UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

   [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES 
        EXCHANGE ACT OF 1934
        For the quarterly period ended March 31, 1998

                                    or

   [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 
        For the transition period from ______ to _______


                       Name of Registrant, State of
                       Incorporation,                           IRS Employer
    Commission         Address of Principal Executive         Identification
    File Number        Offices and Telephone Number                   Number

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


   Indicate by check mark whether the registrant (1) has filed all reports
   required to be filed by Section 13 or 15 (d) of the Securities Exchange
   Act of 1934 during the preceding 12 months (or for such shorter period
   that the registrant was required to file such reports) and (2) has been
   subject to such filing requirements for the past (90) 
   days.  Yes   X      No _____

   Number of shares outstanding for each class of common stock as of 
   April 30, 1998:


    Common Stock, $2.50 par value,
    13,370,788 shares (all of which
    are owned beneficially and of
    record by Interstate Energy
    Corporation)

   <PAGE>

                                   CONTENTS

                                                                   Page
    Part I.    Financial Information

              Item 1.  Consolidated Financial Statements


                       Consolidated Statements of Income for the
                       Three Months Ended
                       March 31, 1998 and 1997                       4

                       Consolidated Balance Sheets as of March 31,   
                       1998 and December 31, 1997                    5

                       Consolidated Statements of Cash Flows for
                       the Three Months Ended
                       March 31, 1998 and 1997                       7

                       Notes to Consolidated Financial Statements    8

             Item 2.   Management's Discussion and Analysis of
                       Financial Condition and 
                       Results of Operations                         9

             Item 3.   Quantitative and Qualitative Disclosures     
                       About Market Risk                            20
                     

             Part II. Other Information                             21

             Item 1.  Legal Proceedings                             21

             Item 6.  Exhibits and Reports on Form 8-K              21

                      Signatures                                    22

   <PAGE>

                               IES UTILITIES INC.



                         PART I - FINANCIAL INFORMATION



                   ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS 



                                       IES UTILITIES INC.
                         CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

   <PAGE>

                                                  For the Three Months Ended
                                                           March 31,
                                                      1998              1997 
                                                         (in thousands)

    Operating revenues:
      Electric utility                               $140,649         $137,286 
      Gas utility                                      60,395           81,428 
      Other                                             7,234            7,684 
                                                     --------         --------
                                                      208,278          226,398 
                                                     --------         --------
    Operating expenses:

      Electric and steam production fuels              30,649           29,881 
      Purchased power                                  11,049           18,673 
      Cost of gas sold                                 37,657           60,791 
      Other operation                                  47,002           36,296 
      Maintenance                                      10,991           12,806 
      Depreciation and amortization                    24,335           23,470 
      Taxes other than income taxes                    12,306           11,893 
                                                     --------         --------
                                                      173,989          193,810 
                                                     --------         --------
    Operating income                                   34,289           32,588 
                                                     --------         --------
    Interest expense and other:
      Interest expense                                 13,075           12,306 
      Allowance for funds used during construction       (765)            (394)
      Miscellaneous, net                                  279             (420)
                                                      -------         --------
                                                       12,589           11,492 
                                                      -------         --------
    Income before income taxes                         21,700           21,096 
                                                      -------         --------
    Income taxes                                       10,040            9,245 
                                                      --------        --------
    Net income                                         11,660           11,851 
                                                      --------         --------
    Preferred dividend requirements                       229              229 
                                                      --------         --------
    Earnings available for common stock               $11,431          $11,622 
                                                      ========         ========


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

   <PAGE>

                       IES UTILITIES INC.
                  CONSOLIDATED BALANCE SHEETS

                                                     March 31,
                                                        1998       December 31,
    ASSETS                                           (Unaudited)       1997 
                                                     (in thousands, except
                                                           share amounts)
    Property, plant and equipment:

      Utility -

        Plant in service -
          Electric                                  $2,080,462       $2,072,866 
          Gas                                          188,069          187,098 
          Steam                                         55,374           55,374 
          Other                                         90,679           90,342 
                                                     ---------       ----------
                                                     2,414,584        2,405,680 
        Less - Accumulated depreciation              1,140,992        1,115,261
                                                     ---------       ----------
                                                     1,273,592        1,290,419

        Construction work in progress                  49,008            38,923 
        Leased nuclear fuel, net of amortization       33,761            36,731 
                                                     --------        ----------
                                                     1,356,361        1,366,073 

      Other property, plant and equipment, net
        of accumulated depreciation and 
        amortization of $1,774 and                                      
        $1,709, respectively                             5,696            5,762
                                                     ---------        ---------
                                                     1,362,057        1,371,835
                                                     ---------        ---------
    Current assets:

