UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                     Washington, D.C. 20549

                           FORM 10-Q


(Mark one)
[X]  QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE  ACT OF 1934


For the quarterly period ended     June 30, 1997

                                        OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934


For the transition period from          to


Commission        Registrant; State of Incorporation;          IRS Employer
File Number       Address; and Telephone Number             Identification No.

1-9187         IES  INDUSTRIES INC. (an Iowa Corporation)       42-1271452
               IES Tower, Cedar Rapids, Iowa  52401
               319-398-4411


0-4117-1       IES UTILITIES INC.  (an Iowa Corporation)        42-0331370
               IES Tower, Cedar Rapids, Iowa    52401
               319-398-4411


Indicate  by  check  mark whether the registrants  (1)  have  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 registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past 90 days.
Yes  X    No
    ---      ---

Indicate  the  number of shares outstanding of each of the  registrants'
classes of common stock, as of July 31, 1997.

  IES Industries Inc. Common Stock, no par value - 30,439,245 shares

  IES Utilities Inc. Common Stock, $2.50 par value - 13,370,788 shares



               IES INDUSTRIES INC. AND IES UTILITIES INC.


                                  INDEX


                                                                     Page No.


Part I.  Financial Information.


Item 1.   Consolidated Financial Statements.

     IES Industries Inc.:
       Consolidated Balance Sheets -
          June 30, 1997 and December 31, 1996                          3 - 4
       Consolidated Statements of Income -
          Three, Six and Twelve Months Ended
          June 30, 1997 and 1996                                         5
       Consolidated Statements of Cash Flows -
          Three, Six and Twelve Months Ended
          June 30, 1997 and 1996                                         6
       Notes to Consolidated Financial Statements                      7 - 14

     IES Utilities Inc.:
       Consolidated Balance Sheets -
          June 30, 1997 and December 31, 1996                         15 - 16
       Consolidated Statements of Income -
          Three, Six and Twelve Months Ended
          June 30, 1997 and 1996                                         17
       Consolidated Statements of Cash Flows -
          Three, Six and Twelve Months Ended
          June 30, 1997 and 1996                                         18
       Notes to Consolidated Financial Statements                        19

Item 2.   Management's Discussion and Analysis of the
          Results of Operations and Financial Condition.              20 - 34


Part II.  Other Information.                                          35 - 38


Signatures.                                                           39 - 40


                      PART I - FINANCIAL INFORMATION

ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS

            IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS

                                                       June 30,
                                                        1997      December 31,
ASSETS (in thousands)                                (Unaudited)       1996

Property, plant and equipment:
  Utility -
    Plant in service -
      Electric                                       $ 2,032,872  $ 2,007,839
      Gas                                                178,588      175,472
      Other                                              133,707      126,850
                                                       2,345,167    2,310,161
    Less - Accumulated depreciation                    1,085,579    1,030,390
                                                       1,259,588    1,279,771
    Leased nuclear fuel, net of amortization              27,739       34,725
    Construction work in progress                         56,674       43,719
                                                       1,344,001    1,358,215
  Other, net of accumulated depreciation
    and amortization of $79,151 and 
    $70,031, respectively                                244,386      223,805
                                                       1,588,387    1,582,020


Current assets:
  Cash and temporary cash investments                      8,932        8,675
  Accounts receivable -
    Customer, less allowance for doubtful accounts
      of $976 and $1,087, respectively                    24,002       50,821
    Other                                                  8,175       12,040
  Income tax refunds receivable                           17,740        8,890
  Production fuel, at average cost                        13,679       13,323
  Materials and supplies, at average cost                 24,183       22,842
  Adjustment clause balances                                   0       10,752
  Regulatory assets                                       34,644       26,539
  Prepayments and other                                   17,017       24,169
                                                         148,372      178,051


Investments:
  Nuclear decommissioning trust funds                     69,490       59,325
  Investment in foreign entities                          46,498       44,946
  Investment in McLeodUSA Inc.                            28,960       29,200
  Cash surrender value of life insurance policies         11,906       11,217
  Other                                                    6,217        4,903
                                                         163,071      149,591


Other assets:
  Regulatory assets                                      195,717      201,129
  Deferred charges and other                              14,609       14,771
                                                         210,326      215,900
                                                     $ 2,110,156  $ 2,125,562



    IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                      
                                                       June 30,
CAPITALIZATION AND LIABILITIES                          1997      December 31,
(in thousands, except share amounts)                 (Unaudited)       1996

Capitalization:
  Common stock - no par value - authorized
    48,000,000 shares; outstanding 30,352,843
    and 30,077,212 shares, respectively              $   415,603  $   407,635
  Retained earnings                                      208,119      219,246
    Total common equity                                  623,722      626,881
  Cumulative preferred stock of IES Utilities Inc.        18,320       18,320
  Long-term debt (excluding current portion)             719,654      701,100
                                                       1,361,696    1,346,301


Current liabilities:
  Short-term borrowings                                  150,000      135,000
  Capital lease obligations                               13,923       15,125
  Maturities and sinking funds                               487        8,473
  Accounts payable                                        58,188       99,861
  Dividends payable                                       16,578       16,431
  Accrued interest                                         8,605        8,985
  Accrued taxes                                           45,903       43,926
  Accumulated refueling outage provision                   5,506        1,316
  Adjustment clause balances                               4,315            0
  Environmental liabilities                                5,661        5,679
  Other                                                   21,316       22,087
                                                         330,482      356,883


Long-term liabilities:
  Pension and other benefit obligations                   48,067       39,643
  Capital lease obligations                               13,816       19,600
  Environmental liabilities                               47,850       47,502
  Other                                                   21,923       18,488
                                                         131,656      125,233


Deferred credits:
  Accumulated deferred income taxes                      253,168      262,675
  Accumulated deferred investment tax credits             33,154       34,470
                                                         286,322      297,145


Commitments and contingencies (Note 7)


                                                     $ 2,110,156  $ 2,125,562

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.


<TABLE>
          IES INDUSTRIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

<CAPTION>
                                      For the Three         For the Six          For the Twelve
                                       Months Ended         Months Ended         Months Ended
                                         June 30               June 30               June 30
                                     1997       1996       1997       1996       1997       1996
                                              (in thousands, except per share amounts)
    
<S>                              <C>        <C>        <C>        <C>        <C>        <C>
Operating revenues:
  Electric                         $ 137,691  $ 137,032  $ 274,977  $ 262,400  $ 586,850  $ 573,246
  Gas                                 25,768     42,628    109,874    132,651    251,201    225,999
  Other                               31,674     30,988     67,969     58,793    134,831    109,773
                                     195,133    210,648    452,820    453,844    972,882    909,018

Operating expenses:
  Fuel for production                 26,532     22,728     56,413     43,021     97,972     99,530
  Purchased power                     15,050     22,000     33,723     36,469     85,603     69,899
  Gas purchased for resale            15,843     31,814     80,341     99,250    198,442    168,610
  Other operating expenses            53,357     52,283    106,320    104,808    216,265    212,231
  Maintenance                         13,481     15,087     27,049     25,920     50,130     48,525
  Depreciation and amortization       28,582     27,225     57,321     54,608    110,106    102,104
  Taxes other than income taxes       12,897     12,741     26,193     26,004     48,360     48,211
                                     165,742    183,878    387,360    390,080    806,878    749,110

Operating income                      29,391     26,770     65,460     63,764    166,004    159,908

Interest expense and other:
  Interest expense                    15,592     12,934     30,439     25,839     59,421     51,518
  Allowance for funds used
    during construction                 -372       -691       -767     -1,380     -1,489     -2,904
  Preferred dividend requirements
    of IES Utilities Inc.                229        229        457        457        914        914
  Miscellaneous, net                   1,936       -696      1,693     -2,373      6,398     -5,016
                                      17,385     11,776     31,822     22,543     65,244     44,512

Income before income taxes            12,006     14,994     33,638     41,221    100,760    115,396

Income taxes:
  Current                              4,855      5,466     20,992     19,576     39,663     51,713
  Deferred                              -541      2,133     -6,703        817      4,314       -732
  Amortization of investment
    tax credits                         -658       -661     -1,316     -1,323     -2,639     -2,663
                                       3,656      6,938     12,973     19,070     41,338     48,318

Net income                         $   8,350  $   8,056  $  20,665  $  22,151  $  59,422  $  67,078

Average number of common
  shares outstanding                  30,324     29,801     30,256     29,723     30,128     29,560

Earnings per average
  common share                     $    0.28  $    0.27  $    0.68  $    0.75  $    1.97  $    2.27

Dividends declared per
  common share                     $   0.525  $   0.525  $    1.05  $    1.05  $    2.10  $    2.10


The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>

<TABLE>
        IES INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
                                                            For the Three        For the Six        For the Twelve
                                                            Months Ended         Months Ended       Months Ended
                                                               June 30             June 30             June 30
                                                            1997      1996      1997      1996      1997      1996
                                                                                (in thousands)
<S>                                                  <C>       <C>       <C>       <C>       <C>       <C>
Cash flows from operating activities:
  Net income                                           $   8,350 $   8,056 $  20,665 $  22,151 $  59,422 $  67,078
  Adjustments to reconcile net income to
    net cash flows from operating activities -
      Depreciation and amortization                       28,582    27,225    57,321    54,608   110,106   102,104
      Amortization of principal under capital
        lease obligations                                  3,740     4,626     7,109     9,250    14,351    19,096
      Deferred taxes and investment tax credits           -1,199     1,472    -8,019      -506     1,675    -3,395
      Refueling outage provision                           2,504     2,373     4,190     4,920    -7,104    10,374
      Amortization of other assets                         2,190     2,194     5,226     5,104     9,875     9,853
      Other                                                  774       285     3,053     1,390     2,616     1,223
  Other changes in assets and liabilities -
      Accounts receivable                                 12,115     9,431    30,684     2,300     6,230   -19,078
      Sale of utility accounts receivable                      0     7,000         0     7,000         0     9,000
      Production fuel, materials and supplies             -1,977      -396    -1,060       484      -894     5,365
      Accounts payable                                    -3,967    -1,554   -39,210   -10,175    -8,039     8,523
      Accrued taxes                                      -34,008   -28,680    -6,873   -12,387   -12,451      -115
      Provision for rate refunds                               0      -229         0       -63       -43   -10,164
      Adjustment clause balances                             556    -3,726    15,067      -339     1,506     2,332
      Gas in storage                                       2,748     1,501     8,821     9,245    -1,578     2,350
      Other                                                3,536     3,888     5,464     4,662    12,598     2,020
          Net cash flows from operating activities        23,944    33,466   102,438    97,644   188,270   206,566
          
Cash flows from financing activities:
      Dividends declared on common stock                 -15,934   -15,643   -31,792   -31,225   -63,306   -62,117
      Proceeds from issuance of common stock               3,147     3,673     6,626     7,399    13,391    15,014
      Purchase of treasury stock                             -83      -269       -83      -269       -83      -269
      Net change in IES Diversified Inc. credit
        facility                                          13,077    11,965    18,772    10,970    55,662    75,415
      Proceeds from issuance of other long-term 
        debt                                              55,000         0    55,000         0   115,000    50,003
      Reductions in other long-term debt                 -63,195      -217   -63,274      -296   -78,432   -50,440
      Net change in short-term borrowings                 24,000    33,000    15,000    24,000    25,000    38,000
      Principal payments under capital lease 
        obligations                                       -3,369    -4,624    -5,665    -9,536   -15,237   -17,781
      Other                                                  -61       -22        35       -91      -400    -1,669
          Net cash flows from financing activities        12,582    27,863    -5,381       952    51,595    46,156
          
Cash flows from investing activities:
      Construction and acquisition expenditures -
         Utility                                         -28,466   -34,000   -48,231   -57,333  -133,147  -125,292
         Other                                           -22,254   -18,456   -35,670   -33,815   -97,985  -106,879
      Oil and gas properties held for resale                   0         0         0     9,843         0         0
      Deferred energy efficiency expenditures             -3,516    -5,090    -7,530    -8,757   -15,630   -18,808
      Nuclear decommissioning trust funds                 -1,502    -1,502    -3,004    -3,004    -6,008    -6,338
      Proceeds from disposition of assets                  1,215       652     1,782     1,856     8,221    10,034
      Other                                                  304     1,152    -4,147       192      -904      -318
          Net cash flows from investing activities       -54,219   -57,244   -96,800   -91,018  -245,453  -247,601

Net increase (decrease) in cash and temporary
  cash investments                                       -17,693     4,085       257     7,578    -5,588     5,121

Cash and temporary cash investments
  at beginning of period                                  26,625    10,435     8,675     6,942    14,520     9,399

Cash and temporary cash investments
  at end of period                                     $   8,932 $  14,520 $   8,932 $  14,520 $   8,932 $  14,520

Supplemental cash flow information:
    Cash paid during the period for -
      Interest                                         $  17,330 $  12,992 $  29,638 $  23,535 $  59,148 $  49,440
      Income taxes                                     $  29,873 $  24,277 $  29,197 $  32,748 $  51,330 $  50,877
    Noncash investing and financing activities -
      Capital lease obligations incurred               $      10 $  10,243 $     123 $  12,846 $   1,558 $  13,106


The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>


      This document contains the Quarterly Reports on Form 10-Q for  the
quarter  ended  June 30, 1997 for each of IES Industries  Inc.  and  IES
Utilities  Inc.  Information contained herein relating to an  individual
registrant  is filed by such registrant on its own behalf.  Accordingly,
except  for its subsidiaries, IES Utilities Inc. makes no representation
as  to  information  relating to IES Industries Inc.  or  to  any  other
companies affiliated with IES Industries Inc.  IES Industries  Inc.  and
its  consolidated subsidiaries may collectively be referred to  as  "the
Company".

