in 2019 -

•

Progress with certifying development-ready sites throughout Iowa and Wisconsin, including finalizing certification of the Prairie View Industrial Center Super Park, a 730-acre rail-served ready-to-build manufacturing and industrial site in Ames, Iowa, which is in close proximity to the regional airport and interstate freeways and accesses IPL’s electric services. In addition, the Beaver Dam Commerce Park was certified, which is a 520-acre ready-to-build manufacturing and industrial site in Beaver Dam, Wisconsin, with access to commercial and freight airports, interstate freeways and WPL’s electric services.

RESULTS OF OPERATIONS

Results of operations include financial information prepared in accordance with GAAP as well as utility electric margins and utility gas margins, which are not measures of financial performance under GAAP. Utility electric margins are defined as electric revenues less electric production fuel, purchased power and electric transmission service expenses. Utility gas margins are defined as gas revenues less cost of gas sold. Utility electric margins and utility gas margins are non-GAAP financial measures because they exclude other utility and non-utility revenues, other operation and maintenance expenses, depreciation and amortization expenses, and taxes other than income tax expense.

Management believes that utility electric and gas margins provide a meaningful basis for evaluating and managing utility operations since electric production fuel, purchased power and electric transmission service expenses and cost of gas sold are generally passed through to customers, and therefore, result in changes to electric and gas revenues that are comparable to changes in such expenses. The presentation of utility electric and gas margins herein is intended to provide supplemental information for investors regarding operating performance. These utility electric and gas margins may not be comparable to how other entities define utility electric and gas margin. Furthermore, these measures are not intended to replace operating income as determined in accordance with GAAP as an indicator of operating performance.

Additionally, the table below includes EPS for Utilities and Corporate Services, ATC Holdings, and Non-utility and Parent, which are non-GAAP financial measures. Alliant Energy believes these non-GAAP financial measures are useful to investors because they facilitate an understanding of segment performance and trends, and provide additional information about Alliant Energy’s operations on a basis consistent with the measures that management uses to manage its operations and evaluate its performance.

Financial Results Overview - Alliant Energy’s net income and EPS attributable to Alliant Energy common shareowners were as follows (dollars in millions, except per share amounts):

	2019								2018
	Income (Loss)				EPS				Income (Loss)				EPS
Utilities and Corporate Services		$529.5				$2.22				$485.7				$2.08
ATC Holdings	33.6				0.14				28.4				0.12
Non-utility and Parent	(5.9		)		(0.03		)		(2.0		)		(0.01		)
Alliant Energy Consolidated		$557.2				$2.33				$512.1				$2.19

Alliant Energy’s Utilities and Corporate Services income increased $44 million in 2019 compared to 2018. The increase was primarily due to higher earnings resulting from IPL’s and WPL’s increasing rate base. This item was partially offset by higher depreciation expense and higher interest expense.

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Operating income and a reconciliation of utility electric and gas margins to the most directly comparable GAAP measure, operating income, was as follows (in millions):

	Alliant Energy								IPL								WPL
	2019				2018				2019				2018				2019				2018
Operating income		$777.7				$694.4				$402.8				$350.8				$347.2				$312.9
Electric utility revenues		$3,063.6				$3,000.3				$1,781.2				$1,731.1				$1,282.4				$1,269.2
Electric production fuel and purchased power expenses	(776.7		)		(855.0		)		(434.5		)		(469.0		)		(342.2		)		(386.0		)
Electric transmission service expense	(481.4		)		(495.7		)		(340.2		)		(352.9		)		(141.2		)		(142.8		)
Utility Electric Margin (non-GAAP)	1,805.5				1,649.6				1,006.5				909.2				799.0				740.4
Gas utility revenues	455.2				446.6				264.2				266.2				191.0				180.4
Cost of gas sold	(221.7		)		(232.3		)		(119.9		)		(129.6		)		(101.8		)		(102.7		)
Utility Gas Margin (non-GAAP)	233.5				214.3				144.3				136.6				89.2				77.7
Other utility revenues	46.5				48.0				44.2				45.0				2.3				3.0
Non-utility revenues	82.4				39.6				—				—				—				—
Other operation and maintenance expenses	(712.2		)		(645.8		)		(404.6		)		(402.6		)		(260.9		)		(241.6		)
Depreciation and amortization expenses	(567.2		)		(506.9		)		(326.7		)		(283.5		)		(235.6		)		(219.4		)
Taxes other than income tax expense	(110.8		)		(104.4		)		(60.9		)		(53.9		)		(46.8		)		(47.2		)
Operating income		$777.7				$694.4				$402.8				$350.8				$347.2				$312.9

Operating Income Variances - Variances between periods in operating income for 2019 compared to 2018 were as follows (in millions):

	Alliant Energy				IPL				WPL
Total higher utility electric margin variance (Refer to details below)		$156				$97				$59
Total higher utility gas margin variance (Refer to details below)	19				8				12
Higher non-utility revenues due to AEF’s new acquisitions	42				—				—
Total higher other operation and maintenance expenses variance (Refer to details below)	(66		)		(2		)		(19		)
Higher depreciation and amortization expense, primarily due to additional plant in service in 2018 and 2019, and new IPL depreciation rates effective May 2018.	(60		)		(43		)		(16		)
Other	(8		)		(8		)		(2		)
		$83				$52				$34

Electric and Gas Revenues and Sales Summary - Electric and gas revenues (in millions), and MWh and Dth sales (in thousands), were as follows:

	Electric														Gas
	Revenues								MWhs Sold						Revenues								Dths Sold
	2019				2018				2019			2018			2019				2018				2019			2018
Alliant Energy
Retail		$2,751.2				$2,687.8			25,121			25,684				$408.4				$402.3			55,850			53,389
Sales for resale	250.2				259.2				6,594			5,804			N/A				N/A				N/A			N/A
Transportation/Other	62.2				53.3				79			96			46.8				44.3				97,135			90,357
		$3,063.6				$3,000.3			31,794			31,584				$455.2				$446.6			152,985			143,746
IPL
Retail		$1,615.7				$1,578.2			14,142			14,670				$235.9				$238.4			29,498			28,651
Sales for resale	128.0				117.3				4,479			2,980			N/A				N/A				N/A			N/A
Transportation/Other	37.5				35.6				36			37			28.3				27.8				38,323			37,899
		$1,781.2				$1,731.1			18,657			17,687				$264.2				$266.2			67,821			66,550
WPL
Retail		$1,135.5				$1,109.6			10,979			11,014				$172.5				$163.9			26,352			24,738
Sales for resale	122.2				141.9				2,115			2,824			N/A				N/A				N/A			N/A
Transportation/Other	24.7				17.7				43			59			18.5				16.5				58,812			52,458
		$1,282.4				$1,269.2			13,137			13,897				$191.0				$180.4			85,164			77,196

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Sales Trends and Temperatures - Alliant Energy’s retail electric sales volumes decreased 2% in 2019 primarily due to the impact of lower residential and commercial sales due to cooler summer temperatures during 2019 compared to 2018 and lower demand from IPL’s industrial customers due to customer operations and general economic conditions.