      Cash and temporary cash investments               42,276              230
      Accounts receivable:
        Customer, less allowance for doubtful 
          accounts of $632 and $630, respectively       24,368           29,259
        Other, less allowance for doubtful accounts
          of $276 and $224, respectively                12,237           10,142
      Production fuel, at average cost                  10,382           10,579
      Materials and supplies, at average cost           24,225           22,976
      Gas stored underground, at average cost            6,683           17,192
      Regulatory assets                                 34,930           36,330
      Prepayments and other                              7,451           11,680
                                                     ---------        ---------
                                                       162,552          138,388
                                                     ---------        ---------
    Investments:
      Nuclear decommissioning trust funds               80,476           77,882
      Other                                              5,370            5,167
                                                     ---------        ---------
                                                        85,846           83,049
                                                     ---------        ---------
    Other assets:
      Regulatory assets                                174,076          181,162
      Deferred charges and other                        11,850           12,393
                                                     ---------        ---------
                                                       185,926          193,555
                                                     ---------        ---------
                                                    $1,796,381       $1,786,827
                                                     =========        =========
 CAPITALIZATION AND LIABILITIES

 Capitalization:

      Common stock - par value $2.50 per share - 
        authorized 24,000,000 shares;
        13,370,788 shares outstanding                 $33,427           $33,427
      Additional paid-in capital                      279,042           279,042
      Retained earnings                               230,647           233,216
                                                     --------         ---------
        Total common equity                           543,116           545,685 
      Cumulative preferred stock, not 
        mandatorily redeemable - par value
        $50 per share - authorized 466,406 
        shares; 366,406 shares outstanding             18,320            18,320
      Long-term debt (excluding current portion)      601,915           651,848
                                                     --------         ---------
                                                    1,163,351         1,215,853
                                                    ---------         ---------
  Current liabilities:
      Capital lease obligations                        13,115            13,183
      Maturities and sinking funds                     50,140               140
      Accounts payable                                 49,931            63,282
      Dividends payable                                14,229               229
      Accrued payroll and vacations                     8,870             7,615
      Accrued interest                                 12,234            12,230
      Accrued taxes                                    73,531            58,996
      Accumulated refueling outage provision           11,905            10,606
      Environmental liabilities                         4,567             4,054
      Other                                            15,763            11,305
                                                     --------         ---------
                                                      254,285           181,640
                                                     --------         ---------
    Long-term liabilities:
      Pension and other benefit obligations            37,615            35,232
      Capital lease obligations                        20,646            23,549
      Environmental liabilities                        37,406            38,256
      Other                                            22,945            21,630
                                                     --------         ---------
                                                      118,612           118,667
                                                     --------         ---------
    Deferred credits:
      Accumulated deferred income taxes               228,944           238,829
      Accumulated deferred investment tax credits      31,189            31,838
                                                     --------         ---------
                                                      260,133           270,667
                                                     --------         ---------
                                                   $1,796,381        $1,786,827
                                                    =========         =========

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

   <PAGE>

                         IES UTILITIES INC.
          CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

     

                                                           For the Three Months
                                                              Ended March 31,
                                                            1998          1997
                                                              (in thousands)

    Cash flows from operating activities:
      Net income                                           $11,660      $11,851
      Adjustments to reconcile net income to net cash    
       flows from operating activities:
         Depreciation and amortization                      24,335       23,470
         Amortization of leased nuclear fuel                 4,010        3,369
         Amortization of deferred energy efficiency
           expenditures                                      6,070        1,900
         Deferred taxes and investment tax credits          (8,822)      (7,837)
         Refueling outage provision                          1,299        1,686
         Other                                                 319        1,332

      Other changes in assets and liabilities:
         Accounts receivable                                 2,796          692 
         Production fuel                                       197        1,281
         Materials and supplies                             (1,249)      (1,172)
         Gas stored underground                             10,509        5,470
         Accounts payable                                  (12,292)     (27,688)
         Accrued taxes                                      13,262       28,214
         Adjustment clause balances                          9,466       14,511
         Other                                               5,449        4,193
                                                          --------      -------
           Net cash flows from operating activities         67,009       61,272
                                                          --------      -------

    Cash flows used for financing activities:
        Common stock dividends                                   -      (14,000)
        Preferred stock dividends                             (229)        (229)
        Net change in short-term borrowings                      -       (9,000)
        Principal payments under capital lease 
          obligations                                       (4,106)      (2,296)
                                                          --------      -------
          Net cash flows used for financing 
          activities                                        (4,335)     (25,525)
                                                          --------     --------
    Cash flows used for investing activities:

        Construction expenditures                         (19,198)      (19,770)
        Deferred energy efficiency expenditures                 -        (4,014)
        Nuclear decommissioning trust funds                (1,502)       (1,502)
        Other                                                  72          (236)
                                                          -------      --------
          Net cash flows used for investing 
          activities                                      (20,628)      (25,522)
                                                          -------      --------
    Net increase in cash and temporary cash 
    investments                                            42,046        10,225 
                                                          -------      --------
    Cash and temporary cash investments at 
    beginning of period                                       230        11,608
                                                          -------       -------
    Cash and temporary cash investments at
    end of period                                         $42,276       $21,833
                                                          =======       =======
    Supplemental cash flow information:
      Cash paid during the period for:
        Interest                                          $12,378        $9,777
                                                          =======       =======
        Income taxes                                      $11,804         ($546)
                                                          =======       =======
      Noncash investing and financing 
        activities - Capital lease obligations
        incurred                                           $1,039          $112
                                                          =======       =======