      From time to time, the Company may make forward-looking statements
within   the  meaning  of  the  federal  securities  laws  that  involve
judgments, assumptions and other uncertainties beyond the control of the
Company.   These forward-looking statements may include,  among  others,
statements  concerning  revenue and cost  trends,  cost  recovery,  cost
reduction  strategies  and  anticipated  outcomes,  pricing  strategies,
changes in the utility industry, planned capital expenditures, financing
needs  and  availability,  statements  of  the  Company's  expectations,
beliefs,  future plans and strategies, anticipated events or trends  and
similar  comments  concerning matters that  are  not  historical  facts.
Investors  and  other  users  of  the  forward-looking  statements   are
cautioned that such statements are not a guarantee of future performance
of  the Company and that such forward-looking statements are subject  to
risks  and  uncertainties  that could cause  actual  results  to  differ
materially  from  those expressed in, or implied  by,  such  statements.
Some,  but  not  all,  of  the risks and uncertainties  include  weather
effects  on  sales  and revenues, competitive factors, general  economic
conditions  in  the  Company's  service  territory,  federal  and  state
regulatory  or  government actions, the operating of a nuclear  facility
and changes in the rate of inflation.


     IES INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)
                                    
                              June 30, 1997

(1)  GENERAL:

     The interim Consolidated Financial Statements have been prepared by
IES  Industries  Inc.  (Industries) and its  consolidated  subsidiaries,
without  audit,  pursuant  to the rules and regulations  of  the  United
States  Securities  and Exchange Commission (SEC).  Industries'  wholly-
owned   subsidiaries  are  IES  Utilities  Inc.  (Utilities)   and   IES
Diversified Inc. (Diversified).  Industries is an investor-owned holding
company   whose  primary  operating  company,  Utilities,   is   engaged
principally  in the generation, transmission, distribution and  sale  of
electric energy and the purchase, distribution, transportation and  sale
of  natural  gas.  The Company's principal markets are  located  in  the
State  of  Iowa.  The Company also has various non-utility  subsidiaries
which  are  primarily engaged in the energy-related, transportation  and
real estate development businesses.

      Certain information and footnote disclosures normally included  in
financial  statements  prepared in accordance  with  generally  accepted
accounting  principles have been condensed or omitted pursuant  to  such
rules   and  regulations,  although  the  Company  believes   that   the
disclosures   are  adequate  to  make  the  information  presented   not
misleading.   In the opinion of the Company, the Consolidated  Financial
Statements  include all adjustments, which are normal and  recurring  in
nature, necessary for the fair presentation of the results of operations
and   financial  position.   Certain  prior  period  amounts  have  been
reclassified on a basis consistent with the 1997 presentation.

       The  preparation  of  financial  statements  in  conformity  with
generally  accepted  accounting principles requires management  to  make
estimates and assumptions that affect: 1) the reported amounts of assets
and  liabilities and the disclosure of contingent assets and liabilities
at  the date of the financial statements, and 2) the reported amounts of
revenues and expenses during the reporting period.  Actual results could
differ from those estimates.

      It  is  suggested that these Consolidated Financial Statements  be
read  in conjunction with the Consolidated Financial Statements and  the
notes  thereto  included in the Company's Form 10-K for the  year  ended
December  31, 1996.  The accounting and financial policies  relative  to
the  following  items have been described in those notes and  have  been
omitted herein because they have not changed materially through the date
of this report:

     Summary of significant accounting policies
     Leases
     Utility accounts receivable (other than discussed in Note 4)
     Income taxes
     Benefit plans
     Common, preferred and preference stock
     Debt (other than discussed in Note 6)
     Estimated fair value of financial instruments (other than discussed
       in Note 5)
     Derivative financial instruments
     Commitments and contingencies (other than discussed in Note 7)
     Jointly-owned electric utility plant
     Segments of business


(2)   PROPOSED MERGER OF THE COMPANY:

      On  November 10, 1995, Industries, WPL Holdings, Inc.  (WPLH)  and
Interstate  Power Company (IPC) entered into an Agreement  and  Plan  of
Merger, as amended (Merger Agreement).  At the 1996 annual meetings, the
shareowners  of all three companies approved the Merger Agreement.   The
merger  is  still  subject  to approval by  several  federal  and  state
regulatory  agencies.   See  Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations for a further discussion.


(3)  RATE MATTERS:

     (a)  Electric Price Announcements -
          
     Utilities   and   its  Iowa-based  proposed  merger  partner,  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  merger-related
application  filed  with the Iowa Utilities Board (IUB).   The  proposal
excludes  price  changes due to government-mandated  programs,  such  as
energy  efficiency  cost  recovery, or unforeseen  dramatic  changes  in
operations.  Utilities, Wisconsin Power and Light Company (WP&L) and IPC
also  proposed to freeze their wholesale electric prices for four  years
from  the  effective date of the merger as part of their  merger  filing
with  the Federal Energy Regulatory Commission (FERC).  The Company does
not  expect  the  merger-related electric  price  proposals  to  have  a
material  adverse  effect  on  its  financial  position  or  results  of
operations.
          
     (b)  Energy Efficiency Cost Recovery -
     
     Under  provisions   of   the  IUB  rules,  Utilities  is  currently
recovering  the  costs incurred through 1993 for its  energy  efficiency
programs, including its direct expenditures, carrying costs, a return on
its  expenditures and a reward.  These costs are being recovered over  a
four-year period and the recovery began on June 1, 1995.
      
      In  December 1996, under provisions of the IUB rules, the  Company
filed  for recovery of the costs relating to its 1994 and 1995 programs.
The Company received the IUB's final order in the proceeding in May 1997
which  allowed  for recovery of approximately $45 million  ($35  million
electric  and  $10 million gas) and was composed of direct  expenditures
and  carrying  costs  as well as a return on the expenditures  over  the
recovery  period.   The costs will be recovered over a four-year  period
and such recovery commenced on August 1, 1997.
      
      Iowa  statutory  changes  enacted in  1996  have  eliminated:   1)
specific  electric and gas percentage spending requirements in favor  of
IUB-determined  energy savings targets,  2) the  delay  in  recovery  of
energy  efficiency costs by allowing recovery which is  concurrent  with
spending  and 3) the recovery of a sharing reward. The IUB  commenced  a
rulemaking  in  January 1997 to implement the statutory  changes  and  a
final  order in this proceeding was issued in April 1997.  The new rules
provide  that  the Company recover its 1996 expenditures, and  the  1997
expenditures incurred prior to August 1, 1997, over a four-year recovery
period which began on August 1, 1997.  The Company also began concurrent
recovery  of  its  prospective expenditures  on  August  1,  1997.   The
implementation of these changes will gradually eliminate the  regulatory
asset  which  exists  under the current rate making mechanism  as  these
costs are recovered.

      The  Company has the following amounts of energy efficiency  costs
included  in  regulatory assets on its Consolidated Balance  Sheets  (in
thousands):

                                           June 30,    December 31,
                                             1997          1996
                                         
Costs incurred through 1993               $  9,890       $ 12,834
Costs incurred in 1994-1995                 34,328         33,161
Costs incurred from 1/1/96 - 6/30/97        21,451         15,087
                                          $ 65,669       $ 61,082

      The  above  amounts include the direct expenditures  and  carrying
costs  incurred  by  the Company but do not include any  amounts  for  a
return on its expenditures over the recovery period.


(4)  UTILITY ACCOUNTS RECEIVABLE:

     Utilities  has  entered into an agreement, which expires  in  1999,
with  a  financial  institution  to  sell,  with  limited  recourse,  an
undivided  fractional  interest of up to $65  million  in  its  pool  of
utility  accounts  receivable.  At June 30, 1997, $65 million  was  sold
under the agreement.

      SFAS  125,  issued  by the FASB in 1996 and  effective  for  1997,
provides  accounting and reporting standards for transfers and servicing
of  financial assets and extinguishment of liabilities.  The  accounting
for Utilities' sale of accounts receivable agreement is impacted by this
standard.  As a result, the agreement was modified in the first  quarter
of 1997 to comply with the SFAS 125 requirements and thus the accounting
and reporting for the sale of Utilities' receivables remains unchanged.


(5)  INVESTMENTS:

     (a)  Foreign Entities -

      At June 30, 1997, the Company had $46.5 million of investments  in
foreign  entities  on its Consolidated Balance Sheet  that  included  1)
investments in two New Zealand electric distribution entities, 2) a loan
to a New Zealand company, 3) an investment in a cogeneration facility in
China,  and  4) an investment in an international venture capital  fund.
The  Company  accounts for the China investment under the equity  method
and  the  other  investments  under the  cost  method.   The  geographic
concentration of the Company's investments in foreign entities  at  June
30,  1997,  included investments of approximately $32.1 million  in  New
Zealand, $13.9 million in China and $0.5 million in other countries.

     (b)  McLeodUSA Inc. (McLeod) -

      At  June  30, 1997, the Company had a $29.0 million investment  in
Class  A  common stock of McLeod and vested options that, if  exercised,
would  represent an additional investment of approximately $2.3  million
(1.3  million shares).  During the second quarter of 1997,  the  Company
converted  its  $9.2  million investment in Class B  Common  Stock  into
shares of Class A Common Stock. McLeod provides local, long-distance and
other telecommunications services.

      McLeod  completed an Initial Public Offering (IPO) of its Class  A
common stock in June 1996 and a secondary offering in November 1996.  As
of  June 30, 1997, the Company was the beneficial owner of approximately
10.3  million  total  shares  on a fully diluted  basis.   (The  Company
contributed  300,000 of its McLeod Class A shares to the IES  Industries
Charitable  Foundation  in the second quarter  of  1997.)   The  Company
currently accounts for this investment under the cost method.

      The  Company  has  entered  into an agreement  with  McLeod  which
restricts the sale or disposal of its shares without the consent of  the
McLeod  Board  of Directors.  The agreement was modified in  the  second
quarter  of  1997 to extend the restriction until the earlier  of  March
1999  or  twelve months following the completion of a recently announced
merger between McLeod and Consolidated Communications Inc. (CCI).   This
merger is expected to be completed in the second half of 1997.  (In  the
event  the merger is not consummated, the restriction will be eliminated
in  June 1998.)  This contractual sale restriction results in restricted
stock   under  the  provisions  of  Statement  of  Financial  Accounting
Standards No. 115 (SFAS No. 115), Accounting for Certain Investments  in
Debt  and  Equity Securities, until such time as the restrictions  lapse
and such shares became qualified for sale within a one year period.   As
a result, the Company currently carries this investment at cost.

      The  closing price of the McLeod Class A common stock on June  30,
1997,  on the Nasdaq National Market, was $33.75 per share.  The current
market  value of the shares the Company beneficially owns (approximately
10.3  million shares) is impacted by, among other things, the fact  that
the  shares cannot be sold for a period of time.  It is not possible  to
estimate  what the market value of the shares will be at  the  point  in
time  such sale restrictions are lifted.  In addition, any gain upon  an
eventual sale of this investment would likely be subject to a tax.   The
estimated  fair value of the McLeod investment at June 30,  1997,  based
upon the closing price on June 30 of $33.75, was $347 million.

      Under  the provisions of SFAS No. 115, the carrying value  of  the
McLeod  investment will be adjusted to estimated fair value at the  time
such  shares  become qualified for sale within a one year  period;  this
will occur on the earlier of the close of the McLeod/CCI merger or March
1998  (assuming the McLeod/CCI merger consummates), which  is  one  year
before  the contractual restrictions on sale are lifted.  At that  time,
the  adjustment  to reflect the estimated fair value of this  investment
will  be reflected as an increase in the investment carrying value  with
the  unrealized  gain reported as a net of tax amount  in  other  common
shareholders' equity until realized (i.e., until the shares are sold  by
the Company).


(6)  DEBT:

     (a)  Long-Term Debt -

      In  August  1997, Utilities issued $135 million of  6-5/8%  Senior
Debentures, due 2009.  The proceeds from these debentures were  used  to
reduce Utilities' short-term borrowings.

      Utilities  repaid at maturity $8 million of 6-1/8% First  Mortgage
Bonds during the second quarter of 1997.

     Also in the second quarter of 1997, Utilities issued $55 million of
Collateral Trust Bonds, 6.875%, due 2007.  Holders thereof may elect  to
have their Collateral Trust Bonds redeemed, in whole but not in part, on
May  1,  2002,  at  100% of the principal amount thereof,  plus  accrued
interest.   The proceeds from the Collateral Trust Bonds  were  used  to
refinance  $15  million of Series L, 7.875% First  Mortgage  Bonds,  $30
million  of  Series M, 7.625% First Mortgage Bonds and  $10  million  of
7.375% First Mortgage Bonds.