Estimated increases to electric and gas margins from the impacts of temperatures were as follows (in millions):

	Electric Margins								Gas Margins
	2019				2018				2019				2018
IPL		$10				$20				$5				$1
WPL	4				12				3				2
Total Alliant Energy		$14				$32				$8				$3

Utility Electric Margin Variances - The following items contributed to increased (decreased) utility electric margins for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Impact of IPL’s retail electric interim and final base rate increases effective April 2019 and May 2018, respectively (a)		$102				$102				$—
Higher margins at WPL from earning on increasing rate base for rates effective January 2019	58				—				58
Higher revenues at WPL due to changes in the amounts recorded in 2019 and 2018 for WPL’s earnings sharing mechanism (2018 reflected higher sharing of WPL’s earnings than in 2019)	15				—				15
Higher revenues at IPL related to changes in recovery amounts for energy efficiency costs through the energy efficiency rider (offset by changes in energy efficiency expense)	10				10				—
Higher revenues at IPL due to changes in electric tax benefit rider credits on customers’ bills (offset by changes in income tax expense)	9				9				—
Estimated changes in sales volumes caused by temperatures	(18		)		(10		)		(8		)
Other (partially due to lower industrial sales at IPL)	(20		)		(14		)		(6		)
		$156				$97				$59

(a)

IPL’s interim retail electric base rate increase effective April 1, 2019 was reduced by anticipated production tax credits for IPL’s new wind generation placed in service in March 2019. This reduction in revenue requirement is expected to be offset by a reduction in income tax expense resulting from production tax credits recognized from the new wind generation. Additionally, the interim retail electric base rate increase was reduced by $8 million as a result of the partial refund agreed to as part of the rate review settlement. Refer to Note 2 for further discussion.

Utility Gas Margin Variances - The following items contributed to increased (decreased) utility gas margins for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Impact of IPL’s retail gas final base rate increase effective January 2019		$9				$9				$—
Higher margins at WPL from earning on increasing rate base for rates effective January 2019	9				—				9
Estimated changes in sales volumes caused by temperatures	5				4				1
Lower revenues at IPL related to changes in recovery amounts for energy efficiency costs through the energy efficiency rider (offset by changes in energy efficiency expense)	(7		)		(7		)		—
Other	3				2				2
		$19				$8				$12

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Other Operation and Maintenance Expenses Variances - The following items contributed to (increased) decreased other operation and maintenance expenses for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Higher operation expense at AEF due to new acquisitions		($39	)			$—				$—
Higher energy efficiency cost recovery amortizations at WPL pursuant to authorization from PSCW rate order effective January 2019	(15		)		—				(15		)
Higher performance compensation expense	(9		)		(5		)		(4		)
Higher energy efficiency expense at IPL (offset by higher electric revenues and lower gas revenues)	(2		)		(2		)		—
Other	(1		)		5				—
		($66	)			($2	)			($19	)

Other Income and Deductions Variances - The following items contributed to (increased) decreased other income and deductions for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Higher interest expense primarily due to higher average outstanding long-term debt balances		($26	)			($8	)			($4	)
Lower equity income due to decreased earnings from non-utility wind farm resulting from an acceleration of earnings in 2018 due to Federal Tax Reform (Refer to Note 6 for more details)	(10		)		—				—
Higher equity income due to increased earnings from ATC resulting from return on equity reserve adjustments recorded in 2019 related to the FERC decision regarding MISO transmission owners’ authorized return on equity (Refer to Note 17(h) for more details)	6				—				—
Higher AFUDC primarily due to changes in CWIP balances related to IPL’s new wind generation and WPL’s West Riverside Energy Center	17				7				10
Other	(4		)		(4		)		(2		)
		($17	)			($5	)			$4

Income Taxes - Refer to Note 12 for details of effective income tax rates.

Other Future Considerations - In addition to items discussed in this report, the following key items could impact Alliant Energy’s, IPL’s and WPL’s future financial condition or results of operations:

•

Financing Plans - Alliant Energy currently expects to issue up to $250 million of common stock in 2020 through the equity forward agreements that were executed in November 2019 and its Shareowner Direct Plan. IPL, WPL and AEF currently expect to issue up to $300 million, $350 million and $300 million of long-term debt in 2020, respectively. IPL, WPL and AEF have $200 million, $150 million and $300 million of long-term debt maturing in 2020, respectively.

•

Common Stock Dividends - Alliant Energy announced a 7% increase in its targeted 2020 annual common stock dividend to $1.52 per share, which is equivalent to a quarterly rate of $0.38 per share, beginning with the February 2020 dividend payment. The timing and amount of future dividends is subject to an approved dividend declaration from Alliant Energy’s Board of Directors, and is dependent upon earnings expectations, capital requirements, and general financial business conditions, among other factors.

•

Higher Earnings on Increasing Rate Base - Alliant Energy and IPL currently expect an increase in earnings in 2020 compared to 2019 due to impacts from increasing revenue requirements from IPL’s retail electric and gas rate reviews (2020 Forward-looking Test Period). IPL’s and WPL’s 2020 increased revenue requirements are expected to be offset by returning to customers a portion of the excess deferred income tax credits from Federal Tax Reform.

•	Depreciation and Amortization Expenses - Alliant Energy, IPL and WPL currently expect an increase in depreciation and amortization expenses in 2020 compared to 2019 due to property additions, including IPL’s expansion of wind generation and WPL’s West Riverside natural gas-fired EGU.

•	Interest Expense - Alliant Energy currently expects interest expense to increase in 2020 compared to 2019 primarily due to financings completed in 2019 and planned in 2020 as discussed above.

•	Allowance for Funds Used During Construction - Alliant Energy currently expects AFUDC to decrease in 2020 compared to 2019 primarily due to decreased CWIP balances related to IPL’s wind generation that was placed in service in 2019 and is expected to be placed in service in 2020, and WPL’s West Riverside Energy Center, which is currently expected to be placed in service in the first half of 2020.

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•	Pending Refunds Related to Transmission Expense - Alliant Energy currently expects to receive refunds related to the MISO transmission owner return on equity complaints later in 2020. These refunds are expected to be provided to IPL and WPL customers without an expected impact to earnings.

CUSTOMER INVESTMENTS

Alliant Energy’s, IPL’s and WPL’s strategic priorities include making significant customer-focused investments toward cleaner energy and sustainable customer solutions. These priorities include:

Environmental Stewardship

Alliant Energy’s environmental stewardship is focused on meeting its customers’ energy needs in an economical, efficient and sustainable manner. Alliant Energy proactively considers future environmental compliance requirements and proposed regulations in its planning, decision-making, construction and ongoing operations activities. Alliant Energy is focused on executing a long-term strategy to deliver reliable and affordable energy with lower emissions independent of changing policies and political landscape. To achieve these long-term goals, Alliant Energy will transition away from coal-fired EGUs and incorporate more renewable energy, energy efficiency, demand response, highly-efficient natural gas-fired EGUs and other emerging technologies such as energy storage. Alliant Energy’s voluntary environmental-related goals and achievements include the following:

•	Reduce air emissions for sulfur dioxide by 90%, nitrogen oxide by 80% and mercury by 90% from 2005 levels, which it achieved in 2019.

•	Reduce CO2 emissions from its fossil-fueled generation 40% by 2030 and 80% by 2050 from 2005 levels.

•	Reduce water supply needs from its fossil-fueled generation 75% by 2030 from 2005 levels.

•	Renewables of at least 30% of Alliant Energy’s overall energy mix by 2030.

•	Eliminate existing coal-fired EGUs from Alliant Energy’s overall energy mix by 2050.