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


   <PAGE>

   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

   1. The interim consolidated financial statements included herein have been
      prepared by IES Utilities Inc. (IESU), without audit, pursuant to the
      rules and regulations of the Securities and Exchange Commission. 
      Accordingly, certain information and footnote disclosures normally
      included in financial statements prepared in accordance with generally
      accepted accounting principles have been condensed or omitted, although
      management believes that the disclosures are adequate to make the
      information presented not misleading.  The consolidated financial
      statements include IESU and its consolidated wholly-owned subsidiary,
      IES Ventures Inc.  These financial statements should be read in
      conjunction with the financial statements and the notes included in
      IESU's latest Annual Report on Form 10-K.

      In the opinion of management, all adjustments, which are normal and
      recurring in nature, necessary for a fair presentation of (a) the
      consolidated results of operations for the three months ended March 31,
      1998 and 1997, (b) the consolidated financial position at March 31,
      1998 and December 31, 1997, and (c) the consolidated statement of cash
      flows for the three months ended March 31, 1998 and 1997, have been
      made.  Because of the seasonal nature of IESU's operations, results for
      the quarter ended March 31, 1998, are not necessarily indicative of
      results that may be expected for the year ending December 31, 1998. 
      Certain prior period amounts have been reclassified on a basis
      consistent with the 1998 presentation.


   2. On January 1, 1998, IESU adopted Statement of Financial Accounting
      Standards No. 130 (SFAS 130), Reporting Comprehensive Income.  SFAS 130
      establishes standards for reporting of comprehensive income and its
      components in a full set of general purpose financial statements.  SFAS
      130 requires reporting a total for comprehensive income which
      includes:  (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.  IESU had no
      comprehensive income in the periods presented.

    
   3. In April 1998, the three-way business combination between WPL Holdings,
      Inc., IES Industries Inc. and Interstate Power Company was
      consummated.  IESU is now a subsidiary of Interstate Energy
      Corporation which is doing business as Alliant Corporation.  See Item
      2, "Merger" for additional information.  
    
                 ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
             OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

                                     MERGER

   In April 1998, IES Industries Inc. (IES), the parent company of IES
   Utilities Inc. (IESU), WPL Holdings, Inc. (WPLH) and Interstate Power
   Company (IPC) completed a three-way merger (Merger) forming Interstate
   Energy Corporation.  Interstate Energy Corporation is currently doing
   business as Alliant Corporation (Alliant).  In connection with the Merger,
   IES was merged with and into WPLH forming Alliant and IPC became a
   subsidiary of Alliant.  In addition, following the Merger, the holding
   companies for the nonregulated businesses of the former WPLH and IES
   (Heartland Development Corporation (HDC) and IES Diversified Inc.
   (Diversified), respectively) were merged.  The resulting company from this
   merger was Alliant Industries, Inc.  As a result of the Merger, the first
   tier subsidiaries of Alliant include: Wisconsin Power & Light Company
   (WP&L), IESU, IPC, Alliant Industries, Inc. and Alliant Services Company 
   (the subsidiary formed to provide administrative services as required
   under the Public Utility Holding Company Act of 1935).  Among various
   other regulatory constraints, Alliant is operating as a registered public
   utility holding company subject to the limitations imposed by the Public
   Utility Holding Company Act of 1935.  For additional information regarding
   the terms of the Merger, refer to Note 2 of the "Notes to Consolidated
   Financial Statements" of IESU's 1997 Annual Report on Form  10-K. 

   Alliant currently anticipates cost savings resulting from the Merger of
   approximately $749 million over a ten-year period, net of transaction
   costs and costs to achieve the savings of approximately $78 million. 
   Approximately $32 million of costs had been incurred by the Merger
   partners through March 31, 1998.  Alliant estimates it will record an
   additional $32 million to $37 million of expenses in the second
   quarter of 1998.  Such expenses are primarily for, among other items,
   employee retirements and separations, the services of financial advisors,
   attorneys and accountants, and costs relating to the various regulatory
   approvals needed to complete the Merger.  The remainder of the $78 million
   will be incurred over the course of the next several years.  The estimate
   of potential cost savings constitutes a forward-looking statement and
   actual results may differ materially from this estimate.  The estimate is
   necessarily based upon various assumptions that involve judgments with
   respect to, among other things, future national and regional economic and
   competitive conditions, technological developments, inflation rates,
   regulatory treatments, weather conditions, financial market conditions,
   future business decisions and other uncertainties.  No assurance can be
   given that the entire amount of estimated cost savings will actually be
   realized. In addition, the allocation between the Alliant companies and
   their customers of the estimated cost savings of approximately $749
   million over ten years resulting from the Merger, net of costs incurred to
   achieve such savings, will be subject to regulatory review and approval. 