      Diversified  has  a  variable rate credit  facility  that  extends
through  November  20,  1999, with two one-year  extensions  potentially
available  to  Diversified.  The unborrowed portion of the agreement  is
also used to support Diversified's commercial paper program.  A combined
maximum of $300 million of borrowings under the agreement and commercial
paper  program  may be outstanding at any one time. Interest  rates  and
maturities are set at the time of borrowing for direct borrowings  under
the  agreement and for issuances of commercial paper.  The interest rate
options  are based upon quoted market rates and the maturities are  less
than  one  year.  At June 30, 1997, there were no borrowings outstanding
under this facility.  Diversified had $190.9 million of commercial paper
outstanding at June 30, 1997, with interest rates ranging from 5.78%  to
6.65%  and  maturity  dates in the third quarter  of  1997.  Diversified
intends  to continue borrowing under the renewal options of the facility
and  no  conditions  exist  at June 30, 1997, that  would  prevent  such
borrowings.   Accordingly, this debt is classified as long-term  in  the
Consolidated Balance Sheets.

     (b)  Short-Term Debt -

      At June 30, 1997, the Company had bank lines of credit aggregating
$160.1  million. Utilities was using $145 million to support  commercial
paper  (weighted  average interest rate of 6.13%) and $11.1  million  to
support certain pollution control obligations.  Commitment fees are paid
to  maintain these lines and there are no conditions which restrict  the
unused  lines  of  credit.  In addition to the above, Utilities  has  an
uncommitted credit facility with a financial institution whereby it  can
borrow up to $40 million. Rates are set at the time of borrowing and  no
fees are paid to maintain this facility.  At June 30, 1997, there was $5
million outstanding under this facility (weighted average interest  rate
of 5.98%).


(7)  CONTINGENCIES:

     (a)  Environmental Liabilities -

     The Company has recorded environmental liabilities of approximately
$54  million  in its Consolidated Balance Sheets at June 30,  1997.  The
Company's significant environmental liabilities are discussed below.

          Former Manufactured Gas Plant (FMGP) Sites

      Utilities has been named as a Potentially Responsible Party  (PRP)
by  various federal and state environmental agencies for 28 FMGP  sites,
but  believes  it  is not responsible for two of these  sites  based  on
extensive  reviews  of the ownership records and historical  information
available  for  the two sites.  Utilities has notified  the  appropriate
regulatory  agency that it believes it does not have any  responsibility
as  relates  to these two sites, but no response has been received  from
the  agency  on this issue.  Utilities is also aware of six other  sites
that  it  may  have owned or operated in the past and for  which,  as  a
result,  it  may be designated as a PRP in the future in the event  that
environmental  concerns  arise at these  sites.   Utilities  is  working
pursuant  to  the  requirements of the various agencies to  investigate,
mitigate,  prevent and remediate, where necessary, damage  to  property,
including damage to natural resources, at and around the sites in  order
to protect public health and the environment.  Utilities believes it has
completed the remediation of twelve sites although it is in the  process
of  obtaining final approval from the applicable environmental  agencies
on  this  issue  for each site.  Utilities is in various stages  of  the
investigation  and/or remediation processes for the  remaining  fourteen
sites  and  estimates the range of additional costs to be  incurred  for
investigation,   remediation  and  monitoring  of  the   sites   to   be
approximately $24 million to $55 million.

      Utilities  has recorded environmental liabilities related  to  the
FMGP  sites  of  approximately $35 million (including  $4.7  million  as
current  liabilities) at June 30, 1997.  These amounts  are  based  upon
Utilities'  best  current  estimate of the amount  to  be  incurred  for
investigation,  remediation and monitoring costs for those  sites  where
the  investigation process has been or is substantially  completed,  and
the  minimum  of  the  estimated cost range for those  sites  where  the
investigation is in its earlier stages.  It is possible that future cost
estimates   will   be  greater  than  the  current  estimates   as   the
investigation  process proceeds and as additional  facts  become  known.
Regulatory assets of approximately $35 million, which reflect the future
recovery  that  is  being provided through Utilities' rates,  have  been
recorded  in  the Consolidated Balance Sheets.  Considering the  current
rate treatment allowed by the IUB, management believes that the clean-up
costs  incurred  by  Utilities for these FMGP  sites  will  not  have  a
material  adverse  effect  on  its  financial  position  or  results  of
operations.

      In  April 1996, Utilities filed a lawsuit against certain  of  its
insurance  carriers seeking reimbursement for investigation, mitigation,
prevention,  remediation and monitoring costs associated with  the  FMGP
sites.  Settlement discussions are proceeding between Utilities and  its
insurance  carriers regarding the recovery of these FMGP-related  costs.
Settlement  has  been  reached with five carriers and  an  agreement  in
principle  has been reached with three other carriers thus  far. Amounts
received   from  insurance  carriers  are  being  deferred   pending   a
determination of the regulatory treatment of such recoveries.

          National Energy Policy Act of 1992
          
      The  National Energy Policy Act of 1992 requires owners of nuclear
power  plants  to  pay  a special assessment into a "Uranium  Enrichment
Decontamination and Decommissioning Fund."  The assessment is based upon
prior  nuclear  fuel purchases and, for the Duane Arnold  Energy  Center
(DAEC), averages $1.4 million annually through 2007, of which Utilities'
70%  share is $1.0 million. Utilities is recovering the costs associated
with  this assessment through its electric fuel adjustment clauses  over
the  period the costs are assessed.  Utilities' 70% share of the  future
assessment,  $9.9 million payable through 2007, has been recorded  as  a
liability  in  the Consolidated Balance Sheets, including  $0.9  million
included  in "Current liabilities - Environmental liabilities,"  with  a
related regulatory asset for the unrecovered amount.
          
          Oil and Gas Properties Dismantlement and Abandonment Costs
          
      Whiting Petroleum Corporation (Whiting), a wholly-owned subsidiary
under   Diversified,  is  responsible  for  certain  dismantlement   and
abandonment  costs related to various off-shore oil and gas  properties,
the  most  significant of which is located off the coast of  California.
The  Company  estimates  the  total costs for  these  properties  to  be
approximately  $16 million and the expenditures are not expected  to  be
incurred  for approximately four years.  Whiting accrues these costs  as
reserves are extracted and such costs are included in "Depreciation  and
amortization" in the Consolidated Statements of Income, resulting  in  a
liability of $8.6 million at June 30, 1997, in the Consolidated  Balance
Sheets.

     (b)  Air Quality Issues -

      The  Clean  Air  Act  Amendments of 1990 (Act)  requires  emission
reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) to  achieve
reductions  of atmospheric chemicals believed to cause acid  rain.   The
provisions of the Act are being implemented in two phases; the  Phase  I
requirements  have been met and the Phase II requirements affect  eleven
other  fossil  units beginning in the year 2000.  Utilities  expects  to
meet  the  requirements of Phase II by switching to lower sulfur  fuels,
capital  expenditures  primarily related to fuel burning  equipment  and
boiler  modifications,  and  the possible purchase  of  SO2  allowances.
Utilities estimates capital expenditures at approximately $12.9 million,
including  $0.6  million  in  1997, in  order  to  meet  the  acid  rain
requirements of the Act.

      The  acid  rain program under the Act also governs SO2 allowances.
An allowance is defined as an authorization for an owner to emit one ton
of  SO2 into the atmosphere.  Currently, Utilities receives a sufficient
number  of allowances annually to offset its emissions of SO2  from  its
Phase  I units.  It is anticipated that in the year 2000, Utilities  may
have  an  insufficient  number  of allowances  annually  to  offset  its
estimated  emissions and may have to purchase additional allowances,  or
make   modifications  to  the  plants  or  limit  operations  to  reduce
emissions.   Utilities is reviewing its options to ensure that  it  will
have  sufficient  allowances  to offset its  emissions  in  the  future.
Utilities  believes  that  the  potential cost  of  ensuring  sufficient
allowances  will  not have a material adverse effect  on  its  financial
position or results of operations.

      The  Act  and  other federal laws also require the  United  States
Environmental  Protection  Agency  (EPA)  to  study  and  regulate,   if
necessary,  additional  issues  that  potentially  affect  the  electric
utility  industry, including emissions relating to NOx, ozone transport,
mercury   and   particulate  control;  toxic  release  inventories   and
modifications  to  the  PCB rules.  In December  1996,  the  EPA  issued
proposed  rules  that  would tighten the National  Ambient  Air  Quality
Standards (NAAQS) for ozone and particulate matter emissions.   In  June
1997,  President  Clinton gave his support for lowering  the  NAAQS  for
ozone  and  particulate matter.  In July 1997, the EPA issued the  final
rules  on these emissions issues.  The impacts of these regulations  are
too speculative to quantify at this point in time.

       Also  in  the fourth quarter of 1996, the EPA announced  that  it
would  issue  a  notice requiring the 37 states in the  Ozone  Transport
Assessment  Group  (OTAG),  which includes Iowa,  to  implement  further
controls on NOx.  In June 1997, OTAG made their final recommendations to
the  EPA.  These recommendations exclude Iowa from the OTAG process with
the  understanding that Iowa will work with Wisconsin in the development
of   the  SE  Wisconsin  attainment  State  Implementation  Plan  (SIP).
Utilities believes that the potential cost of this effort will not  have
a  material  adverse  effect on its financial  position  or  results  of
operations.

     In 1995, the EPA published the Sulfur Dioxide Network Design Review
for Cedar Rapids, Iowa, which, based on the EPA's assumptions and worst-
case  modeling  method  suggests that the Cedar  Rapids  area  could  be
classified  as "nonattainment" for the NAAQS established for  SO2.   The
worst-case  modeling  study suggested that two of Utilities'  generating
facilities  contribute to the modeled exceedences and  recommended  that
additional monitors be located near Utilities' sources to assess  actual
ambient  air  quality.   As  a  result of  exceedences  at  a  relocated
monitor,  the  EPA issued a letter in March 1997 to the Iowa  Governor's
Office directing the state to develop a plan of action within 120  days.
The Governor of Iowa then issued a letter to the EPA stating that a plan
of  action would be in place with local industry to avoid the area being
declared  nonattainment.  In this regard, Utilities has entered  into  a
Consent Order with the Iowa Department of Natural Resources (IDNR).  The
objective of this order is to establish the necessary commitments  which
will  maintain the area in attainment for SO2.  Two primary  commitments
are  being  made by Utilities in this consent order:  1) Utilities  will
limit SO2 emissions from the two noted generating facilities located  in
Cedar  Rapids, and 2) Utilities will install a new stack at one  of  the
facilities  at a potential aggregate capital cost of up to $4.5  million
over the next two years.  It is anticipated that this consent order will
receive EPA approval in the third quarter of 1997.

      Pursuant  to  a  routine internal review of operations,  Utilities
determined  that  certain changes undertaken during the  previous  three
years  at one of its power plants may have required a federal Prevention
of   Significant   Deterioration  (PSD)  permit.   Utilities   initiated
discussions  with  its  regulators  on  the  matter,  resulting  in  the
submittal  of  a  PSD  permit application in February  1997.   Utilities
expects  to  receive  the  PSD permit by the  fourth  quarter  of  1997.
Utilities  may  be required to accept operational limits or  to  install
additional  controls  and may be subject to a  penalty  for  not  having
obtained  the  permit previously; however, Utilities believes  that  any
likely  actions  resulting from this matter will  not  have  a  material
adverse effect on its financial position or results of operations.


             IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS


                                                   June 30,
                                                    1997          December 31,
ASSETS (in thousands)                            (Unaudited)          1996

Property, plant and equipment:
  Utility -
    Plant in service -
        Electric                                 $ 2,032,872      $ 2,007,839
        Gas                                          178,588          175,472
        Other                                        133,707          126,850
                                                   2,345,167        2,310,161
    Less - Accumulated depreciation                1,085,579        1,030,390
                                                   1,259,588        1,279,771
    Leased nuclear fuel, net of amortization          27,739           34,725
    Construction work in progress                     56,674           43,719
                                                   1,344,001        1,358,215
  Other, net of accumulated depreciation
    and amortization of $1,560 and 
    $1,438, respectively                               5,750            5,872
                                                   1,349,751        1,364,087


Current assets:
  Cash and temporary cash investments                  3,381           11,608
  Accounts receivable -
    Customer, less allowance for doubtful
      accounts of $491 and $546, respectively         13,691           22,461
    Other                                              7,797           11,270
  Income tax refunds receivable                       10,815            2,664
  Production fuel, at average cost                    13,679           13,323
  Materials and supplies, at average cost             22,666           21,716
  Adjustment clause balances                               0           10,752
  Regulatory assets                                   34,644           26,539
  Prepayments and other                               11,147           18,705
                                                     117,820          139,038


Investments:
  Nuclear decommissioning trust funds                 69,490           59,325
  Cash surrender value of life 
    insurance policies                                 4,635            4,281
  Other                                                   79              313
                                                      74,204           63,919


Other assets:
  Regulatory assets                                  195,717          201,129
  Deferred charges and other                          10,273           10,437
                                                     205,990          211,566
                                                 $ 1,747,765      $ 1,778,610



             IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)


                                                   June 30,
CAPITALIZATION AND LIABILITIES                      1997          December 31,
(in thousands, except share amounts)             (Unaudited)          1996

Capitalization:                                            
  Common stock - par value $2.50 per 
    share - authorized 24,000,000 shares; 
    13,370,788 shares outstanding                $    33,427      $    33,427
  Paid-in surplus                                    279,042          279,042
  Retained earnings                                  221,622          231,337
      Total common equity                            534,091          543,806
  Cumulative preferred stock - par                                 
    value $50 per share - authorized                               
    466,406 shares; 366,406 shares outstanding        18,320           18,320
  Long-term debt (excluding current portion)         517,265          517,334
                                                   1,069,676        1,079,460


Current liabilities:
  Short-term borrowings                              150,000          135,000
  Capital lease obligations                           13,923           15,125
  Maturities and sinking funds                           140            8,140
  Accounts payable                                    46,932           76,287
  Accrued interest                                     8,591            8,839
  Accrued taxes                                       43,262           40,953
  Accumulated refueling outage provision               5,506            1,316
  Adjustment clause balances                           4,315                0
  Environmental liabilities                            5,517            5,517
  Other                                               18,172           17,114
                                                     296,358          308,291


Long-term liabilities:
  Pension and other benefit obligations               32,992           25,826
  Capital lease obligations                           13,816           19,600
  Environmental liabilities                           39,070           40,299
  Other                                               17,299           14,030
                                                     103,177           99,755


Deferred credits:
  Accumulated deferred income taxes                  245,400          256,634
  Accumulated deferred investment tax credits         33,154           34,470
                                                     278,554          291,104


Commitments and contingencies (Note 7)


                                                 $ 1,747,765      $ 1,778,610

The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.


<TABLE>
        IES UTILITIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
                                            For the Three             For the Six              For the Twelve
                                            Months Ended              Months Ended             Months Ended
                                               June 30                   June 30                   June 30
                                          1997         1996         1997         1996         1997         1996
                                                                      (in thousands)
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>
Operating revenues:
    Electric                          $ 137,691    $ 137,032    $ 274,977    $ 262,400    $ 586,850    $ 573,246
    Gas                                  25,776       22,445      107,203       91,686      176,382      153,951
    Other                                 6,156        4,763       13,841        8,922       24,761       15,126
                                        169,623      164,240      396,021      363,008      787,993      742,323


Operating expenses:
    Fuel for production                  26,532       22,728       56,413       43,021       97,972       99,530
    Purchased power                      15,050       22,000       33,723       36,469       85,603       69,899
    Gas purchased for resale             15,788       12,042       76,579       59,411      121,044       99,021
    Other operating expenses             38,163       36,555       74,459       74,912      149,548      153,106
    Maintenance                          12,644       14,333       25,450       24,325       46,995       45,621
    Depreciation and amortization        23,294       22,024       46,764       44,049       87,691       82,116
    Taxes other than income taxes        11,715       11,549       23,607       23,609       43,601       43,892
                                        143,186      141,231      336,995      305,796      632,454      593,185


Operating income                         26,437       23,009       59,026       57,212      155,539      149,138


Interest expense and other:
   Interest expense                      12,768       10,988       25,075       21,880       46,908       44,151
   Allowance for funds used during
     construction                          -372         -691         -767       -1,380       -1,489       -2,904
   Miscellaneous, net                     1,746         -176        1,327       -1,139        7,759         -880
                                         14,142       10,121       25,635       19,361       53,178       40,367


Income before income taxes               12,295       12,888       33,391       37,851      102,361      108,771


Federal and state income taxes:
    Current                               7,313        4,994       24,395       18,355       41,370       48,847
    Deferred                             -1,251        1,325       -8,430         -538        2,516         -821
    Amortization of investment
       tax credits                         -658         -661       -1,316       -1,323       -2,638       -2,663
                                          5,404        5,658       14,649       16,494       41,248       45,363


Net income                                6,891        7,230       18,742       21,357       61,113       63,408
Preferred dividend requirements             229          229          457          457          914          914
Net income available for
  common stock                        $   6,662    $   7,001    $  18,285    $  20,900    $  60,199    $  62,494


The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>


<TABLE>
     IES UTILITIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
                                               For the Three         For the Six          For the Twelve
                                               Months Ended          Months Ended         Months Ended
                                                  June 30               June 30               June 30
                                              1997       1996       1997       1996       1997       1996
                                                                    (in thousands)

<S>                                     <C>        <C>        <C>        <C>        <C>        <C>
Cash flows from operating activities:
  Net income                              $   6,891  $   7,230  $  18,742  $  21,357  $  61,113  $  63,408
  Adjustments to reconcile net income 
    to net cash flows from operating 
      activities -
      Depreciation and amortization          23,294     22,024     46,764     44,049     87,691     82,116
      Amortization of principal under
        capital lease obligations             3,740      4,626      7,109      9,250     14,351     19,096
      Deferred taxes and investment tax 
        credits                              -1,909        664     -9,746     -1,861       -122     -3,484
      Refueling outage provision              2,504      2,373      4,190      4,920     -7,104     10,374
      Amortization of other assets            2,166      2,194      5,181      5,104      9,802      9,853
      Other                                      12         65        228         61        544        586
  Other changes in assets and
    liabilities -
      Accounts receivable                    11,551      8,434     12,243        975     -1,932    -13,287
      Sale of utility accounts 
        receivable                                0      7,000          0      7,000          0      9,000
      Production fuel, materials and 
        supplies                             -1,564         26       -669        928       -946      5,517
      Accounts payable                       -1,679     -3,068    -26,892    -13,365       -580      1,200
      Accrued taxes                         -34,056    -30,028     -5,842    -12,958     -4,118     -1,153
      Provision for rate refunds                  0       -229          0        -63        -43    -10,164
      Adjustment clause balances                556     -3,726     15,067       -339      1,506      2,332
      Gas in storage                          2,748      1,501      8,218      9,245     -1,578      2,350
      Other                                   2,561      2,865      7,865      4,372     10,621     -1,703
          Net cash flows from operating
            activities                       16,815     21,951     82,458     78,675    169,205    176,041

Cash flows from financing activities:
      Dividends declared on common stock    -14,000    -12,000    -28,000    -22,000    -50,000    -42,000
      Dividends declared on preferred
        stock                                  -229       -229       -457       -457       -914       -914
      Proceeds from issuance of
        long-term debt                       55,000          0     55,000          0    115,000     50,000
      Reductions in long-term debt          -63,140       -140    -63,140       -140    -78,140    -50,140
      Net change in short-term 
        borrowings                           24,000     34,334     15,000     19,687     20,425     36,794
      Principal payments under capital
        lease obligations                    -3,369     -4,624     -5,665     -9,536    -15,237    -17,781
      Other                                    -112        -86       -112       -172       -360     -1,936
          Net cash flows from financing
            activities                       -1,850     17,255    -27,374    -12,618     -9,226    -25,977

Cash flows from investing activities:
      Construction and acquisition 
        expenditures -
         Utility                            -28,486    -34,009    -48,251    -57,383   -133,249   -125,492
         Other                                   -2       -146         -7       -342       -932     -1,705
      Deferred energy efficiency
        expenditures                         -3,516     -5,090     -7,530     -8,757    -15,630    -18,808
      Nuclear decommissioning trust
        funds                                -1,502     -1,502     -3,004     -3,004     -6,008     -6,338
      Other                                      89      1,225     -4,519        813       -897        916
          Net cash flows from investing
            activities                      -33,417    -39,522    -63,311    -68,673   -156,716   -151,427

Net increase (decrease) in cash and
  temporary cash investments                -18,452       -316     -8,227     -2,616      3,263     -1,363

Cash and temporary cash investments
  at beginning of period                     21,833        434     11,608      2,734        118      1,481

Cash and temporary cash investments               
  at end of period                        $   3,381  $     118  $   3,381  $     118  $   3,381  $     118

Supplemental cash flow information:
      Cash paid during the period for -
         Interest                         $  14,365  $  11,046  $  24,142  $  19,576  $  46,638  $  42,072
         Income taxes                     $  32,422  $  24,430  $  31,876  $  31,568  $  45,691  $  49,268
      Noncash investing and financing
        activities -                              
         Capital lease obligations
           incurred                       $      10  $  10,243  $     123  $  12,846  $   1,558  $  13,106


The accompanying Notes to Consolidated Financial Statements
are an integral part of these statements.

</TABLE>


      IES UTILITIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)



      Except  as  modified below, the IES Industries  Inc.  (Industries)
Notes to Consolidated Financial Statements are incorporated by reference
insofar  as  they relate to IES Utilities Inc. (Utilities).  Industries'
Note  5 does not relate to Utilities and, therefore, is not incorporated
by reference.


(1)  GENERAL:

     The interim Consolidated Financial Statements have been prepared by
IES  Utilities  Inc.  (Utilities)  and  its  consolidated  subsidiaries,
without  audit,  pursuant  to the rules and regulations  of  the  United
States Securities and Exchange Commission (SEC).  Utilities' only wholly-
owned  subsidiary is IES Ventures Inc. (Ventures), which  is  a  holding
company for unregulated investments.


              ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION


     IES Industries Inc.'s Consolidated Financial Statements include the
accounts  of  IES  Industries  Inc. (Industries)  and  its  consolidated
subsidiaries   (collectively  the  Company).   Industries'  wholly-owned
subsidiaries are IES Utilities Inc. (Utilities) and IES Diversified Inc.
(Diversified).    The   information  presented  in   this   management's
discussion and analysis addresses the financial statements of Industries
and Utilities as presented in this joint filing.  Information related to
Utilities also relates to Industries' Consolidated Financial Statements.
Information related to Diversified does not pertain to the discussion of
the  financial  condition and results of operations of  Utilities.   The
references to various Notes to Consolidated Financial Statements are all
to Industries' Notes to Consolidated Financial Statements.


                               COMPETITION

      Electric energy generation, transmission, and distribution, are in
a  period of fundamental change in the manner in which customers obtain,
and   energy   suppliers  provide,  energy  services.   As  legislative,
regulatory, economic and technological changes occur, electric utilities
are  faced  with  increasing pressure to become more  competitive.  Such
competitive  pressures  could  result  in  loss  of  customers  and   an
incurrence  of  stranded  costs  (i.e.,  the  cost  of  assets  rendered
unrecoverable  as  the result of competitive pricing).   To  the  extent
stranded  costs cannot be recovered from customers, they would be  borne
by security holders.

      The  National Energy Policy Act of 1992 addresses several  matters
designed  to  promote  competition  in  the  electric  wholesale   power
generation  market.   In 1996, the Federal Energy Regulatory  Commission
(FERC)  issued final rules (FERC Orders 888 and 889) requiring  electric
utilities to open their transmission lines to other wholesale buyers and
sellers  of  electricity.   The rules became  effective  in  July  1996.
Utilities  filed  conforming pro-forma open access transmission  tariffs
with  the  FERC which became effective in October 1995.  In response  to
FERC Order 888, Utilities filed its final pro-forma tariffs with FERC in
July  1996.   The  non-rate provisions of the tariffs were  approved  in
November  1996.  FERC has not yet ruled on the rate  provisions  of  the
tariffs.   The  geographic  position of Utilities'  transmission  system
could  provide  revenue  opportunities in the open  access  environment.
Industrial  Energy  Applications, Inc. (IEA), a wholly-owned  subsidiary
under  Diversified,  received approval in the 1995  FERC  proceeding  to
market electric power at market based rates.  The Company cannot predict
the  long-term consequences of these rules on its results of  operations
or financial condition.

      FERC does not have jurisdiction over retail distribution, and thus
the  final FERC rules do not provide for the recovery of stranded  costs
resulting   from   retail  competition.   The  various   states   retain
jurisdiction  over the question of whether to permit retail competition,
the terms of such retail competition, and the recovery of any portion of
stranded costs that are ultimately determined by FERC and the states  to
have resulted from retail competition.

      The  Iowa  Utilities  Board (IUB) initiated a  Notice  of  Inquiry
(Docket  No.  NOI-95-1)  in  early 1995  on  the  subject  of  "Emerging
Competition  in the Electric Utility Industry" to address all  forms  of
competition  in the electric utility industry and to gather  information
and  perspectives on electric competition from all persons  or  entities
with  an  interest  or stake in the issues.  In January  1996,  the  IUB
created its own timeline for evaluating industry restructuring in  Iowa.
Included  in the IUB's process was the creation of a 22-member  advisory
panel,  of  which  Utilities  is a member.   The  IUB  conducted  public
information  meetings around the State of Iowa.  The Staff's  report  in
this docket was accepted by the IUB, finding, in part, that there is  no
compelling  reason  to  move  quickly into  restructuring  the  electric
utility  industry  in  Iowa, based upon the current  level  of  relative
prices.   However,  they  will  continue  the  analysis  and  debate  on
restructuring and retail competition in Iowa.