Renewable Generation

Alliant Energy’s cleaner energy strategy includes the planned development and acquisition of renewable energy, including wind and solar generation. Current wind generation plans include adding up to approximately 1,200 MW in aggregate (approximately 1,000 MW at IPL and approximately 200 MW at WPL) from 2018 through 2020. Current solar generation plans include adding up to approximately 1,000 MW at WPL by the end of 2023. Alliant Energy, IPL and WPL continue to evaluate additional opportunities to add more renewable generation. Estimated capital expenditures for the planned renewable projects for 2020 through 2023 are included in the “Renewable projects” line in the construction and acquisition expenditures table in “Liquidity and Capital Resources.”

IPL’s Expansion of Wind Generation - In 2016 and 2018, IPL received approvals from the IUB for advance rate-making principles for up to 1,000 MW of new wind generation. IPL currently has on-going, new wind generation development utilizing the following sites:

				Actual/Expected
Wind Site		Nameplate Capacity		In-service Date		Location
Upland Prairie		303 MW		March 2019		Clay and Dickinson Counties, Iowa
English Farms		172 MW		March 2019		Poweshiek County, Iowa
Whispering Willow Expansion		201 MW		January 2020		Franklin County, Iowa
Golden Plains		Up to 200 MW		2020		Winnebago and Kossuth Counties, Iowa
Richland		Up to 130 MW		2020		Sac County, Iowa

WPL’s Expansion of Wind Generation - In January 2019, WPL received final approval from the PSCW to own a 150 MW wind project being developed in Kossuth County, Iowa. In October 2019, WPL purchased the development assets related to this project, including land rights and permits. Construction began in 2019 and the wind farm is currently expected to be placed in service in 2020. In addition, WPL acquired a partial ownership interest in the assets of the FWEC wind farm located in Wisconsin (59 MW) in 2018, pursuant to approvals from the PSCW and FERC.

WPL’s Solar Generation - WPL currently expects to file the first CA with the PSCW for a portion of the planned development of up to 1,000 MW of new solar generation in the first half of 2020. WPL expects that the new solar generation will qualify for 30% investment tax credits.

Complementary Generation Investments

WPL’s Construction of West Riverside Natural Gas-fired Generating Station - In 2016, WPL received an order from the PSCW authorizing WPL to construct an approximate 730 MW natural gas-fired combined-cycle EGU in Beloit, Wisconsin,

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referred to as West Riverside. WPL’s construction of West Riverside began in 2016 and the EGU is currently expected to be completed in the first half of 2020. WPL’s estimated portion of capital expenditures is currently expected to be approximately $600 million. The capital expenditures include costs to construct the EGU and a pipeline to supply natural gas to the EGU, and exclude transmission network upgrades and AFUDC. West Riverside replaces energy and capacity being eliminated with the retirements of various EGUs.

WPL entered into agreements with neighboring utilities and electric cooperatives that provide each of them options to purchase a partial ownership interest in West Riverside. The purchase price for such options is based on the ownership interest acquired and the net book value of West Riverside on the date of the purchase. The exercise of the WPSC and MGE options is subject to PSCW approval, and the timing and ownership amounts of the options are as follows:

Counterparty		Option Amount		Option Timing
Wisconsin Public Service Corporation (WPSC)		Up to 200 MW (no more than 100 MW to be acquired in first two years) (a)		Up to four years following the in-service date
Madison Gas and Electric Company (MGE)		Up to 50 MW (no more than 25 MW to be acquired in first two years)		Up to five years following the in-service date
Electric cooperatives		Approximately 60 MW		Exercised January 2018

(a)	If WPSC exercises its options, WPL may exercise reciprocal options, subject to approval by the PSCW, to purchase up to 200 MW of any natural-gas combined-cycle EGU that either WPSC or its affiliated utility, Wisconsin Electric Power Company, places in service within 10 years of the date West Riverside is placed in service.

Environmental Controls Projects - Alliant Energy’s strategy to transition its generation portfolio to cleaner sources of energy includes adding environmental controls at newer, larger and more efficient coal-fired EGUs to continue producing affordable energy for customers and to benefit the environment. In 2019, IPL completed the installation of a selective catalytic reduction system at Ottumwa Unit 1, which supports compliance obligations under the Cross-State Air Pollution Rule and IPL’s Consent Decree.

Plant Retirements and Fuel Switching - The current strategy includes the retirement, or fuel switch from coal to natural gas, of older, smaller and less efficient EGUs in the next several years. Alliant Energy, IPL and WPL are working with MISO, state regulatory commissions and other regulatory agencies, as required, to determine the timing of these actions, which are subject to change depending on operational, regulatory, market and other factors. Refer to Note 17(e) for discussion of IPL’s requirements to fuel switch or retire certain EGUs under a Consent Decree.

Other Customer-focused Investments

Electric and Gas Distribution Systems - Customer-focused investments include replacing, modernizing and upgrading infrastructure in the electric and gas distribution systems. Electric system investments will focus on areas such as improving resiliency with more underground electric distribution and enabling distributed energy solutions with higher capacity lines. Gas system investments will focus on pipeline replacement to ensure safety and pipeline expansion to support reliability and economic development. Estimated capital expenditures for expected and current electric and gas distribution infrastructure projects for 2020 through 2023 are included in the “Electric and gas distribution systems” lines in the construction and acquisition expenditures table in “Liquidity and Capital Resources.”

Gas Pipeline Expansion - IPL and WPL currently expect to make investments to extend various gas distribution systems to provide natural gas to unserved or underserved areas in their service territories. In September 2019, WPL filed a CA application with the PSCW for approval to expand its gas distribution systems in Western Wisconsin in 2020. Estimated capital expenditures for this project for 2020 are included in the “Gas distribution systems” line in the construction and acquisition expenditures table in “Liquidity and Capital Resources.”

Gas Pipeline Safety - In October 2019, the Pipeline and Hazardous Materials Safety Administration published a final rule that updates safety requirements for gas transmission pipelines. Procedures must be developed by July 2021, and remediation efforts must be completed by July 2035. In anticipation of these rule changes, Alliant Energy, IPL and WPL have been proactively replacing certain of IPL’s transmission pipelines and making modifications to certain of WPL’s transmission pipelines, and are evaluating the impact of this final rule on their financial condition and results of operations.

Advanced Metering Infrastructure (AMI) - In 2019, IPL completed the installation of AMI in its electric and gas service territories in Iowa. AMI is a system of meters, communications networks and data management systems that enables two-way communication between utilities and its customers. AMI allows for remote meter reading, automatic outage notification, and remote disconnects and reconnects. AMI technology is expected to enhance the communication infrastructure in Alliant

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Energy’s service territories, improve customer service, enhance energy management initiatives and provide operational savings through increased efficiencies.

Non-utility business - Alliant Energy continues to explore limited scope opportunities for growth outside of, but related to, Alliant Energy’s utility business. This non-utility strategy continues to evolve through exploration of modest opportunities that are accretive to earnings and cash flows within and outside of Alliant Energy’s service territories. In January and March 2019, AEF purchased two freight management companies. These non-utility acquisitions enhance Alliant Energy’s Transportation value to customers by adding customized supply chain solution capabilities to their portfolio of service offerings. Refer to Note 3 for details.

RATE MATTERS

Rate Reviews

Retail Base Rate Filings - Base rate changes reflect both returns on additions to infrastructure and recovery of changes in costs incurred or expected to be incurred. Given that a portion of the rate changes will offset changes in costs, revenues from rate changes should not be expected to result in an equal change in net income for either IPL or WPL.