   As part of the approval process for the Merger, IESU agreed to various
   rate freezes not to exceed four years commencing on the effective date of
   the Merger (see "Liquidity and Capital Resources - Rates and Regulatory
   Matters" for a further discussion).  Assuming capture of the anticipated
   Merger-related synergies and no significant legislative or regulatory
   changes affecting IESU, IESU does not expect the Merger-related electric
   and natural gas price freezes to have a material adverse effect on its
   financial position or results of operations.

   FORWARD-LOOKING STATEMENTS

   Statements contained in this Quarterly Report on Form 10-Q (including
   MD&A) that are not of historical fact are forward-looking statements
   intended to qualify for the safe harbor from liability established by the
   Private Securities Litigation Reform Act of 1995.  From time to time, IESU
   (including its consolidated subsidiary) may make other forward-looking
   statements within the meaning of the federal securities laws that involve
   judgments, assumptions and other uncertainties beyond the control of IESU. 
   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 IESU'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 IESU 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 IESU's service territory, federal and state
   regulatory or government actions, unanticipated construction and
   acquisition expenditures, issues related to stranded costs and the
   recovery thereof, the operations of IESU's nuclear facility, unanticipated
   issues or costs associated with achieving Year 2000 compliance, the
   ability of Alliant to successfully integrate the operations of the parties
   to the Merger, unanticipated costs associated with certain environmental
   remediation efforts being undertaken by IESU and changes in the rate of
   inflation.

                            UTILITY INDUSTRY OUTLOOK

   IESU competes in an ever-changing utility industry.  Set forth below is an
   overview of this evolving marketplace.

   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., assets and other costs 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.

   IESU realized all of its electric and gas utility revenues in Iowa in the
   first quarter of 1998.  During the first quarter of 1998, approximately
   96% of the electric revenues were regulated by the Iowa Utilities Board
   (IUB) while the other 4% were regulated by the Federal Energy Regulatory
   Commission (FERC).

   Legislative action which would allow customers to choose their electric
   energy supplier is not expected in Iowa this year.  Nationwide, however,
   18 states (including Illinois and Michigan) have adopted legislative or
   regulatory plans to implement electric utility competition.  In March
   1998, the Clinton Administration unveiled its electric utility competition
   plan, proposing that states implement customer choice by January 1, 2003.

   Federal Regulation

   IESU is subject to regulation by the FERC.  The National Energy Policy Act
   of 1992 addresses several matters designed to promote competition in the
   electric wholesale power generation market.  In 1996, the 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.   In March 1997, FERC issued its orders on rehearing for
   Orders 888 and 889 (Orders 888-A and 889-A).   In response to FERC Orders
   888 and 888-A,  Alliant Services Company, on behalf of WP&L, IESU and IPC,
   filed an Open Access Transmission Tariff (Tariff) that complies with the
   orders.  The Tariff supersedes the transmission tariffs previously filed
   by the three utilities.  Upon receiving the final Merger-related
   regulatory order, a compliance tariff was filed by Alliant Services
   Company with the FERC.  This filing was made to comply with the FERC's
   merger order. In response to FERC Orders 889 and 889-A, IESU is
   participating in a regional Open Access Same-Time Information System.
    
   FERC Order 888 permits utilities to seek recovery of legitimate, prudent
   and verifiable stranded costs associated with providing open access
   transmission services.  FERC does not have jurisdiction over retail
   distribution and, consequently, 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 to have
   resulted from retail competition.

   IESU cannot predict the long-term consequences of these rules on its
   results of operations or financial condition.

   In April 1998, Alliant joined the Midwest Independent System Operator
   (Midwest ISO) for electric transmission and advised the FERC of its
   decision.  The Midwest ISO initially was filed with the FERC by nine
   energy companies in January 1998.  It would establish independent
   operation and control of the electric transmission system across a broad
   geographic area spanning from West Virginia to Missouri.  All buyers and
   sellers of electricity would have open access to the transmission system
   governed by the Midwest ISO.

   The FERC must review and approve the Midwest ISO proposal.  As part of its
   Merger proceedings, the FERC accepted Alliant's offer to file an ISO
   proposal in early 1998.  Alliant believes that its decision to join the
   Midwest ISO satisfies this agreement with the FERC.  Alliant also filed
   with the FERC a copy of a Wisconsin-only ISO proposal developed by
   Wisconsin Public Power Inc. (WPPI).  Alliant was ordered to include the
   WPPI proposal in its FERC filing by the Public Service Commission of
   Wisconsin (PSCW), which reviewed and commented upon Alliant's ISO filing
   with the FERC as a condition of merger approval in Wisconsin.  Alliant's
   decision to join the Midwest ISO also responds to electric-reliability
   legislation that was enacted in Wisconsin.  