      As  part  of  Utilities' strategy for the emerging and competitive
power  markets, Utilities, Interstate Power Company (IPC) and  Wisconsin
Power  and Light Company (WP&L) (the utility subsidiary of WPL Holdings,
Inc. (WPLH)), and a number of other utilities have proposed the creation
of  an  independent  system  operator (ISO)  for  the  companies'  power
transmission grid.  The companies would retain ownership and control  of
the  facilities, but the ISO would set rates for access and assure  fair
treatment  for  all  companies seeking access.   The  proposal  requires
approval  from  state regulators and the FERC.  Various other  proposals
for ISO's have been made by other companies, and Utilities is monitoring
all  such  proposals.  Membership in an ISO could become a condition  of
merger approval by the various regulatory bodies.

      Utilities  is subject to the provisions of Statement of  Financial
Accounting  Standards  No. 71, "Accounting for the  Effects  of  Certain
Types  of  Regulation" (SFAS 71).  If a portion of Utilities' operations
become  no  longer subject to the provisions of SFAS 71, as a result  of
competitive  restructurings  or  otherwise,  a  write-down  of   related
regulatory assets would be required, unless some form of transition cost
recovery  is established by the appropriate regulatory body which  would
meet the requirements under generally accepted accounting principles for
continued  accounting as regulatory assets during such recovery  period.
In  addition, the Company would be required to determine any  impairment
to  other  assets  and  write-down such  assets  to  their  fair  value.
Utilities believes that it still meets the requirements of SFAS 71.

      The  Company  cannot predict the long-term consequences  of  these
competitive issues on its results of operations or financial  condition.
The  Company's strategy for dealing with these emerging issues  includes
seeking  growth  opportunities, continuing  to  offer  quality  customer
service,  ongoing  cost reductions and productivity  enhancements.   The
major  objective of these is to allow Utilities to better prepare for  a
competitive, deregulated electric utility industry.  In this connection,
Utilities  is  in the final stages of a significant process  improvement
program  to  improve its service levels, reduce its cost  structure  and
become  more  market-focused  and  customer  oriented.   (The  Company's
continuous  improvement efforts, in general, will be an ongoing  effort,
however).


                     PROPOSED MERGER OF THE COMPANY

     Industries, WPLH and IPC have entered into an Agreement and Plan of
Merger,  as  amended, dated November 10, 1995, which  provides  for  the
combination  of  all  three companies.  The new company  will  be  named
Interstate Energy Corporation (IEC).

      WPLH is a holding company headquartered in Madison, Wisconsin, and
is  the  parent  company  of 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 businesses in  three
major   areas:  environmental  engineering  and  consulting,  affordable
housing   and  energy  services.   IPC,  an  operating  public   utility
headquartered  in Dubuque, Iowa, supplies electric and  gas  service  to
approximately 165,000 and 49,000 customers, respectively,  in  northeast
Iowa, northwest Illinois and southern Minnesota.

      The  proposed merger, which will be accounted for as a pooling  of
interests,  was approved by the respective shareowners on  September  5,
1996.   The merger is conditioned on the receipt of approvals of several
federal  and state regulatory agencies.  Updates to the status of  these
approvals  are  as  follows  (for additional information  regarding  the
merger please refer to the Company's 1996 Annual Report on Form 10-K):

      The  FERC  issued  an  order  on  January  15,  1997,  finding  no
substantial market-power concerns with the merger.  Some limited  issues
were set for hearings which began on April 23, 1997 and ended on May  2,
1997.  On July 3, 1997, an administrative law judge issued a non-binding
recommendation that FERC approve the merger subject to the  terms  of  a
stipulation  agreement on competition issues entered  into  between  the
companies  and  FERC trial staff.  A final decision is expected  in  the
third or fourth quarter of 1997.

      On  May 7, 1997, the Illinois Commerce Commission (ICC) issued  an
order approving the proposed merger.

     On March 24, 1997, the Minnesota Public Utilities Commission (MPUC)
issued  an  order approving the merger without hearings,  subject  to  a
number  of technical conditions which the parties are willing  to  meet.
Included is a 4-year rate freeze for IPC's Minnesota customers.

      Hearings  regarding the merger were completed in July 1997  before
the IUB.

      On  May  7,  1997,  WP&L filed testimony with the  Public  Service
Commission  of  Wisconsin (PSCW) proposing a retail  electric,  gas  and
water  rate freeze from the date of the merger approval through calendar
year  2000.  Hearings regarding the merger were completed in  June  1997
before the PSCW.

      Given that the merger was not consummated before July 7, 1997, the
merger  partners  are  required to submit new information  to  the  U.S.
Department of Justice (DOJ) pursuant to the Hart-Scott-Rodino  Antitrust
Improvements Act.  The DOJ completed its impact review of the merger  on
market power earlier and all requirements of such review were satisfied.
The  merger partners do not believe that the resubmission will cause any
material delays in finalizing the merger.

      The companies expect to receive all necessary regulatory approvals
relating  to the merger by the end of 1997.  Refer to Note 3(a)  of  the
Notes  to Consolidated Financial Statements for a discussion of  merger-
related  retail  and  wholesale  price  proposals  that  Utilities   has
announced.


                  RESULTS OF OPERATIONS OF THE COMPANY
                                    
      The  following  discussion  analyzes significant  changes  in  the
components of net income and financial condition from the prior  periods
for the Company.

Summary

      The  Company's net income increased or (decreased)  $0.3  million,
($1.5) million and ($7.7) million during the three, six and twelve month
periods,  respectively.  Earnings per average common share increased  or
(decreased)  $0.01,  ($0.07)  and ($0.30) for  the  respective  periods.
Utilities'  net  income  available for  common  stock  decreased  ($0.3)
million,  ($2.6) million and ($2.3) million during the  three,  six  and
twelve  month periods, respectively.  Increased electric sales resulting
from  continuing  growth in Utilities' service  territory  and  a  lower
effective tax rate contributed to the three month increase and partially
offset  the  six  and twelve month decreases.  Partially offsetting  the
three  month  increase  and contributing to the  six  and  twelve  month
decreases  were  increased  interest and depreciation  expense  and  the
recording  of  a  $2.5  million reserve for non-utility  investments  at
Utilities.   The  impact of weather, primarily the significant  positive
impact  the  weather  had  on the prior period  results,  on  Utilities'
electric and gas sales also contributed to the decrease in earnings  for
the  twelve  month period.  Accordingly, in comparing the  twelve  month
periods,  the  Company  estimates  that  weather  impacted  earnings  by
approximately  ($0.26) per share.  The earnings  for  the  twelve  month
period  were also impacted by costs incurred relating to the  successful
defense  of  the hostile takeover attempt mounted by MidAmerican  Energy
Company (MAEC) in the third quarter of 1996.  The Company estimates that
the cost of the hostile takeover defense reduced earnings for the twelve
month period by ($0.15) per share.

     The Company's operating income increased $2.6 million, $1.7 million
and  $6.1  million  during  the three, six  and  twelve  month  periods,
respectively, while Utilities' operating income increased $3.4  million,
$1.8  million and $6.4 million during the same periods.  The contrasting
relationship between the change in operating income and net  income  was
primarily  due to higher interest expense and comparative  decreases  in
income  included in "Miscellaneous, net" in the Consolidated  Statements
of Income. Miscellaneous, net includes the recording of the reserve  for
non-utility  investments at Utilities for all three periods and  hostile
takeover defense costs of $7.8 million for the twelve month period.

Electric Operations

Electric margins and Kwh sales for Utilities for the three months  ended
June 30 were as follows:

                                  Revenues and Costs           Kwhs Sold
                                    (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Residential and rural        $    50,177 $    49,219     600,758     591,896
General service                   23,197      22,261     290,815     276,484
Large general service             55,609      52,934   1,444,842   1,364,453
Sales for resale and other         7,408       7,052     129,744     136,992
Total, excluding off-                                                 
  system sales                   136,391     131,466   2,466,159   2,369,825
Off-system sales                   1,300       5,566      73,097     384,666
    Total                        137,691     137,032   2,539,256   2,754,491
                                                                      
Fuel for production                                                   
  (excluding steam)               23,156      20,464
Purchased power                   15,050      22,000                        
Margin                       $    99,485 $    94,568                        
                             
                             
Electric  margins and Kwh sales for Utilities for the six  months  ended
June 30 were as follows:       
                             
                                  Revenues and Costs           Kwhs Sold
                                    (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Residential and rural        $   102,993 $    99,071   1,291,768   1,301,307
General service                   47,017      44,537     601,403     590,975
Large general service            106,709      94,532   2,855,938   2,640,417
Sales for resale and other        15,085      14,013     272,887     286,972
Total, excluding off-                                                 
  system sales                   271,804     252,153   5,021,996   4,819,671
Off-system sales                   3,173      10,247     119,992     641,223
    Total                        274,977     262,400   5,141,988   5,460,894
                                                                      
Fuel for production                                                   
  (excluding steam)               48,049      38,627                        
Purchased power                   33,723      36,469                        
Margin                       $   193,205 $   187,304                        
                                 
                                 
Electric margins and Kwh sales for Utilities for the twelve months ended
June 30 were as follows:          
                                  
                                  Revenues and Costs           Kwhs Sold
                                    (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Residential and rural        $   216,721 $   220,262   2,624,164   2,728,534
General service                  100,677      99,668   1,241,543   1,241,351
Large general service            225,399     204,189   5,716,127   5,348,739
Sales for resale and other        31,637      27,202     573,695     585,216
Total, excluding off-                                              
  system sales                   574,434     551,321  10,155,529   9,903,840
Off-system sales                  12,416      21,925     710,067   1,341,191
    Total                        586,850     573,246  10,865,596  11,245,031
                                                                   
Fuel for production                                                
  (excluding steam)               84,029      92,283                        
Purchased power                   85,603      69,899                        
Margin                       $   417,218 $   411,064                        
                              
                             
      The  electric margin increased $4.9 million, $5.9 million and $6.2
million  during  the three, six and twelve month periods,  respectively,
primarily  due  to higher Kwh sales (excluding off-system sales).  Large
general service Kwh sales increased during all periods due to continuing
industrial  growth  in Utilities' service territory.   Weather  was  the
primary reason for the changes in residential and rural Kwh sales during
each  period.  Lower purchased power capacity costs also contributed  to
the  increase  in  margin  for all periods.  Under  historically  normal
weather conditions, total Kwh sales (excluding off-system sales) for the
three, six and twelve month periods would have increased 3.1%, 4.4%  and
4.9%,  respectively, as compared to actual increases of 4.1%,  4.2%  and
2.5%.                          
                               
     Refer to Notes 3(a) and 3(b) of the Notes to Consolidated Financial
Statements  for  a  discussion of merger-related  retail  and  wholesale
electric  price  proposals that Utilities has announced and  the  energy
efficiency cost recoveries, respectively.
                                 
     Utilities' electric tariffs include energy adjustment clauses (EAC)
that  are designed to currently recover the costs of fuel and the energy
portion of purchased power billings.
                              
Gas Operations                      
                              
Gas  margins  and dekatherm (Dth) sales for Utilities and  IEA  for  the
three months ended June 30 were as follows:
                              
                                 Revenues and Costs           Dths Sold
                                   (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Utilities -                                                           
  Residential                $    15,649 $    13,358       2,478       2,370
  Commercial                       7,244       6,106       1,429       1,365
  Industrial                       2,030       1,856         599         573
  Transportation and                                                
    other                            853       1,125       2,455       2,478
  Total Utilities                 25,776      22,445       6,961       6,786
IEA                                   (8)     20,183           3       8,651
  Total                           25,768      42,628       6,964      15,437
                                                                      
Gas purchased for resale          15,843      31,814                        
Margin                       $     9,925 $    10,814                        
                               
                              
Gas margins and Dth sales for Utilities and IEA for the six months ended
June 30 were as follows:      
                               
                                 Revenues and Costs          Dths Sold
                                   (In thousands)          (In thousands)
                                  1997        1996        1997        1996
Utilities -                                                         
  Residential                $   66,235 $    57,786      10,115      10,881
  Commercial                     32,819      27,291       5,762       6,127
  Industrial                      6,270       4,664       1,434       1,414
  Transportation and
    other                         1,879       1,945       5,220       5,304
  Total Utilities               107,203      91,686      22,531      23,726
IEA                               2,671      40,965         978      17,137
  Total                         109,874     132,651      23,509      40,863
                                                                    
Gas purchased for resale         80,341      99,250                        
Margin                       $   29,533 $    33,401                        
                             
                              
Gas  margins  and Dth sales for Utilities and IEA for the twelve  months
ended June 30 were as follows:
                               
                                  Revenues and Costs         Dths Sold
                                    (In thousands)         (In thousands)
                                   1997       1996         1997       1996
Utilities -                                                      
  Residential                $   106,157 $   95,529       16,915     17,637
  Commercial                      52,494     44,992        9,958     10,164
  Industrial                      13,862      9,629        3,816      3,165
  Transportation and         
    other                          3,869      3,801       10,256     10,772
  Total Utilities                176,382    153,951       40,945     41,738
IEA                               74,819     72,048       26,895     35,932
  Total                          251,201    225,999       67,840     77,670
                                                                 
Gas purchased for resale         198,442    168,610                        
Margin                       $    52,759 $   57,389                        


      Total  gas  margin  decreased ($0.9) million, ($3.9)  million  and
($4.6)   million  during  the  three,  six  and  twelve  month  periods,
respectively, primarily due to lower gas margins at IEA.  IEA's reported
Dth gas sales were significantly lower during each period as a result of
IEA  contributing substantially all of its gas marketing business  to  a
joint  venture,  effective January 1, 1997, in exchange  for  a  partial
interest  in the joint venture.  The investment in the joint venture  is
accounted  for  under the equity accounting method and  IEA's  allocated
portion  of  gas  revenues  and gas expenses resulting  from  the  joint
venture are recorded in "Miscellaneous, net" on Industries' Consolidated
Statements of Income.