IPL’s Retail Electric and Gas Rate Reviews (2020 Forward-looking Test Period) - In 2019, IPL filed retail electric and gas rate review requests with the IUB covering the 2020 forward-looking Test Period. In January 2020, IPL received an order from the IUB approving IPL’s proposed settlement for its retail electric rate review. Final retail electric rates are expected to be effective by the end of the first quarter of 2020. In December 2019, IPL received an order from the IUB approving IPL’s proposed settlement for its retail gas rate review. Final retail gas rates were effective January 10, 2020. Refer to Note 2 for details.

WPL’s Retail Electric and Gas Rate Review (2019/2020 Forward-looking Test Period) - In 2017, WPL filed retail electric and gas rate review requests with the PSCW covering the 2019/2020 forward-looking Test Period. In December 2018, WPL received an order from the PSCW approving WPL’s proposed settlement for its retail electric and gas rate reviews, effective January 1, 2019. Under the settlement, WPL’s retail electric and gas base rates will not change from current levels through the end of 2020. Retail electric revenue requirements resulting from increasing investments in rate base (including West Riverside) are offset by lower fuel-related costs and Federal Tax Reform refunds. Retail gas revenue requirements resulting from increasing investments in rate base are offset by Federal Tax Reform refunds. WPL’s settlement extends, with certain modifications, an earnings sharing mechanism through 2020. Under the earnings sharing mechanism, WPL will defer a portion of its earnings if its annual regulatory return on common equity exceeds 10.25% during the 2019/2020 Test Period. WPL must defer 50% of its excess earnings between 10.25% and 10.75%, and 100% of any excess earnings above 10.75%.

Planned Rate Review - WPL currently expects to make a retail electric and gas rate filing in the second quarter of 2020 for the 2021/2022 Test Period. The key drivers for the anticipated filing include recovery of capital projects, including investments in wind generation, and electric and gas distribution systems. Any rate changes granted from this request are expected to be effective on January 1, 2021. WPL currently expects a decision from the PSCW regarding this rate filing by the end of 2020.

Rate Review Details - Details related to IPL’s and WPL’s key jurisdictions were as follows:

			Average				Authorized Return		Common Equity
	Regulatory		Rate Base				on Common		Component of Regulatory		Effective
	Body		(in millions)				Equity (a)		Capital Structure		Date
IPL Retail Electric (2020 Test Period)
Marshalltown (b)	IUB			$559			11.00%		51.0%		(c)
Emery (b)	IUB		165				12.23%		51.0%		(c)
Whispering Willow - East (b)	IUB		163				11.70%		51.0%		(c)
Renewable energy rider (b)(d)	IUB		1,335				10.65%		51.0%		(c)
Other (b)	IUB		3,767				9.50%		51.0%		(c)
IPL Retail Gas (2020 Test Period) (b)	IUB		557				9.60%		51.0%		1/10/2020
IPL Wholesale Electric	FERC		119				10.97%		50.4%		1/1/2019
WPL Retail Electric and Gas
Electric (2020 Test Period) (e)	PSCW		3,955				10.00%		52.5%		1/1/2020
Gas (2020 Test Period) (e)	PSCW		387				10.00%		52.5%		1/1/2020
WPL Wholesale Electric	FERC		239				10.90%		55.0%		1/1/2019

(a)	Authorized returns on common equity may not be indicative of actual returns earned or projections of future returns.

(b)	Average rate base amounts reflect IPL’s allocated retail share of rate base and do not include CWIP, and were calculated using a forecasted 13-month average for the test period.

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(c)	Final retail electric rates are expected to be effective by the end of the first quarter of 2020.

(d)

Average rate base amounts recovered through IPL’s new renewable energy rider mechanism include construction costs incurred to fund IPL’s most recent 1,000 MW of new wind generation (11.00% return on common equity), production tax credit carryforwards for the most recent 1,000 MW of new wind generation (5.00% return on common equity) and certain transmission facilities classified as intangible assets (9.50% return on common equity).

(e)	Average rate base amounts reflect WPL’s allocated retail share of rate base and do not include CWIP or a cash working capital allowance, and were calculated using a forecasted 13-month average for the test period. The PSCW provides a return on selected CWIP and a cash working capital allowance by adjusting the percentage return on rate base.

WPL’s Retail Fuel-related Rate Filing (2020 Forward-looking Test Period) - In December 2019, WPL received an order from the PSCW authorizing an annual retail electric rate decrease of $29 million, or approximately 2%, effective January 1, 2020. The decrease primarily reflects a change in expected fuel-related costs in 2020. Fuel-related costs are subject to deferral if they are outside an annual bandwidth of plus or minus 2% of the approved annual forecasted fuel-related costs.

Other Rate Matters

Federal Tax Reform - Federal Tax Reform resulted in future benefits to customers as a result of remeasurement of accumulated deferred income taxes (approximately $350 million for IPL and $460 million for WPL of retail revenue requirement as of December 31, 2019). The majority of these benefits are subject to tax normalization rules (protected benefits), which limit the rate at which they can be passed on to their electric and gas customers.

For those benefits that were not limited by tax normalization rules (the non-protected benefits), IPL will begin providing $28 million of credits back to its retail electric and gas customers over a 12-month period beginning in 2020 when final rates go into effect. After returning these benefits to customers, IPL is not expected to have any significant remaining non-protected benefits as a result of the original Federal Tax Reform impacts.

WPL began providing non-protected benefits back to its retail electric and gas customers in 2019 and will continue into 2020. WPL expects to utilize approximately $72 million to help maintain base rates from current levels through 2020 and remaining non-protected benefits of approximately $118 million will be addressed in WPL’s future retail electric and gas rate reviews.

LIQUIDITY AND CAPITAL RESOURCES

Overview - Alliant Energy, IPL and WPL expect to maintain adequate liquidity to operate their businesses and implement their strategy as a result of operating cash flows generated by their utility business, and available capacity under a single revolving credit facility and IPL’s sales of accounts receivable program, supplemented by periodic issuances of long-term debt and Alliant Energy equity securities.

Liquidity Position - At December 31, 2019, Alliant Energy had $16 million of cash and cash equivalents, $663 million ($281 million at the parent company, $250 million at IPL and $132 million at WPL) of available capacity under the single revolving credit facility and $83 million of available capacity at IPL under its sales of accounts receivable program.

Capital Structure - Alliant Energy, IPL and WPL plan to maintain debt-to-total capitalization ratios that are consistent with investment-grade credit ratings. IPL and WPL expect to maintain capital structures consistent with their authorized levels. Alliant Energy expects to maintain consolidated debt at approximately 55% of total capital and consolidated preferred stock at less than 5% of total capital. These targets may be adjusted depending on subsequent developments and the impact on their respective weighted-average cost of capital and investment-grade credit ratings. Capital structures as of December 31, 2019 were as follows (Common Equity (CE); IPL’s Preferred Stock (PS); Long-term Debt (including current maturities) (LD); Short-term Debt (SD)):

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Alliant Energy, IPL and WPL intend to manage their capital structures and liquidity positions in such a way that facilitates their ability to raise funds reliably and on reasonable terms and conditions, while maintaining capital structures consistent with those approved by regulators. In addition to capital structures, other important factors used to determine the characteristics of future financings include financial coverage ratios, capital spending plans, regulatory orders and rate-making considerations, levels of debt imputed by rating agencies, market conditions, the impact of tax initiatives and legislation, and any potential proceeds from asset sales. The PSCW factors certain imputed debt adjustments in establishing a regulatory capital structure as part of WPL’s retail rate reviews. The IUB does not make any explicit adjustments for imputed debt in establishing capital ratios used in determining customer rates, although such adjustments are considered by IPL in recommending an appropriate capital structure. Debt imputations by rating agencies include pension and OPEB obligations and the sales of accounts receivable program.