   State Regulation

   IESU is subject to regulation by the IUB.  The 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.  The IUB 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 existing level of relative prices.  However, the IUB
   is continuing the analysis and debate on restructuring and retail
   competition in Iowa.

   On September 10, 1997, the IUB issued an order adopting an "Action Plan to
   Develop a Competitive Model for the Electric Industry in Iowa."  The IUB
   states in this action plan that while "the IUB has not determined retail
   competition in the electric industry is in the best interests of Iowa's
   consumers...", the State of Iowa is likely to be affected by federal or
   neighboring states' actions so there is a need for the IUB to design a
   model that suits Iowa's needs.  The priority concerns in the plan are
   public interest issues (an Iowa-specific pilot project, customer
   information and assessment, environmental impacts, public benefits and
   transition costs/benefits) and transmission-related issues (transmission
   and distribution system reliability and transmission system operations). 
   There is no timetable in the action plan.  On October 2, 1997, the IUB
   staff sent to the advisory group (of which IESU is a member) for written
   comment a set of proposed guidelines for an Iowa-specific electric pilot
   project that would allow retail access to a "subset of all customer
   classes."  IESU has indicated to the IUB its interest in pursuing such a
   pilot program.  The IUB has also issued an order covering unbundling of
   natural gas rates for all Iowa customers to be effective in 1999.

   Summary

   IESU complies with the provisions of Statement of Financial Accounting
   Standards No. 71 (SFAS 71) "Accounting for the Effects of Certain Types of
   Regulation."  SFAS 71 provides that rate-regulated public utilities record
   certain costs and credits allowed in the ratemaking process in different
   periods than for nonregulated entities. These are deferred as regulatory
   assets or regulatory liabilities and are recognized in the consolidated
   statements of income at the time they are reflected in rates. If a portion
   of IESU's operations becomes no longer subject to the provisions of SFAS
   71 as a result of competitive restructurings or otherwise, a write-down of
   related regulatory assets and possibly other charges would be required,
   unless some form of transition cost recovery is established by the
   appropriate regulatory body that would meet the requirements under
   generally accepted accounting principles for continued accounting as
   regulatory assets during such recovery period.  In addition, IESU would be
   required to determine any impairment of other assets and write-down any
   impaired assets to their fair value.  IESU believes it currently meets the
   requirements of SFAS 71.

   IESU cannot currently predict the long-term consequences of the
   competitive and restructuring issues described above on its results of
   operations or financial condition.  The major objective is to allow IESU
   to better prepare for a competitive, deregulated utility industry.  The
   strategy for dealing with these emerging issues includes seeking growth
   opportunities, continuing to offer quality customer service, ongoing cost
   reductions and productivity enhancements. 

                            RESULTS OF OPERATIONS - 
              THREE MONTHS ENDED MARCH 31, 1998 VS. MARCH 31, 1997 

   Overview

   IESU reported first quarter 1998 earnings available for common stock of
   $11.4 million compared with $11.6 million for the same period in 1997. 
   Increased electric and gas margins and lower maintenance expenses were
   offset by higher other operation expenses, higher interest expense and
   slightly higher income tax expense as described below.  

   Prior to August 1997, energy efficiency expenditures for state mandated
   energy efficiency programs had been recorded as a regulatory asset and
   recovered through rates over a four-year period.  In August 1997, the IUB
   allowed IESU to begin concurrent recovery of its prospective expenditures
   (see "Rates and Regulatory Matters" for additional information). 
    
   Electric Operations

   Electric margins and megawatt-hour (MWH) sales for IESU for the three
   months ended March 31 were as follows:

   <TABLE>
   <CAPTION>

                                            Revenues and Costs             MWH's Sold
                                            (In Thousands)  Change      (In Thousands) Change
   <S>                                    <C>       <C>        <C>        <C>     <C>    <C>    
   Residential                            $ 54,569  $ 53,084   3%           663     693  (4%) 
   Commercial                               37,611    36,812   2%           583     580   1% 
   Industrial                               40,239    38,695   4%         1,163   1,147   1% 
                                           -------  -------- ----         -----   -----  ---
       Total from ultimate customers       132,419   128,591   3%         2,409   2,420   -
   Sales for resale                          5,712     6,197  (8%)          189     172  10% 
   Other                                     2,518     2,498   1%            10      11  (9%) 
                                           -------  -------- ----         ------  -----  ---
       Total                               140,649   137,286   2%         2,608   2,603   -
                                                                          ======  =====  ===
   Electric production fuels                26,795    24,893   8%
   Purchased power                          11,049    18,673 (41%)
                                           -------  --------  
      Margin                              $102,805  $ 93,720  10% 
                                           =======  ======== =====

   </TABLE>

   Electric margin increased $9.1 million, or 10%, during the first quarter
   of 1998 compared with the same period in 1997 primarily due to the
   recovery of concurrent and previously deferred expenditures for state-
   mandated energy efficiency programs and reduced purchased power capacity
   costs. The recovery for energy efficiency programs is in accordance with
   IUB orders  (a portion of these recoveries is also amortized to expense in
   other operation expenses).   Electric revenues included recoveries for
   energy efficiency program costs of $7.7 million and $1.3 million for the
   first quarters of 1998 and 1997, respectively.   Residential sales
   decreased by four percent as a result of warmer weather in the first
   quarter of 1998 compared with the first quarter of 1997.
    