      Utilities'  gas  margin increased or (decreased)  ($0.4)  million,
($1.7)  million and $0.4 million during the three, six and twelve  month
periods, respectively.  The decrease in Utilities' margin during the six
month  period was primarily due to lower Dth sales, resulting  from  the
milder  weather  conditions  in  the  first  quarter  of  1997.    Under
historically  normal  weather  conditions,  Utilities'  gas  sales   and
transported volumes would have increased or (decreased) 1.1%, (1.7%) and
(0.7%) during the three, six and twelve month periods, respectively,  as
compared to actual increases or (decreases) of 2.6%, (5.0%) and (1.9%).

      The contrasting  relationship between the change in Utilities' gas
revenues  and  Dths sold  during  the six  and twelve  month periods was
primarily  due to higher per unit gas  costs  during  the  1997 periods.
Utilities'  gas  tariffs include  purchased gas adjustment clauses (PGA)
that are designed to currently recover the cost of gas sold.

Other  Revenues   The Company's other revenues increased  $0.7  million,
$9.2  million  and $25.1 million during the three, six and twelve  month
periods,  respectively ($1.4 million, $4.9 million and $9.6  million  at
Utilities).   Steam revenues at Utilities increased during  all  periods
due  to an increase in volumes sold resulting from the addition of a new
industrial  customer  and  increased  demand  from  existing  customers.
Increased  operating activities at IEA also contributed to the  increase
each period.  The three and six month increases were partially offset by
decreased  oil  and gas revenues at Whiting resulting primarily  from  a
decrease  in oil volumes sold.  Whiting's oil and gas revenues increased
during the twelve month period primarily due to increases in oil and gas
prices.

Operating Expenses   The Company's other operating expenses increased or
(decreased)  $1.1  million, $1.5 million and  $4.0  million  during  the
three,  six and twelve month periods, respectively ($1.6 million, ($0.5)
and  ($3.6)  million  at  Utilities).   The  three  month  increase  was
primarily  due  to  increases in labor and  benefits  costs  and  former
manufactured gas plant (FMGP) clean-up costs, partially offset by  lower
operating  costs  at Whiting.  The six and twelve month  increases  were
primarily  due  to the increased operating activities at IEA,  increased
international  business  development activities and  higher  information
technology  and  FMGP clean-up costs at Utilities.  The six  and  twelve
month increases were partially offset by decreases in costs relating  to
the Company's process improvement programs, decreased operating expenses
at  the Duane Arnold Energy Center (DAEC), Utilities' nuclear generating
facility, and lower operating costs at Whiting.  Costs incurred relating
to the Company's merger also contributed to the twelve month increase.

      The Company's maintenance expenses increased or (decreased) ($1.6)
million, $1.1 million and $1.6 million during the three, six and  twelve
month  periods,  respectively (($1.7) million,  $1.1  million  and  $1.4
million  at  Utilities),  primarily due to fluctuations  in  maintenance
activities at Utilities' fossil-fueled generating stations.  The  twelve
month increase was partially offset by lower maintenance expenses at the
DAEC.

      The Company's depreciation and amortization expense increased $1.4
million, $2.7 million and $8.0 million during the three, six and  twelve
month periods, respectively ($1.3 million, $2.7 million and $5.6 million
at  Utilities),  primarily  because of increases  in  utility  plant  in
service.  The  twelve  month  increase was  also  due  to  increases  in
amortization costs of Whiting's oil and gas properties. Depreciation and
amortization   expenses  for  both  periods  include  a  provision   for
decommissioning the DAEC, which is collected through rates.  The current
annual recovery level is $6.0 million.

      During  the  first  quarter  of  1996,  the  Financial  Accounting
Standards  Board  (FASB)  issued an Exposure  Draft  on  Accounting  for
Liabilities  Related to Closure and Removal of Long-Lived  Assets  which
deals  with,  among  other  issues, the accounting  for  decommissioning
costs.   If  current electric utility industry accounting practices  for
such   decommissioning   are  changed:   (1)   annual   provisions   for
decommissioning   could  increase  and  (2)  the  estimated   cost   for
decommissioning  could  be  recorded as  a  liability,  rather  than  as
accumulated  depreciation,  with  recognition  of  an  increase  in  the
recorded  amount  of  the  related DAEC  plant.   If  such  changes  are
required,  Utilities believes that there would not be an adverse  effect
on its financial position or results of operations based on current rate
making practices.

Interest  Expense  and Other   The Company's interest expense  increased
$2.7  million, $4.6 million and $7.9 million during the three,  six  and
twelve month periods, respectively ($1.8 million, $3.2 million and  $2.8
million  at  Utilities), primarily because of increases in  the  average
amount  of short-term debt outstanding at Utilities, the average  amount
of borrowings under Diversified's credit facility and a higher amount of
long-term debt outstanding at Utilities.  The twelve month increase  was
partially  offset by lower average interest rates, rate refund  interest
recorded  in 1995 at Utilities and the effects of an interest rate  swap
agreement at Diversified.

      Miscellaneous, net for the Company reflects comparative  decreases
in  income of ($2.6) million, ($4.1) million and ($11.4) million  during
the  three, six and twelve month periods, respectively (($1.9)  million,
($2.5)  million  and ($8.6) million at Utilities).  The recording  of  a
$2.5   million   reserve  for  non-utility  investments   at   Utilities
contributed  to  the decrease for all three periods.  The  twelve  month
decrease  was  also due to approximately $7.8 million in costs  incurred
relating  to  the  successful defense of the  hostile  takeover  attempt
mounted  by  MAEC  and  certain  property  write-downs  at  Diversified.
Dividends  received  from  the two New Zealand  entities  in  which  the
company  has investments partially offset these items during the  twelve
month period.

Income  Taxes    The  Company's  income  tax  expense  decreased  ($3.3)
million,  ($6.1) million and ($7.0) million during the  three,  six  and
twelve month periods, respectively (($0.3) million, ($1.8) million)  and
($4.1)  million at Utilities).  The decreases were primarily due  to  1)
lower  pretax  income, 2) the impact of a tax deduction  ($1.4  million)
resulting  from  the  contribution of 300,000 shares  of  the  Company's
investment  in McLeodUSA Inc. (McLeod) to the IES Charitable  Foundation
and  3)  reserves recorded during the first and second quarters of  1996
related  to an Internal Revenue Service (IRS) audit for tax years  1991-
1993.


                     LIQUIDITY AND CAPITAL RESOURCES

      The  Company's capital requirements are primarily attributable  to
Utilities' construction programs, its debt maturities and the  level  of
Diversified's  business opportunities.  The Company's  pretax  ratio  of
times interest earned was 2.71 and 3.26 for the twelve months ended June
30,  1997  and  June 30, 1996, respectively.  Cash flows from  operating
activities for the twelve months ended June 30, 1997 and June  30,  1996
were $188 million and $207 million, respectively.

      The  Company anticipates that future capital requirements will  be
met by cash generated from operations and external financing.  The level
of  cash  generated from operations is partially dependent upon economic
conditions,  legislative activities, environmental  matters  and  timely
regulatory recovery of Utilities' costs.  See Notes 3 and 7 of the Notes
to  Consolidated  Financial Statements as well  as  the  Company's  1996
Annual Report on Form 10-K.

      Access to the long-term and short-term capital and credit markets,
and  costs  of  external  financing,  are  dependent  on  the  Company's
creditworthiness.  The Company's debt ratings are as follows:

                                       Moody's    Standard & Poor's
                                            
     Utilities   - Long-term debt        A2               A
                 - Commercial paper      P1              A1
                                            
     Diversified - Commercial paper      P2              A2

      The Company's liquidity and capital resources will be affected  by
environmental, regulatory and competitive issues, including the ultimate
disposition   of   remediation   issues   surrounding   the    Company's
environmental liabilities and the Clean Air Act as amended, as discussed
in  Note  7  of the Notes to Consolidated Financial Statements  and  the
Company's  1996 Annual Report on Form 10-K, and emerging competition  in
the  electric utility industry as discussed in the Competition  section.
Consistent  with rate making principles of the IUB, management  believes
that  the  costs incurred for the above matters will not have a material
adverse effect on the financial position or results of operations of the
Company.

     At June 30, 1997, Utilities had approximately $66 million of energy
efficiency program costs recorded as regulatory assets.  See  Note  3(b)
of  the  Notes to Consolidated Financial Statements for a discussion  of
the recovery of these costs.

      At  June  30, 1997, the Company had a $29.0 million investment  in
Class  A  common stock of McLeod and vested options that, if  exercised,
would  represent an additional investment of approximately $2.3  million
(1.3  million shares).  McLeod provides local, long-distance  and  other
telecommunications services.  See Note 5(b) of the Notes to Consolidated
Financial Statements for further information on the Company's investment
in McLeod.

      The  Company  has financial guarantees amounting to $22.2  million
outstanding  at  June  30,  1997,  which  are  not  reflected   in   the
consolidated financial statements.  Such guarantees are generally issued
to  support third-party borrowing arrangements and similar transactions.
The  Company  believes that any possible cash payments  associated  with
these  agreements  will  not  have  a material  adverse  effect  on  the
financial position or results of operations of the Company.

     The Company continues to explore domestic investment opportunities,
including   investments   in   the  domestic  utility   business.   Such
investments could be significant.

      At  June 30, 1997, the Company had approximately $46.5 million  of
investments  in  foreign  entities  (see  Note  5(a)  of  the  Notes  to
Consolidated  Financial  Statements  for  a  further  discussion).    In
addition,  the  Company  also continues to explore  other  international
investment opportunities.  Such investments may carry a higher level  of
risk than the Company's traditional utility investments or Diversified's
domestic  investments.   Such  risks could  include  foreign  government
actions,  foreign economic and currency risks and others.   The  Company
may  also  incur  business development expenses for  potential  projects
pursued  by  the  Company that may never materialize.   The  Company  is
striving to select international investments where these risks are  both
understood and manageable.

      The Resale Power Group of Iowa (RPGI), consisting of virtually all
of  Utilities' wholesale customers, has notified Utilities that it  will
not  purchase its power supply from Utilities after December  31,  1998.
It  is  possible that certain RPGI customers will drop out  of  RPGI  in
order  to remain as Utilities' customers; to-date, three customers  have
signed  contracts  to  remain with Utilities.  All RPGI  customers  will
continue to purchase transmission services from Utilities after December
31,  1998.  While the Company cannot determine the outcome of this issue
at  this time, the result will not have a material adverse effect on its
financial   position  or  results  of  operations  given  1)  Utilities'
wholesale  sales  only account for approximately 5% of Utilities'  total
electric  sales, excluding off-system sales; 2) Utilities currently  has
to supplement its generating capability with purchased power to meet its
sales load; 3) Utilities' annual electric sales growth rate continues to
be  strong;  and  4)  Utilities will continue  to  realize  transmission
revenues from such customers.

     Under provisions of the Merger Agreement, there are restrictions on
the  amount  of  common stock and long-term debt the Company  can  issue
pending  the  merger.  The Company does not expect the  restrictions  to
have  a  material  effect  on its ability to  meet  its  future  capital
requirements.


                  CONSTRUCTION AND ACQUISITION PROGRAM

      The  Company's  construction and acquisition  program  anticipates
expenditures   of  approximately  $225  million  for  1997,   of   which
approximately  $147  million represents expenditures  at  Utilities  and
approximately  $78 million represents expenditures at  Diversified.   Of
the $147 million of Utilities' expenditures, 39% represents expenditures
for  electric  transmission and distribution facilities, 21%  represents
electric  generation expenditures, 21% represents information technology
expenditures  and  5% represents gas expenditures.   The  remaining  14%
represents  miscellaneous  electric,  steam  and  general  expenditures.
Diversified's anticipated expenditures include approximately $75 million
for   domestic   and   international  energy-related  construction   and
acquisition  expenditures.  The Company had construction and acquisition
expenditures of approximately $84 million for the six months ended  June
30,  1997,  including approximately $48 million of utility  expenditures
and $36 million of non-utility expenditures.

      The  Company's levels of construction and acquisition expenditures
are  projected  to  be  $208  million in 1998,  $212  million  in  1999,
$182  million  in 2000 and $198 million in 2001.  It is  estimated  that
virtually  all  of Utilities' construction and acquisition  expenditures
will  be  provided by cash from operating activities (after  payment  of
dividends)  for  the  five-year period 1997-2001.  Financing  plans  for
Diversified's construction and acquisition program will vary,  depending
primarily on the level of energy-related acquisitions.