Credit and Capital Markets - Alliant Energy, IPL and WPL maintain a single revolving credit facility to provide backstop liquidity to their commercial paper programs, and ensure a committed source of liquidity in the event the commercial paper market becomes disrupted. In addition, IPL maintains a sales of accounts receivable program as an alternative financing source.

Primary Sources and Uses of Cash - Alliant Energy’s most significant source of cash is from electric and gas sales to IPL’s and WPL’s customers. Cash from these sales reimburses IPL and WPL for prudently-incurred expenses to provide service to their utility customers and generally provides IPL and WPL a return of and a return on the assets used to provide such services. Capital needed to retire debt and fund capital expenditures related to large strategic projects is expected to be met primarily through external financings.

Cash Flows - Selected information from the cash flows statements was as follows (in millions):

	Alliant Energy								IPL								WPL
	2019				2018				2019				2018				2019				2018
Cash, cash equivalents and restricted cash, January 1		$25.5				$33.9				$12.4				$7.2				$9.2				$24.2
Cash flows from (used for):
Operating activities	660.4				527.7				172.9				(5.0		)		423.2				457.0
Investing activities	(1,287.3		)		(1,066.8		)		(667.0		)		(429.4		)		(557.2		)		(607.5		)
Financing activities	619.1				530.7				491.0				439.6				129.2				135.5
Net increase (decrease)	(7.8		)		(8.4		)		(3.1		)		5.2				(4.8		)		(15.0		)
Cash, cash equivalents and restricted cash, December 31		$17.7				$25.5				$9.3				$12.4				$4.4				$9.2

Operating Activities - The following items contributed to increased (decreased) operating activity cash flows for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Higher collections from IPL’s retail electric and gas base rate increases		$111				$111				$—
Changes in amounts refunded to customers related to Federal Tax Reform	54				15				39
Changes in income taxes paid/refunded	26				31				(43		)
Contributions to qualified defined benefit pension plans in 2019	(32		)		(16		)		(16		)
Changes in levels of production fuel	(27		)		(10		)		(17		)
Changes in interest payments	(20		)		(1		)		(4		)
Decreased collections from IPL’s and WPL’s retail customers caused by temperature impacts on electric and gas sales	(13		)		(6		)		(7		)
Timing of intercompany payments and receipts	—				37				4
Other (primarily due to other changes in working capital)	34				17				10
		$133				$178				($34	)

Income Tax Payments and Refunds - Income tax (payments) refunds, including refunds of alternative minimum tax credits, were as follows (in millions):

	2019				2018
IPL		$7				($24	)
WPL	(29		)		14
Other subsidiaries	43				5
Alliant Energy		$21				($5	)

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Alliant Energy, IPL and WPL currently do not expect to make any significant federal income tax payments through 2024 based on their current federal net operating loss and credit carryforward positions. While no significant federal income tax payments through 2024 are expected to occur, some tax payments and refunds may occur for state taxes and between consolidated group members (including IPL and WPL) under the tax sharing agreement between Alliant Energy and its subsidiaries. Refer to Note 12 for discussion of the carryforward positions.

Pension Plan Contributions - Alliant Energy, IPL and WPL currently expect to make $60 million, $19 million and $22 million of pension plan contributions in 2020, respectively, based on the funded status and assumed return on assets for each plan as of the December 31, 2019 measurement date. Refer to Note 13(a) for discussion of the current funded levels of pension plans.

Investing Activities - The following items contributed to increased (decreased) investing activity cash flows for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Changes in the amount of cash receipts on sold receivables		($192	)			($192	)			$—
Expenditures for new acquisitions at AEF in 2019	(13		)		—				—
Lower (higher) utility construction and acquisition expenditures (a)	30				(29		)		59
Other	(46		)		(17		)		(9		)
		($221	)			($238	)			$50

(a)	Largely due to lower expenditures related to WPL’s acquisition of a partial interest in the Forward Wind Energy Center in 2018, WPL’s West Riverside facility and IPL’s advanced metering infrastructure, partially offset by higher expenditures related to expansion of wind generation at IPL and WPL.

Construction and Acquisition Expenditures - Construction and acquisition expenditures and financing plans are reviewed, approved and updated as part of the financial planning process. Changes may result from a number of reasons, including regulatory requirements, changing legislation, not obtaining favorable and acceptable regulatory approval on certain projects, improvements in technology and improvements to ensure reliability of the electric and gas distribution systems. Alliant Energy, IPL and WPL have not yet entered into contractual commitments relating to the majority of their anticipated future construction and acquisition expenditures. As a result, they have some discretion with regard to the level and timing of these expenditures. The table below summarizes anticipated construction and acquisition expenditures (in millions). Cost estimates represent Alliant Energy’s, IPL’s and WPL’s portion of construction expenditures and exclude AFUDC and capitalized interest, if applicable. Such amounts do not include IPL’s expected $110 million buyout payment in September 2020 related to the DAEC PPA. Such estimates reflect reductions to Alliant Energy’s and WPL’s capital expenditures resulting from purchase options by certain electric cooperatives for a partial ownership interest in West Riverside; however, such estimates do not reflect any potential proceeds if neighboring utilities exercise options for a partial ownership in West Riverside. Refer to “Customer Investments” for further discussion of certain key projects impacting construction and acquisition plans related to the utility business.

	Alliant Energy													IPL													WPL
	2020			2021			2022			2023				2020			2021			2022			2023				2020			2021			2022			2023
Generation:
Renewable projects		$260			$110			$275			$390				$135			$—			$—			$—				$125			$110			$275			$390
Other	205			140			170			90				90			85			125			50				115			55			45			40
Distribution:
Electric systems	570			535			525			540				320			285			270			310				250			250			255			230
Gas systems	185			80			130			105				50			45			95			65				135			35			35			40
Other	205			180			235			245				30			10			10			15				15			10			20			15
		$1,425			$1,045			$1,335			$1,370				$625			$425			$500			$440				$640			$460			$630			$715

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Financing Activities - The following items contributed to increased (decreased) financing activity cash flows for 2019 compared to 2018 (in millions):

	Alliant Energy				IPL				WPL
Lower (higher) payments to retire long-term debt		$599				$350				($250	)
Higher net proceeds from common stock issuances	194				—				—
Higher (lower) net proceeds from issuance of long-term debt	(550		)		100				350
Net changes in the amount of commercial paper and other short-term borrowings outstanding	(130		)		(101		)		(18		)
Lower capital contributions from IPL’s and WPL’s parent company, Alliant Energy	—				(300		)		(75		)
Other	(25		)		2				(13		)
		$88				$51				($6	)

FERC and Public Utility Holding Company Act Financing Authorizations - Under the Public Utility Holding Company Act of 2005, FERC has authority over the issuance of utility securities, except to the extent that a public utility’s primary state regulatory commission has retained jurisdiction over such matters. FERC currently has authority over the issuance of securities by IPL. FERC does not have authority over the issuance of securities by Alliant Energy, WPL, AEF or Corporate Services. In 2019, IPL received authorization from FERC to issue securities in 2020 and 2021 as follows (in millions):

	Initial Authorization and Remaining Capacity as of December 31, 2019
Long-term debt securities issuances in aggregate		$700
Short-term debt securities outstanding at any time (including borrowings from its parent)	400
Preferred stock issuances in aggregate	300

State Regulatory Financing Authorizations - In 2017, WPL received authorization from the PSCW to have up to $400 million of short-term borrowings and/or letters of credit outstanding at any time through the earlier of the expiration date of WPL’s credit facility agreement (including extensions) or December 2024. In October 2019, WPL received authorization from the PSCW to issue up to $350 million of long-term debt securities in aggregate in 2020.

