SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C  20549

                                  FORM 10-K

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

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)).  
          **

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).   **







*    Filed Herewith
**   Previously Filed

Exhibit
Number    Description of Exhibit

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).   **

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.   *



*    Filed Herewith
**   Previously Filed
Exhibit
Number    Description of Exhibit

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).   **

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).   **


*    Filed Herewith
**   Previously Filed
Exhibit
Number    Description of Exhibit

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).   **

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  (27)



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