      Capital expenditure and investment and financing plans are subject
to  continual review and change.  The capital expenditure and investment
programs may be revised significantly as a result of many considerations
including changes in economic conditions, variations in actual sales and
load  growth  compared  to  forecasts,  requirements  of  environmental,
nuclear  and  other  regulatory authorities,  acquisition  and  business
combination  opportunities, the availability  of  alternate  energy  and
purchased power sources, the ability to obtain adequate and timely  rate
relief,  escalations in construction costs and conservation  and  energy
efficiency programs.

     Under provisions of the Merger Agreement, there are restrictions on
the  amount of construction and acquisition expenditures the Company can
make  pending  the merger.  The Company does not expect the restrictions
to  have  a  material effect on its ability to implement its anticipated
construction and acquisition program.


                           LONG-TERM FINANCING

      Other  than  Utilities' periodic sinking fund requirements,  which
Utilities intends to meet by pledging additional property, the following
long-term debt will mature prior to December 31, 2001:

                                         (in millions)
         Utilities                          $ 184.0
         Diversified's credit facility        190.9
         Other subsidiaries' debt              11.0
                                            $ 385.9

      The  Company  intends  to  refinance  the  majority  of  the  debt
maturities with long-term securities.

      In  August  1997, Utilities issued $135 million of  6-5/8%  Senior
Debentures, due 2009.  The proceeds from these debentures were  used  to
reduce Utilities' short-term borrowings.

      Utilities  repaid at maturity $8 million of 6-1/8% First  Mortgage
Bonds during the second quarter of 1997.

     Also in the second quarter of 1997, Utilities issued $55 million of
Collateral Trust Bonds, 6.875%, due 2007.  Holders thereof may elect  to
have their Collateral Trust Bonds redeemed, in whole but not in part, on
May  1,  2002,  at  100% of the principal amount thereof,  plus  accrued
interest.   The proceeds from the Collateral Trust Bonds  were  used  to
refinance  $15  million of Series L, 7.875% First  Mortgage  Bonds,  $30
million  of  Series M, 7.625% First Mortgage Bonds and  $10  million  of
7.375% First Mortgage Bonds.

      In  1993, Utilities entered into an Indenture of Mortgage and Deed
of Trust dated as of September 1, 1993 (New Mortgage).  The New Mortgage
provides for, among other things, the issuance of Collateral Trust Bonds
upon  the basis of First Mortgage Bonds being issued by Utilities.   The
lien  of the New Mortgage is subordinate to the lien of Utilities' first
mortgages  until such time as all bonds issued under the first mortgages
have  been  retired and such mortgages satisfied.  Accordingly,  to  the
extent  that  Utilities issues Collateral Trust Bonds on  the  basis  of
First  Mortgage  Bonds,  it must comply with the  requirements  for  the
issuance  of  First  Mortgage  Bonds under Utilities'  first  mortgages.
Under  the  terms of the New Mortgage, Utilities has covenanted  not  to
issue  any  additional First Mortgage Bonds under  its  first  mortgages
except to provide the basis for issuance of Collateral Trust Bonds.

      The  indentures pursuant to which Utilities issues First  Mortgage
Bonds  constitute  direct first mortgage liens  upon  substantially  all
tangible  public utility property and contain covenants  which  restrict
the  amount of additional bonds which may be issued.  At June 30,  1997,
such  restrictions  would  have allowed  Utilities  to  issue  at  least
$233 million of additional First Mortgage Bonds.

      In  order  to provide an instrument for the issuance of  unsecured
subordinated debt securities, Utilities entered into an Indenture  dated
December  1,  1995 (Subordinated Indenture). The Subordinated  Indenture
provides for, among other things, the issuance of unsecured subordinated
debt  securities.   Any  debt securities issued under  the  Subordinated
Indenture  are  subordinate  to all senior  indebtedness  of  Utilities,
including  First  Mortgage  Bonds, Collateral  Trust  Bonds  and  Senior
Debentures.

      In  order  to  provide an instrument for the  issuance  of  senior
unsecured debt securities, Utilities entered into an Indenture dated  as
of  August  1, 1997 (Senior Unsecured Indenture).  The Senior  Unsecured
Indenture  provides  for, among other things,  the  issuance  of  senior
unsecured debt securities.  Any debt securities issued under the  Senior
Unsecured   Indenture   will  rank  on  parity  with   other   unsecured
unsubordinated debt of the Company.

      Subsequent to the issuance of $135 million of Senior Debentures in
August  1997, Utilities does not have any remaining authority  to  issue
additional  long-term debt under either the current FERC docket  or  the
current   Securities   and  Exchange  Commission  shelf   registrations.
Utilities  plans  to  evaluate  future  needs  for  authority  to  issue
additional long-term debt.

      Diversified  has  a  variable rate credit  facility  that  extends
through  November  20,  1999, with two one-year  extensions  potentially
available  to  Diversified.   Refer  to  Note  6(a)  of  the  Notes   to
Consolidated  Financial  Statements for a  further  discussion  of  this
credit facility.

      The Articles of Incorporation of Utilities authorize and limit the
aggregate amount of additional shares of Cumulative Preference Stock and
Cumulative  Preferred  Stock that may be  issued.   At  June  30,  1997,
Utilities  could have issued an additional 700,000 shares of  Cumulative
Preference  Stock and 100,000 additional shares of Cumulative  Preferred
Stock.   In  addition,  Industries had 5,000,000  shares  of  Cumulative
Preferred  Stock, no par value, authorized for issuance, none  of  which
were outstanding at June 30, 1997.

      The  Company's  capitalization ratios at June  30,  1997  were  as
follows:

                        
     Long-term debt       53%
     Preferred stock       1
     Common equity        46
                         100%


     Under provisions of the Merger Agreement, there are restrictions on
the  amount  of  common stock and long-term debt the Company  can  issue
pending  the  merger.  The Company does not expect the  restrictions  to
have  a  material  effect  on its ability to  meet  its  future  capital
requirements.


                          SHORT-TERM FINANCING

      For  interim  financing, Utilities is authorized by  the  FERC  to
issue,  through  1998,  up  to $200 million  of  short-term  notes.   In
addition   to   providing  for  ongoing  working  capital  needs,   this
availability  of short-term financing provides Utilities flexibility  in
the  issuance of long-term securities.  At June 30, 1997, Utilities  had
outstanding  short-term  borrowings of $150 million.   In  August  1997,
Utilities issued $135 million of Senior Debentures and used the proceeds
to reduce Utilities' short-term borrowings.

     Utilities has an agreement, which expires in 1999, with a financial
institution  to  sell,  with limited recourse, an  undivided  fractional
interest  of  up  to  $65  million  in  its  pool  of  utility  accounts
receivable.  At June 30, 1997, Utilities had sold $65 million under  the
agreement.

      At June 30, 1997, the Company had bank lines of credit aggregating
$160.1  million. Utilities was using $145 million to support  commercial
paper  (weighted  average interest rate of 6.13%) and $11.1  million  to
support certain pollution control obligations.  Commitment fees are paid
to  maintain these lines and there are no conditions which restrict  the
unused  lines  of  credit.  In addition to the above, Utilities  has  an
uncommitted credit facility with a financial institution whereby it  can
borrow up to $40 million.  Rates are set at the time of borrowing and no
fees are paid to maintain this facility.  At June 30, 1997, there was $5
million outstanding under this facility (weighted average interest  rate
of 5.98%).


                          ENVIRONMENTAL MATTERS
                                    
      Utilities has been named as a Potentially Responsible Party  (PRP)
by  various federal and state environmental agencies for 28 FMGP  sites.
Utilities  has recorded environmental liabilities related  to  the  FMGP
sites  of  approximately $35 million (including $4.7 million as  current
liabilities)  at June 30, 1997.  Regulatory assets of approximately  $35
million,  which  reflect  the future recovery  that  is  being  provided
through Utilities' rates, have been recorded in the Consolidated Balance
Sheets.   Considering  the current rate treatment allowed  by  the  IUB,
management  believes that the clean-up costs incurred by  Utilities  for
these  FMGP  sites  will  not  have a material  adverse  effect  on  its
financial position or results of operations.  Refer to Note 7(a) of  the
Notes  to  Consolidated Financial Statements for a  further  discussion,
including a discussion of a lawsuit filed by Utilities seeking  recovery
of FMGP-related costs from its insurance carriers.

      The  Clean  Air  Act  Amendments of 1990 (Act)  requires  emission
reductions of sulfur dioxide (SO2) and nitrogen oxides (NOx) to  achieve
reductions  of atmospheric chemicals believed to cause acid  rain.   The
acid  rain program under the Act also governs SO2 allowances.   The  Act
and  other  federal  laws also require the United  States  Environmental
Protection  Agency (EPA) to study and regulate, if necessary, additional
issues  that potentially affect the electric utility industry, including
emissions  relating  to NOx and mercury, toxic release  inventories  and
modifications to the PCB rules.  In July 1997, the EPA issued new  rules
pertaining to ozone and particulate matter emissions.

     In 1995, the EPA published the Sulfur Dioxide Network Design Review
for Cedar Rapids, Iowa, which, based on the EPA's assumptions and worst-
case  modeling  method  suggests that the Cedar  Rapids  area  could  be
classified  as  "nonattainment" for the  National  Ambient  Air  Quality
Standards  established for SO2.  The worst-case modeling study suggested
that  two of Utilities' generating facilities contribute to the  modeled
exceedences.   Utilities  entered into a Consent  Order  with  the  Iowa
Department  of Natural Resources in the third quarter of  1997  on  this
issue.

      Pursuant  to a routine review of operations, Utilities  determined
that  certain changes undertaken during the previous three years at  one
of   its  power  plants  may  have  required  a  federal  Prevention  of
Significant Deterioration (PSD) permit.  Refer to Note 7(b) of the Notes
to  Consolidated  Financial Statements for a further discussion  of  the
above mentioned air quality issues.

      The  National Energy Policy Act of 1992 requires owners of nuclear
power  plants  to  pay  a special assessment into a "Uranium  Enrichment
Decontamination and Decommissioning Fund."  Refer to Note  7(a)  of  the
Notes to Consolidated Financial Statements for a further discussion.

     The Nuclear Waste Policy Act of 1982 (NWPA) assigned responsibility
to  the U.S. Department of Energy (DOE) to establish a facility for  the
ultimate  disposition  of high level waste and spent  nuclear  fuel  and
authorized the DOE to enter into contracts with parties for the disposal
of such material beginning in January 1998.  Utilities entered into such
a  contract  and has made the agreed payments to the Nuclear Waste  Fund
(NWF)  held  by  the U.S. Treasury, however, Utilities  has  since  been
formally notified by the DOE that they anticipate being unable to  begin
acceptance of spent nuclear fuel by January 31, 1998.  Furthermore,  the
DOE  has  experienced  significant delays in its  efforts  and  material
acceptance  is  now  expected to occur no earlier  than  2010  with  the
possibility of further delay being likely.  Utilities is evaluating  and
pursuing  multiple  options  including  litigation  and  legislation  to
protect its customers and its contractual and statutory rights that  are
diminished   by   delays  in  the  DOE  program.    The   NWPA   assigns
responsibility of interim storage of spent nuclear fuel to generators of
such  spent  nuclear fuel, such as Utilities.  In accordance  with  this
responsibility,  Utilities has been storing spent nuclear  fuel  on-site
since  plant operations began in 1974 and has current on-site capability
to  store  spent  fuel until 2001.  Utilities is reviewing  options  for
expanding  on-site  storage  and according to  their  current  analysis,
construction  of  an  on-site storage facility  with  dry  cask  modular
capability  is  the most favorable option.  Analysis and  discussion  of
this and other options continues.

      The  Low-Level  Radioactive Waste Policy Amendments  Act  of  1985
mandated that each state must take responsibility for the storage of low-
level radioactive waste produced within its borders.  The State of  Iowa
is  a  member  of  the  Midwest Interstate Low-Level  Radioactive  Waste
Compact  Commission (Compact), which is responsible for any  development
of  new disposal capability within the member states of the Compact.  In
June  1997,  the Compact commissioners voted to discontinue  work  on  a
proposed  waste  disposal  facility in the State  of  Ohio  because  the
expected  cost  of  such  a facility was comparably  higher  than  other
options  currently available.  At June 30, 1997, Utilities  had  prepaid
costs  of  approximately $1.1 million to the Compact.   The  Compact  is
currently  evaluating its plans for the future.  Utilities continues  to
ship the waste it produces to a disposal facility located near Barnwell,
South  Carolina, thereby minimizing the amount of low-level waste stored
on-site.  Utilities  has  on-site  storage  capability  that  would   be
available  in  the  event of disruptions of shipments  to  the  Barnwell
facility.

      Whiting  is  responsible for certain dismantlement and abandonment
costs  related  to various off-shore oil and gas properties.   Refer  to
Note  7(a)  of  the  Notes to Consolidated Financial  Statements  for  a
further discussion.


                              OTHER MATTERS

Labor  Issues   Utilities  has  six  collective  bargaining  agreements,
covering  approximately 54% of its workforce.  None  of  the  agreements
expires in 1997.