   IESU's 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 IESU for the three months ended
   March 31 were as follows:

                    Revenues and Costs             Dekatherms Sold
                     (In Thousands)     Change   (In Thousands)  Change
                     1998      1997               1998    1997
      
   Residential     $38,002   $ 50,587  (25%)      6,624  7,638  (13%) 
   Commercial       17,992     25,576  (30%)      3,876  4,333  (11%) 
   Industrial        3,163      4,240  (25%)        914    835    9% 
   Transportation
     and other       1,238      1,025   21%       3,237  2,764   17% 
                   -------   --------           -------  -----
      Total         60,395     81,428  (26%)     14,651 15,570   (6%) 
                                                =======  ===== =====
   Cost of gas sold 37,657     60,791  (38%) 
                   -------   --------
      Margin       $22,738   $ 20,637   10% 
                   =======   ======== =====

   Gas margin increased $2.1 million, or 10%, during the first quarter of
   1998 compared with the first quarter of 1997 primarily due to higher
   revenues from the recovery of concurrent and previously deferred energy
   efficiency expenditures for state mandated energy efficiency program costs 
   in accordance with  IUB orders (a portion of these recoveries is also
   amortized to expense in other operation expenses).   Gas revenues included
   recoveries for energy efficiency program costs of $5.2 million and $1.5
   million for the first quarters of 1998 and 1997, respectively.  Dekatherm
   sales were 6% lower resulting from warmer weather. 

   IESU's gas tariffs include purchased gas adjustment clauses (PGA) that
   are designed to currently recover the cost of gas sold.

   Operating Expenses 

   IESU's other operation expenses increased $10.7 million during the first
   quarter of 1998 compared to the first quarter of 1997.  The increase was
   primarily due to an increase of $8.9 million in energy efficiency expenses
   and higher Merger-related costs. 

   Maintenance expense decreased $1.8 million primarily due to reduced
   maintenance costs at the fossil-fueled generating plants.

   IESU's depreciation and amortization expense increased $0.9 million
   primarily because of increases in utility plant in service. Depreciation
   and amortization expenses for all periods include a provision for
   decommissioning the Duane Arnold Energy Center (DAEC), IESU's nuclear
   generating facility, currently collected through rates at an annual
   recovery level of $6.0 million.

   Interest Expense and Other   

   Interest expense and other increased $1.1 million during the first quarter
   of 1998 compared with the first quarter of 1997 primarily due to higher
   interest expense and lower returns on energy efficiency recoveries given
   that the expenditures are now being recovered concurrently (effective
   August 1997).

   Income Taxes 

   IESU's income tax expense increased $0.8 million due to slightly higher
   pre-tax income and an increase in the overall effective tax rate.  The
   effective tax rate increase was due to additional non-deductible Merger-
   related expenses.

   LIQUIDITY AND CAPITAL RESOURCES

   IESU's capital requirements are primarily attributable to its construction
   and acquisition programs and its debt maturities.  IESU 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 utility costs. 
   IESU's liquidity and capital resources will be affected by environmental
   and regulatory issues.  Emerging competition in the utility industry could
   also impact IESU's liquidity and capital resources, as discussed
   previously in the "Utility Industry Outlook" section.

   IESU has certain off-balance sheet financial guarantees amounting to
   approximately $18 million outstanding at March 31, 1998.  Such guarantees
   were generally issued to support third-party borrowing arrangements and
   similar transactions.  Management currently believes the possibility of
   IESU having to make any material cash payments under these agreements is
   remote.

   Cash flows generated from operating activities increased in the first
   quarter of 1998 compared with the first quarter of 1997 primarily due to
   higher amortization of deferred energy efficiency costs.  Cash flows used
   for financing activities were significantly lower in the first quarter of
   1998 as compared with the first quarter of 1997 due to dividends declared
   in March 1998 but not paid until April 1998 and a net reduction in short-
   term borrowings.  The dividends were paid in the first quarter of 1997. 
   Cash flows used for investing activities were lower in the first quarter
   of 1998 as compared with the first quarter of 1997 primarily due to the
   concurrent recovery of energy efficiency expenditures in 1998.  

   Financing and Capital Structure 

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

                            Moody's      Standard &
                                           Poor's

    - Secured long-term debt    A2           A+
    - Unsecured long-term 
        debt                    A3           A
    - Commercial paper          P1          A1  

   IESU expects to participate in a utility money pool which will be funded,
   as needed, by Alliant through the issuance of commercial paper.  This
   utility money pool is expected to replace the commercial paper program
   currently in place at IESU.