Shelf Registrations - Alliant Energy, IPL and WPL have current shelf registration statements on file with the SEC for availability to issue unspecified amounts of securities through December 2020. Alliant Energy’s shelf registration statement may be used to issue common stock, debt and other securities. IPL’s and WPL’s shelf registration statements may be used to issue preferred stock and debt securities.

Common Stock Dividends - Payment of common stock dividends is subject to dividend declaration by Alliant Energy’s Board of Directors. Alliant Energy’s general long-term goal is to maintain a dividend payout ratio that is competitive with the industry average. Based on that, Alliant Energy’s goal is to maintain a dividend payout ratio of approximately 60% to 70% of consolidated earnings from continuing operations. IPL’s and WPL’s goal is to maintain dividend payout ratios of approximately 65% to 75%. Alliant Energy’s, IPL’s and WPL’s dividend payout ratios were 61%, 59% and 62% of their consolidated earnings from continuing operations in 2019, respectively. Refer to “Results of Operations” for discussion of expected common stock dividends in 2020.

Common Stock Issuances - Refer to Note 7 for discussion of common stock issuances by Alliant Energy in 2018 and 2019, and “Results of Operations” for discussion of expected issuances of common stock in 2020.

Short-term Debt - In 2017, Alliant Energy, IPL and WPL entered into a single revolving credit facility agreement, which expires in August 2023 and is discussed in Note 9(a). There are currently 13 lenders that participate in the credit facility, with respective commitments ranging from $20 million to $130 million. The credit facility includes a $100 million letter of credit commitment and $50 million swingline commitment, which are available to each of Alliant Energy, IPL and WPL. Subject to certain conditions, Alliant Energy, IPL and WPL may exercise one extension option, extending the maturity date by one year. The credit facility has a provision to expand the facility size up to an additional $300 million, for a potential total commitment of $1.3 billion, subject to lender approval for Alliant Energy and subject to lender and regulatory approvals for IPL and WPL.

The credit agreement contains customary events of default, including a cross-default provision that would be triggered if Alliant Energy or certain of its significant subsidiaries (including IPL and WPL) defaults on debt (other than non-recourse debt) totaling $100 million or more. IPL and WPL are subject to a similar cross-default provision with respect to their own respective consolidated debt. A default by Alliant Energy or its non-utility subsidiaries would not trigger a cross-default at IPL or WPL, nor would a default by either of IPL or WPL constitute a cross-default event for the other. If an event of default under the credit agreement occurs and is continuing, then the lenders may declare any outstanding obligations of the

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defaulting borrower under the credit agreement immediately due and payable. At December 31, 2019, Alliant Energy, IPL and WPL were in compliance with financial covenants of the credit agreement.

Long-term Debt - Refer to Note 9(b) for discussion of issuances and retirements of long-term debt in 2019 and “Results of Operations” for discussion of expected issuances of long-term debt in 2020. In 2018, IPL issued $500 million of 4.1% senior debentures (green bonds) due September 2028. In 2018, AEF entered into a $300 million variable-rate term loan credit agreement due April 2020. In 2018, AEF issued $400 million of 3.75% senior notes due June 2023 and $300 million of 4.25% senior notes due June 2028, and a portion of the proceeds from the issuances were used by AEF to retire its $500 million and $95 million variable-rate term loan credit agreements expiring in 2018. In addition, IPL retired $250 million of 7.25% senior debentures and $100 million of 5.875% senior debentures in 2018.

Impact of Credit Ratings on Liquidity and Collateral Obligations -

Ratings Triggers - The long-term debt of Alliant Energy and its subsidiaries is not subject to any repayment requirements as a result of explicit credit rating downgrades or so-called “ratings triggers.” However, Alliant Energy and its subsidiaries are parties to various agreements that contain provisions dependent on credit ratings. In the event of a significant downgrade, Alliant Energy or its subsidiaries may need to provide credit support, such as letters of credit or cash collateral equal to the amount of any exposure, or may need to unwind contracts or pay underlying obligations. In the event of a significant downgrade, management believes Alliant Energy, IPL and WPL have sufficient liquidity to cover counterparty credit support or collateral requirements under these various agreements. In addition, a downgrade in the credit ratings of Alliant Energy, IPL or WPL, could also result in them paying higher interest rates in future financings, reduce flexibility with future financing plans, reduce their pool of potential lenders, increase their borrowing costs under existing credit facilities or limit their access to the commercial paper market. Credit ratings and outlooks as of the date of this report are as follows:

		Standard & Poor’s Ratings Services		Moody’s Investors Service
Alliant Energy:	Corporate/issuer	A-		Baa2
	Commercial paper	A-2		P-2
	Senior unsecured long-term debt	N/A		N/A
	Outlook	Stable		Stable
IPL:	Corporate/issuer	A-		Baa1
	Commercial paper	A-2		P-2
	Senior unsecured long-term debt	A-		Baa1
	Preferred stock	BBB		Baa3
	Outlook	Stable		Stable
WPL:	Corporate/issuer	A		A3
	Commercial paper	A-1		P-2
	Senior unsecured long-term debt	A		A3
	Outlook	Stable		Stable

Standard & Poor’s Ratings Services and Moody’s Investors Service issued credit ratings of BBB+ and Baa2, respectively, for the senior notes issued by AEF in 2018 (with Alliant Energy as guarantor). Credit ratings are not recommendations to buy or sell securities and are subject to change, and each rating should be evaluated independently of any other rating. Each of Alliant Energy, IPL or WPL assumes no obligation to update their respective credit ratings. Refer to Note 15 for additional information on ratings triggers for commodity contracts accounted for as derivatives.

Off-Balance Sheet Arrangements -

Special Purpose Entities - IPL maintains a Receivables Agreement whereby it may sell its customer accounts receivables, unbilled revenues and certain other accounts receivables to a third party through wholly-owned and consolidated special purpose entities. The purchase commitment from the third party to which IPL sells its receivables expires in March 2021. In 2019 and 2018, IPL evaluated the third party that purchases IPL’s receivable assets under the Receivables Agreement and believes that the third party is a VIE. However, IPL concluded consolidation of the third party was not required.

In addition, IPL’s sales of accounts receivable program agreement contains a cross-default provision that is triggered if IPL or Alliant Energy incurs an event of default on debt totaling $100 million or more. If an event of default under IPL’s sales of accounts receivable program agreement occurs, then the counterparty could terminate such agreement. Refer to Note 5(b) for additional information regarding IPL’s sales of accounts receivable program.

Guarantees and Indemnifications - At December 31, 2019, various guarantees and indemnifications are outstanding related to Alliant Energy’s cash equity ownership interest in a non-utility wind farm and Alliant Energy’s and IPL’s prior divestiture activities. Refer to Note 17(d) for additional information.