Financial   Derivatives    The  Company  has  a  policy  that  financial
derivatives are to be used only to mitigate business risks and  not  for
speculative  purposes.  Derivatives have been used by the Company  on  a
very  limited  basis.   At  June 30, 1997, the only  material  financial
derivatives  outstanding  for the Company were  an  interest  rate  swap
agreement at Diversified and gas futures contracts at IEA.

Accounting Pronouncements   SFAS 128, Earnings Per Share, was issued  by
the FASB in the first quarter of 1997.  SFAS 128 deals with, among other
issues,  the  computation and disclosure of earnings per  share  amounts
when a company has stock options, warrants and/or convertible securities
outstanding.   SFAS 128 is effective for periods ending  after  December
15, 1997, and is not expected to have a material impact upon adoption.

     SFAS 130, Reporting Comprehensive Income, was issued by the FASB in
the  second  quarter  of  1997.   SFAS  130  establishes  standards  for
reporting  of comprehensive income and its components in a full  set  of
general purpose financial statements.  SFAS 130 will require the Company
to  report a total for comprehensive income which includes, among  other
items (a) unrealized holding gains / losses  on securities classified as
available-for-sale  under  SFAS 115, (b)  foreign  currency  translation
adjustments  accounted  for  under SFAS  52,  and  (c)  minimum  pension
liability  adjustments made pursuant to SFAS 87.  SFAS 130 is  effective
for periods beginning after December 15, 1997.

      SFAS  131, Disclosures About Segments of an Enterprise and Related
Information, was issued by the FASB in the second quarter of 1997.  SFAS
131  requires disclosures for each business segment that are similar  to
those  required under current standards with the addition  of  quarterly
disclosure   requirements  and  a  finer  partitioning   of   geographic
disclosures.  SFAS 131 is effective for periods beginning after December
15, 1997.

Joint  Venture    On June 11, 1997, WPLH announced the  formation  of  a
joint venture with Cargill.  The joint venture, to be named Cargill-IEC,
will  be an energy-commodity trading company that will offer a range  of
energy  trading,  marketing and risk management  services  to  wholesale
electric  customers.  Power trading will begin under the  joint  venture
upon  receipt  of a FERC license which is anticipated during  the  third
quarter of 1997.  Interstate Energy Corporation will ultimately  be  the
formal partner with Cargill in the new joint venture.

Inflation    The  Company does not expect the effects  of  inflation  at
current levels to have a significant effect on its financial position or
results of operations.


                       PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

     On April 30, 1996, Utilities filed suit, IES Utilities Inc. v. Home
Ins.  Co.,  et al., No. 4-96-CV-10343 (S.D. Iowa filed Apr.  30,  1996),
against  various  insurers who had sold comprehensive general  liability
policies  to  Iowa  Southern Utilities Company (ISU) and  Iowa  Electric
Light  and Power Company (IE) (Utilities was formed as the result  of  a
merger  of  ISU and IE).  The suit seeks judicial determination  of  the
respective  rights  of the parties, a judgment that  each  defendant  is
obligated  under its respective insurance policies to pay  in  full  all
sums  that  Utilities  has  become or may become  obligated  to  pay  in
connection  with  its  defense  against  allegations  of  liability  for
property  damage  at  and around Former Manufactured  Gas  Plant  (FMGP)
sites,  and  indemnification for all sums that  it  has  or  may  become
obligated   to  pay  for  the  investigation,  mitigation,   prevention,
remediation  and monitoring of damage to property, including  damage  to
natural  resources  like  groundwater, at and  around  the  FMGP  sites.
Settlement  discussions  are  proceeding  between  Utilities   and   its
insurance  carriers regarding the recovery of these FMGP-related  costs.
Settlement  has  been  reached with five carriers and  an  agreement  in
principle has been reached with three other carriers thus  far.  Amounts
received   from  insurance  carriers  are  being  deferred   pending   a
determination of the regulatory treatment of such recoveries.

     Industries, Diversified, IES Energy Inc. (a wholly-owned subsidiary
of  Diversified), MicroFuel Corporation (the Corporation) now  known  as
Ely,  Inc. in which IES Energy has a 69.40% equity ownership, and  other
parties  have  been sued in Linn County District Court in Cedar  Rapids,
Iowa, by Allen C. Wiley.  Mr. Wiley claims money damages on various tort
and  contract theories arising out of the 1992 sale of the assets of the
Corporation, of which Mr. Wiley was a director and shareholder.  All  of
the  defendants  in Mr. Wiley's suit answered the complaint  and  denied
liability.  Industries and Diversified were dismissed from the suit in a
motion  for summary judgment.  In addition, a grant of summary  judgment
has  reduced Mr. Wiley's claims against the remaining parties to  breach
of  fiduciary duty.  A separate motion for summary judgment,  which  was
filed  seeking  dismissal of the remaining claims against the  remaining
parties, was overruled on September 20, 1996, and the trial has been set
for  May  1998.   All  of the defendants are vigorously  contesting  the
claims.

      The  Corporation commenced a separate suit to determine  the  fair
value of Mr. Wiley's shares under Iowa Code section 490.  A decision was
issued on August 31, 1994, by the Linn County District Court ruling that
the  value  of Mr. Wiley's shares was $377,600 based on a  40  cent  per
share valuation. The Corporation contended that the value of Mr. Wiley's
shares  was 2.5 cents per share.  The Decision was appealed to the  Iowa
Supreme  Court  by the Corporation on a number of issues, including  the
Corporation's position that the trial court erred as a matter of law  in
discounting the testimony of the Corporation's expert witness.  The Iowa
Supreme  Court  assigned  the case to the Iowa  Court  of  Appeals.   On
February 2, 1996, the Iowa Court of Appeals reversed the District  Court
ruling  after  determining the District Court erred in  discounting  the
expert testimony.  The case was remanded back to the District Court  for
consideration  of the expert testimony, but with no additional  evidence
taken.   The District Court re-affirmed its original decision on  August
28,  1996,  and the Corporation has again appealed to the  Iowa  Supreme
Court.

     On October 3, 1996, Lambda Energy Marketing Company, L. C. (Lambda)
filed  a  request  with the IUB that the IUB initiate  formal  complaint
proceedings  against  Utilities.   Lambda  alleges  that  Utilities   is
discriminating  against it by refusing to enter into contracts  with  it
for remote displacement service and by favoring IEA, a subsidiary of the
Company,  in  such  matters.  On October 17,  1996,  Utilities  filed  a
Response  which  denied the allegations, and alleged, inter  alia,  that
Lambda is unlawfully attempting to provide retail electrical services in
Utilities' exclusive service territory.  The IUB hearings were  held  in
March 1997.  A decision is expected in the third quarter of 1997.

      On  October  9, 1996, the Company filed a civil suit in  the  Iowa
District  Court  in and for Linn County against Lambda,  Robert  Latham,
Louie  Ervin, and David Charles (three former employees of  the  Company
and/or its subsidiaries), collectively the "Defendants", alleging, inter
alia,  violations  of  Iowa's trade secret  act  and  interference  with
existing  and prospective business advantage.  On November 1, 1996,  the
Defendants  filed their Answer and Counterclaims alleging,  inter  alia,
violation  of Iowa competition law, tortious interference and commercial
disparagement.   The  Defendants  therewith  also  filed  a  Third-Party
Petition  against Utilities, IEA and Lee Liu, Chairman of  the  Board  &
Chief  Executive  Officer of Industries and Utilities,  alleging,  inter
alia,  tortious interference and commercial disparagement.  On April  9,
1997,   Utilities  amended  its  suit  to  include  Central  Iowa  Power
Cooperative alleging that it, too, inter alia had violated Iowa's  trade
secret  act, and had tortiously interfered with existing and prospective
business advantage.

      Reference  is  made  to  Notes 3 and 7  of  Industries'  Notes  to
Consolidated  Financial Statements for a discussion of  Utilities'  rate
proceedings  and the Company's environmental matters, respectively,  and
Item  2.  Management's  Discussion  and  Analysis  of  the  Results   of
Operations and Financial Condition - Environmental Matters.

Item 2.  Changes in the Rights of the Company's Security Holders.

None.

Item 3.  Default Upon Senior Securities.

None.

Item 4.  Results of Votes of Security Holders.

(a)  The  Company  held its Annual Meeting of Shareholders  on  May  22,
     1997.

(b)  The  following  matter  was voted upon at  the  Annual  Meeting  of
     Shareholders:

     The  election of nominees for Directors who will serve  a  one-year
     term  or  until their respective successors shall be duly  elected.
     The nominees were all elected.  The number of votes for, against or
     withheld, and non-votes for each nominee were as follows:

                                       AGAINST /        
                           FOR         WITHHELD    NON-VOTES
                                           
C.R.S. Anderson         25,048,497     440,103     4,726,840
J. Wayne Bevis          25,146,326     342,274     4,726,840
Lee Liu                 25,131,871     356,729     4,726,840
Jack R. Newman          25,127,426     361,174     4,726,840
Robert D. Ray           25,106,928     381,672     4,726,840
David Q. Reed           25,137,718     350,882     4,726,840
Henry Royer             25,140,584     348,016     4,726,840
Robert W. Schlutz       25,166,322     322,278     4,726,840
Anthony R. Weiler       25,139,887     348,713     4,726,840


Item 5.  Other Information.

(a)  IES  Utilities Inc. has calculated their ratio of earnings to fixed
     charges  pursuant to Item 503 of Regulation S-K of  the  Securities
     and Exchange Commission as follows:

     For the twelve months ended:
          June 30, 1997            3.00
          December 31, 1996        3.23
          December 31, 1995        3.04
          December 31, 1994        3.18
          December 31, 1993        3.41
          December 31, 1992        2.49


Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits -

     4(a)    Fifth Supplemental Indenture, dated as of April  1,
             1997, supplementing Utilities' Indenture of Mortgage and  Deed
             of  Trust, dated September 1, 1993.  (Filed as Exhibit 4(a) to
             Industries'  Form 10-Q for the quarter ended  March  31,  1997
             (File No. 1-9187)).
       
     4(b)    Sixty-third Supplemental Indenture,  dated  as  of
             April  1, 1997, supplementing Utilities' Indenture of Mortgage
             and  Deed  of Trust, dated August 1, 1940. (Filed  as  Exhibit
             4(b) to Industries' Form 10-Q for the quarter ended March  31,
             1997 (File No. 1-9187)).
       
     4(c)    Commercial  Paper Dealer Agreement,  dated  as  of
             November  9,  1994, between IES Diversified Inc. and  Citicorp
             Securities, Inc. (Filed as Exhibit 4(c) to Industries' Form 10-
             Q for the quarter ended March 31, 1997 (File No. 1-9187)).
       
     4(d)    First Amendment, dated as of March 24, 1997, to the
             Commercial  Paper Dealer Agreement, dated as  of  November  9,
             1994,  between  IES Diversified Inc. and Citicorp  Securities,
             Inc.  (Filed as Exhibit 4(d) to Industries' Form 10-Q for  the
             quarter ended March 31, 1997 (File No. 1-9187)).
       
     4(e)    Indenture (For Senior Unsecured Debt  Securities),
             dated  as  of August 1, 1997, between Utilities and The  First
             National Bank of Chicago, as Trustee.  (Filed as Exhibit  4(j)
             to Utilities' Registration Statement, File No. 333-32097).
       
    10(a)    Receivables Purchase and Sale Agreement dated as of
             June  30,  1989,  as Amended and Restated as of  February  28,
             1997, among IES Utilities Inc. (as Seller) and CIESCO L.P. (as
             the  Investor)  and Citicorp North America, Inc.  (as  Agent).
             (Filed  as  Exhibit  10(a) to Industries' Form  10-Q  for  the
             quarter ended March 31, 1997 (File No. 1-9187)).
  
   *10(b)    Director Retirement Plan.
     
   *12       Ratio of Earnings to Fixed Charges (IES Utilities Inc.)
       
   *27(a)    Financial Data Schedule (IES Industries Inc.)

   *27(b)    Financial Data Schedule (IES Utilities Inc.)

   *  Exhibits designated by an asterisk are filed herewith.


(b) Reports on Form 8-K -

     IES Industries Inc.

     None.

     IES Utilities Inc.

          Items Reported       Financial Statements       Date of Report
                                                                
                 5                     None               April 28,1997
                 5                     None               July 29,  1997  



                               SIGNATURES




      Pursuant  to  the requirements 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.



                                  IES INDUSTRIES INC.
                                      (Registrant)




Date:  August 13, 1997            By /s/           Thomas M. Walker
                                                      (Signature)
                                                   Thomas M. Walker
                                              Executive Vice President &
                                               Chief Financial Officer
                                                                             
                                                   
                                                   
                                                     
                                  By /s/           John E. Ebright
                                                     (Signature)
                                                   John E. Ebright
                                        Controller & Chief Accounting Officer



                               SIGNATURES




      Pursuant  to  the requirements 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.



                                   IES UTILITIES INC.
                                      (Registrant)




Date:  August 13, 1997             By /s/           Thomas M. Walker
                                                      (Signature)
                                                    Thomas M. Walker
                                               Executive Vice President &
                                                Chief Financial Officer
                                                    
                                                    
                                                    
                                                    
                                   By /s/           John E. Ebright
                                                      (Signature)
                                                    John E. Ebright
                                         Controller & Chief Accounting Officer