   Other than IESU's periodic sinking fund requirements, which IESU intends
   to meet by pledging additional property, $185.1 million of long-term debt
   will mature prior to December 31, 2002. Depending upon market conditions,
   it is currently anticipated that a majority of the maturing debt will be
   refinanced with the issuance of long-term securities.

   IESU currently has no authority from FERC or the Securities and Exchange
   Commission (SEC) to issue additional long-term debt.  IESU is evaluating
   its future financing needs and will make the necessary regulatory filings
   as needed.  Under the most restrictive terms of its indentures, IESU could
   have issued at least $234 million of long-term debt at March 31, 1998.

   The Articles of Incorporation of IESU authorize and limit the aggregate
   amount of additional shares of Cumulative Preference Stock and Cumulative
   Preferred Stock that may be issued.  At March 31, 1998, IESU could have
   issued an additional 700,000 shares of Cumulative Preference Stock and no
   additional shares of Cumulative Preferred Stock.  

   IESU's capitalization ratios were as follows:

                           March 31,   December 31,
                             1998         1997

    Common equity             47%          45% 
    Preferred stock            1            1  
    Long-term debt            52           54   
                          -------       -------                             
                             100%         100% 

   For interim financing, IESU is authorized by the FERC to issue up to $200
   million of short-term debt.  IESU had no short-term debt outstanding at
   March 31, 1998.  In addition to providing for ongoing working capital
   needs, this availability of short-term financing provides IESU flexibility
   in the issuance of long-term securities.  The level of short-term
   borrowing fluctuates based on seasonal corporate needs, the timing of
   long-term financing, and capital market conditions.  To maintain
   flexibility in its capital structure and to take advantage of favorable
   short-term rates, IESU also uses proceeds from the sales of accounts
   receivable and unbilled revenues to finance a portion of its long-term
   cash needs.  IESU anticipates that short-term debt will continue to be
   available at reasonable costs due to current ratings by independent
   utility analysts and rating services. 

   IESU had $41 million in bank lines of credit at March 31, 1998 available
   to support its borrowings ($11 million of which was utilized).  Commitment
   fees are paid to maintain these lines and there are no conditions which
   restrict the unused lines of credit.  From time to time, IESU may also borrow
   from banks and other financial institutions in lieu of commercial paper,
   and has agreements with several financial institutions for such
   borrowings.  There are no commitment fees associated with these agreements
   and there were no borrowings outstanding under these agreements at March
   31, 1998.  

   Given the above financing flexibility available to IESU, management
   believes it has the necessary financing capabilities in place to
   adequately finance its capital requirements for the foreseeable future.

   Capital Requirements

   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 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.
    
   IESU's construction and acquisition expenditures for the first quarter of
   1998 were $19.2 million compared with $19.8 million in the first quarter
   of 1997.  IESU's construction and acquisition program anticipates
   expenditures of approximately $124 million for 1998, of which 46%
   represents expenditures for electric transmission and distribution
   facilities, 17% represents electric generation expenditures, 12%
   represents information technology expenditures and 7% represents gas
   utility expenditures.  The remaining 18% represents miscellaneous
   electric, steam and general expenditures.  IESU's levels of utility
   construction and acquisition expenditures are projected to be $129 million
   in 1999, $103 million in 2000, $98 million in 2001 and $99 million in
   2002.  IESU anticipates funding the large majority of its utility
   construction and acquisition expenditures during 1998-2002 through
   internally generated funds, supplemented by external financings as needed.

   DAEC, a 520-megawatt boiling water reactor plant, is operated by IESU and
   IESU has a 70% ownership interest in the plant.  The DAEC operating
   license expires in 2014.  Pursuant to the most recent electric rate case
   order, the IUB allows IESU to recover $6.0 million annually for the cost
   to decommission the DAEC. The current recovery figures are based on an
   assumed  cost to decommission the DAEC of $252.8 million, which is IESU's
   70% portion in 1993 dollars, based on the Nuclear Regulatory Commission
   (NRC) minimum formula (which exceeds the amount in the current
   site-specific study completed in 1994).  At March 31, 1998, IESU had $80.5
   million invested in external decommissioning trust funds and also had an
   internal decommissioning reserve of $21.7 million recorded as accumulated
   depreciation. 

   Refer to the "Other Matters-Environmental" section for a discussion of
   various issues that may impact IESU's future capital requirements.

   Rates and Regulatory Matters

   In September 1997, IESU agreed with the IUB to provide Iowa customers a
   four-year retail electric and gas price freeze commencing on the effective
   date of the Merger.  The agreement excluded price changes due to
   government-mandated programs (such as energy efficiency cost recovery),
   the electric fuel adjustment clause and purchase gas adjustment clause and
   unforeseen dramatic changes in operations.  In addition, the price freeze
   does not preclude a review by either the IUB or Office of Consumer
   Advocate (OCA) into whether IESU is exceeding a reasonable return on
   common equity. In November 1997, as part of its approval of the Merger,
   FERC accepted a proposal by IESU, WP&L, and IPC, which provides for a
   four-year freeze on wholesale electric prices beginning with the effective
   date of the Merger.  Assuming capture of the anticipated Merger-related
   synergies and no significant legislative or regulatory changes affecting
   IESU, IESU does not expect the Merger-related electric and gas price
   freezes to have a material adverse effect on its financial position or
   results of operations.