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Certain Financial Commitments -

Contractual Obligations - Consolidated long-term contractual obligations as of December 31, 2019 were as follows (in millions):

Alliant Energy	2020				2021				2022				2023				2024				Thereafter				Total
Other purchase obligations (Note 17(b))		$499				$223				$160				$128				$84				$199				$1,293
Long-term debt maturities (Note 9(b))	657				8				333				408				509				4,325				6,240
Interest - long-term debt obligations	251				237				237				220				213				2,182				3,340
IPL’s DAEC PPA buyout payment (Note 2)	110				—				—				—				—				—				110
Capital purchase obligations (Note 17(a))	77				—				—				—				—				—				77
Operating leases (Note 10)	2				2				2				2				2				10				20
		$1,596				$470				$732				$758				$808				$6,716				$11,080

IPL	2020				2021				2022				2023				2024				Thereafter				Total
Other purchase obligations (Note 17(b))		$315				$126				$91				$80				$56				$99				$767
Long-term debt maturities (Note 9(b))	200				—				—				—				500				2,475				3,175
Interest - long-term debt obligations	133				125				125				125				125				1,276				1,909
IPL’s DAEC PPA buyout payment (Note 2)	110				—				—				—				—				—				110
Capital purchase obligations (Note 17(a))	60				—				—				—				—				—				60
Operating leases (Note 10)	1				1				1				1				1				7				12
		$819				$252				$217				$206				$682				$3,857				$6,033

WPL	2020				2021				2022				2023				2024				Thereafter				Total
Other purchase obligations (Note 17(b))		$176				$89				$63				$43				$23				$99				$493
Long-term debt maturities (Note 9(b))	150				—				250				—				—				1,550				1,950
Interest - long-term debt obligations	84				80				80				74				74				862				1,254
Capital purchase obligations (Note 17(a))	17				—				—				—				—				—				17
Operating leases (Note 10)	1				1				1				1				1				3				8
Finance lease - Sheboygan Falls Energy Facility (Note 10)	15				15				15				15				15				5				80
		$443				$185				$409				$133				$113				$2,519				$3,802

At December 31, 2019, Alliant Energy, IPL and WPL had no uncertain tax positions recorded as liabilities. Refer to Note 13(a) for anticipated pension and OPEB funding amounts, which are not included in the above tables. Refer to “Construction and Acquisition Expenditures” above for additional information on construction and acquisition programs. In addition, at December 31, 2019, there were various other liabilities included on the balance sheets that, due to the nature of the liabilities, the timing of payments cannot be estimated and are therefore excluded from the above tables.

OTHER MATTERS

Market Risk Sensitive Instruments and Positions - Primary market risk exposures are associated with commodity prices, investment prices and interest rates. Risk management policies are used to monitor and assist in mitigating these market risks and derivative instruments are used to manage some of the exposures related to commodity prices. Refer to Notes 1(h) and 15 for further discussion of derivative instruments, and Note 1(g) for details of utility cost recovery mechanisms that significantly reduce commodity risk.

Commodity Price - Alliant Energy, IPL and WPL are exposed to the impact of market fluctuations in the price and transportation costs of commodities they procure and market. Established policies and procedures mitigate risks associated with these market fluctuations, including the use of various commodity derivatives and contracts of various durations for the forward sale and purchase of these commodities. Exposure to commodity price risks in the utility businesses is also significantly mitigated by current rate-making structures in place for recovery of fuel-related costs as well as the cost of natural gas purchased for resale. IPL’s electric and gas tariffs and WPL’s wholesale electric and gas tariffs provide for subsequent monthly adjustments to their tariff rates for material changes in prudently incurred commodity costs. IPL’s and WPL’s rate mechanisms, combined with commodity derivatives, significantly reduce commodity risk associated with their electric and gas margins. WPL’s retail electric margins have modest exposure to the impact of changes in commodity prices due largely to the current retail recovery mechanism in place in Wisconsin for fuel-related costs.

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Investment Price - Alliant Energy, IPL and WPL are exposed to investment price risk as a result of their investments in securities, largely related to securities held by their pension and OPEB plans. Refer to Note 13(a) for details of the securities held by their pension and OPEB plans. Refer to “Critical Accounting Policies and Estimates” for the impact on retirement plan costs of changes in the rate of returns earned by plan assets.

Interest Rate - Alliant Energy, IPL and WPL are exposed to risk resulting from changes in interest rates associated with variable-rate borrowings. In addition, Alliant Energy and IPL are exposed to risk resulting from changes in interest rates on cash amounts outstanding under IPL’s sales of accounts receivable program. Assuming the impact of a hypothetical 100 basis point increase in interest rates on variable-rate borrowings and cash amounts outstanding under IPL’s sales of accounts receivable program at December 31, 2019, Alliant Energy’s, IPL’s and WPL’s annual pre-tax expense would increase by approximately $7 million, $0 and $2 million, respectively. Refer to Notes 5(b) and 9 for additional information on cash amounts outstanding under IPL’s sales of accounts receivable program, and short- and long-term variable-rate borrowings, respectively. Refer to “Critical Accounting Policies and Estimates” for the impacts of changes in discount rates on retirement plan obligations and costs.

New Accounting Standards - Refer to Note 1(o) for discussion of new accounting standards impacting Alliant Energy, IPL and WPL.

Critical Accounting Policies and Estimates - Alliant Energy’s, IPL’s and WPL’s financial statements are prepared in conformity with GAAP, which requires management to apply accounting policies, judgments and assumptions, and make estimates that affect results of operations and the amounts of assets and liabilities reported in the financial statements. The following accounting policies and estimates are critical to the business and the understanding of financial results as they require critical assumptions and judgments by management. The results of these assumptions and judgments form the basis for making estimates regarding the results of operations and the amounts of assets and liabilities that are not readily apparent from other sources. Actual financial results may differ materially from estimates. Management has discussed these critical accounting policies and estimates with the Audit Committee of the Board of Directors. Refer to Note 1 for additional discussion of accounting policies and estimates used in the preparation of the financial statements.

Contingencies - Assumptions and judgments are made each reporting period regarding the future outcome of contingent events. Loss contingency amounts are recorded for any contingent events for which the likelihood of loss is probable and able to be reasonably estimated based upon current available information. The amounts recorded may differ from actuals when the uncertainty is resolved. The estimates made in accounting for contingencies, and the gains and losses that are recorded upon the ultimate resolution of these uncertainties, could have a significant effect on results of operations and the amount of assets and liabilities in the financial statements. Note 17 provides further discussion of contingencies assessed at December 31, 2019, including impacts to Alliant Energy’s ATC Holdings equity earnings as a result of future changes in FERC’s evaluation of certain MISO return on equity complaints, various pending legal proceedings, guarantees and indemnifications that may have a material impact on financial condition and results of operations.

Regulatory Assets and Regulatory Liabilities - IPL and WPL are regulated by various federal and state regulatory agencies. As a result, they are subject to GAAP for regulated operations, which recognizes that the actions of a regulator can provide reasonable assurance of the existence of an asset or liability. Regulatory assets or regulatory liabilities arise as a result of a difference between GAAP and actions imposed by the regulatory agencies in the rate-making process. Regulatory assets generally represent incurred costs that have been deferred as such costs are probable of recovery in future customer rates. Regulatory liabilities generally represent obligations to make refunds to customers or amounts collected in rates for which the related costs have not yet been incurred. Regulatory assets and regulatory liabilities are recognized in accordance with the rulings of applicable federal and state regulators, and future regulatory rulings may impact the carrying value and accounting treatment of regulatory assets and regulatory liabilities.

Assumptions and judgments are made each reporting period regarding whether regulatory assets are probable of future recovery and regulatory liabilities are probable future obligations by considering factors such as regulatory environment changes, rate orders issued by the applicable regulatory agencies, historical decisions by such regulatory agencies regarding similar regulatory assets and regulatory liabilities, and subsequent events of such regulatory agencies. The decisions made by regulatory authorities have an impact on the recovery of costs, the rate of return on invested capital and the timing and amount of assets to be recovered by rates. A change in these decisions may result in a material impact on results of operations and the amount of assets and liabilities in the financial statements. Note 2 provides details of the nature and amounts of regulatory assets and regulatory liabilities assessed at December 31, 2019.

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Long-Lived Assets - Periodic assessments regarding the recoverability of certain long-lived assets are completed when factors indicate the carrying value of such assets may not be recoverable or such assets are planned to be sold. These assessments require significant assumptions and judgments by management. The long-lived assets assessed for impairment generally include certain assets within regulated operations that may not be fully recovered from IPL’s and WPL’s customers as a result of regulatory decisions in the future, and assets within non-utility operations that are proposed to be sold or are currently generating operating losses.

Regulated Operations - Certain long-lived assets within regulated operations are reviewed for possible impairment whenever events or changes in circumstances indicate all or a portion of the carrying value of the assets may be disallowed for rate-making purposes. If IPL or WPL is disallowed recovery of any portion of the carrying value of its regulated property, plant and equipment that is under construction, has been recently completed or is probable of being retired early, an impairment charge is recognized equal to the amount of the carrying value that was disallowed recovery. If IPL or WPL is disallowed a full or partial return on the carrying value of its regulated property, plant and equipment that is under construction, has been recently completed or is probable of being retired early, an impairment charge is recognized equal to the difference between the carrying amount of the asset and the present value of the future revenues expected from its regulated property, plant and equipment. Alliant Energy’s, IPL’s and WPL’s long-lived assets within their regulated operations that were assessed for impairment and plant abandonment in 2019 included IPL’s and WPL’s generating units subject to early retirement, and IPL’s analog electric meters retired in 2019.

Generating Units Subject to Early Retirement - Alliant Energy, IPL and WPL evaluate future plans for their electric generation fleet and have announced the early retirement of certain older and less-efficient EGUs. When it becomes probable that an EGU will be retired before the end of its useful life, Alliant Energy, IPL and WPL must assess whether the EGU meets the criteria to be considered probable of abandonment. EGUs that are considered probable of abandonment generally have material remaining net book values and are expected to cease operations in the near term significantly before the end of their original estimated useful lives. If an EGU meets such criteria to be considered probable of abandonment, Alliant Energy, IPL and WPL must assess the probability of full recovery of the remaining carrying value of such EGU. If it is probable that regulators will not allow full recovery of and a full return on the remaining net book value of the abandoned EGU, an impairment charge is recognized equal to the difference between the remaining carrying value and the present value of the future revenues expected from the abandoned EGU. Alliant Energy, IPL and WPL evaluated their EGUs that are subject to early retirement and determined that no EGUs meet the criteria to be considered probable of abandonment as of December 31, 2019.

IPL’s Analog Electric Meters - Upon completion of the installation of an advanced metering infrastructure program, IPL retired certain analog electric meters in 2019. As permitted in the recent IPL rate review, IPL will recover the remaining net book value of these meters but will not recover a return on these meters when final rates are implemented, which are expected by the end of the first quarter of 2020. Alliant Energy and IPL recorded a $4 million pre-tax charge in 2019 as a result of the decision not to allow a return on the remaining net book value of IPL’s analog electric meters.

Unbilled Revenues - Unbilled revenues are primarily associated with utility operations. Energy sales to individual customers are based on the reading of customers’ meters, which occurs on a systematic basis throughout the month. Amounts of energy delivered to customers since the date of the last meter reading are estimated at the end of each reporting period and the corresponding estimated unbilled revenue is recorded. The unbilled revenue is based on estimates of daily system demand volumes, customer usage by class, temperature impacts, line losses and the most recent customer rates. Such process involves the use of various judgments and assumptions and significant changes in these judgments and assumptions could have a material impact on results of operations. As of December 31, 2019, unbilled revenues related to Alliant Energy’s utility operations were $178 million ($96 million at IPL and $82 million at WPL).

Pensions and Other Postretirement Benefits - Alliant Energy, IPL and WPL sponsor various defined benefit pension and OPEB plans that provide benefits to a significant portion of their employees and retirees. Assumptions and judgments are made periodically to estimate the obligations and costs related to their retirement plans. There are many judgments and assumptions involved in determining an entity’s pension and other postretirement liabilities and costs each period including employee demographics (including life expectancies and compensation levels), discount rates, assumed rates of return and funding. Changes made to plan provisions may also impact current and future benefits costs. Judgments and assumptions are supported by historical data and reasonable projections and are reviewed at least annually. The following table shows the impacts of changing certain key actuarial assumptions discussed above (in millions):

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		Defined Benefit Pension Plans								OPEB Plans
Change in Actuarial Assumption		Impact on Projected Benefit Obligation at December 31, 2019				Impact on 2020 Net Periodic Benefit Costs				Impact on Accumulated Benefit Obligation at December 31, 2019				Impact on 2020 Net Periodic Benefit Costs
Alliant Energy
1% change in discount rate			$163				$10				$20				$2
1% change in expected rate of return		N/A				9				N/A				1
IPL
1% change in discount rate		76				5				8				1
1% change in expected rate of return		N/A				4				N/A				1
WPL
1% change in discount rate		72				5				8				1
1% change in expected rate of return		N/A				4				N/A				—

Income Taxes - Alliant Energy, IPL and WPL are subject to income taxes in various jurisdictions. Assumptions and judgments are made each reporting period to estimate income tax assets, liabilities, benefits and expenses. Judgments and assumptions are supported by historical data and reasonable projections. Significant changes in these judgments and assumptions could have a material impact on financial condition and results of operations. Alliant Energy’s and IPL’s critical assumptions and judgments for 2019 include estimates of qualifying deductions for repairs expenditures and allocation of mixed service costs due to the impact of Iowa rate-making principles on such property-related differences. Critical assumptions and judgments also include projections of future taxable income used to determine the ability to utilize net operating losses and credit carryforwards prior to their expiration. Refer to Note 12 for further discussion of tax matters.

Effect of Rate-making on Property-related Differences - Alliant Energy’s and IPL’s effective income tax rates are normally impacted by certain property-related differences at IPL for which deferred tax is not recorded in the income statement pursuant to Iowa rate-making principles. Changes in methods or assumptions regarding the amount of IPL’s qualifying repairs expenditures, allocation of mixed service costs, and costs related to retirement or removal of depreciable property could result in a material impact on Alliant Energy’s and IPL’s financial condition and results of operations.

Carryforward Utilization - Significant federal tax credit carryforwards and federal and state net operating loss carryforwards exist for Alliant Energy, IPL and WPL as of December 31, 2019. Based on projections of current and future taxable income, Alliant Energy, IPL and WPL plan to utilize substantially all of these carryforwards prior to their expiration. Taxable income must be reduced by federal net operating losses carryforwards prior to utilizing federal tax credit carryforwards. Alliant Energy does not expect to utilize all of its federal net operating loss carryforwards until 2024, and therefore, currently does not expect to utilize 2002 and 2003 vintage federal credit carryforwards prior to their expiration in 2022 and 2023, respectively. This resulted in valuation allowance charges recorded to “Income tax expense (benefit)” in the income statements in 2017. Federal credit carryforwards generated from 2004 through 2008, which amount to $7 million for Alliant Energy, are expected to be utilized within five years of expiration. All other federal credit carryforwards and federal net operating loss carryforwards are expected to be utilized more than five years before expiration. Changes in tax regulations or assumptions regarding current and future taxable income could require changes to valuation allowances in the future resulting in a material impact on financial condition and results of operations.