   Under provisions of the IUB rules, IESU is currently recovering the costs
   it has incurred for its energy efficiency programs.  IESU has the
   following amounts of energy efficiency costs included in regulatory assets
   on its Consolidated Balance Sheets (in thousands):
   
   <TABLE>
   <CAPTION>
                                                   Four-Year
                                                   Recovery
                                                   Beginning    March 31, 1998  December 31, 1997 
    <S>                                               <C>         <C>              <C>
    Costs incurred through 1993                       6/95        $6,167           $7,779
    Costs incurred in 1994 -1995                      8/97        28,357           30,924
    Costs incurred from 1/96 - 7/97                   8/97        17,955           19,847
    (Over) under collection 
               of concurrent recovery                  N/A          (532)             850
                                                                 -------         --------
                                                                 $51,947          $59,400
                                                                 =======         ========

   </TABLE>

                                   OTHER MATTERS

   Year 2000 

   IESU utilizes software, embedded systems and related technologies
   throughout its business that will be affected by the date change in the
   Year 2000.  An internal task force has been assembled to review and
   develop the full scope, work plan and cost estimates to ensure that IESU's
   systems continue to meet its internal and customer needs.  

   Phase I of the project, which encompassed a review of the necessary
   software modifications that will need to be made to IESU's financial and
   customer systems, has been completed.  IESU currently estimates that the
   remaining costs to be incurred on this phase of the project will be
   approximately $2 million to $3 million in the aggregate.

   The task force has also begun Phase II of the project which is an
   extensive review of IESU's embedded systems for Year 2000 conversion
   issues.  The task force has inventoried critical embedded operating
   systems and is working with the system vendors to ascertain Year 2000
   compliance of the systems.  The task force is also developing detailed
   plans for testing and remediating critical systems (i.e., systems whose
   failure could affect employee safety or business operations).   

   As part of an awareness effort, IESU has also notified its utility
   customers of its Year 2000 project efforts.  Key suppliers are also being
   contacted to confirm their Year 2000 readiness plans.  Efforts are also
   underway to develop contingency plans for critical embedded operating
   systems.  IESU is currently unable to estimate the costs to be incurred on
   this phase of the project but does believe that the cost will be
   significant.  An estimate of the expenses to be incurred on this phase of
   the project is expected to be available by the third quarter of 1998.

   The goal of IESU is to have all the material Year 2000 conversions made
   sufficiently in advance of December 31, 1999 to allow for unanticipated
   issues.  At this time, management is unable to determine if the Year 2000
   issue will have a material adverse effect on IESU's financial position or
   results of operations.

   Labor Issues  

   IESU has six collective bargaining agreements, covering approximately 50%
   of its workforce.  Two of the agreements, covering less than 5% of IESU's
   workforce, will expire on July 1, 1998.

   Financial Instruments

   IESU had no derivative financial instruments outstanding at March 31,
   1998.

   Accounting Pronouncements

   In February 1998, the American Institute of Certified Public Accountants
   issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
   Computer Software Developed or Obtained for Internal Use."  This SOP
   provides authoritative guidance for determining whether computer software
   is in fact internal-use software, citing specific examples and situations
   that answer that preliminary question.  Further, it provides guidelines on
   accounting for the proceeds of computer software originally developed or
   obtained for internal use and then subsequently sold to the public. 

   Additionally, SOP 98-1 addresses specifics of accounting by discussing
   expensing versus capitalization of costs, accounting for the costs
   incurred in the upgrading of the software and amortizing the capitalized
   cost of software.  This statement is effective for fiscal years beginning
   after December 15, 1998 and is not expected to have a material adverse
   impact on IESU's financial position or results of operations.

   In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
   Start-up Activities."  This SOP provides guidance on the financial
   reporting of start-up costs and organization costs.  Costs of start-up
   activities and organization costs are required to be expensed as incurred. 
   The statement is effective for periods beginning after December 15, 1998. 
   IESU will be adopting the requirements of this statement in 1999 and does
   not anticipate any material impact on its financial statements upon
   adoption.

   Accounting for Obligations Associated with the Retirement of Long-Lived
   Assets

   The staff of the SEC has questioned certain of the current accounting
   practices of the electric utility industry, including IESU, regarding the
   recognition, measurement and classification of decommissioning costs for
   nuclear generating stations in financial statements of electric utilities. 
   In response to these questions, the FASB is reviewing the accounting for
   closure and removal costs, including decommissioning of nuclear power
   plants.  If current electric utility industry accounting practices for
   nuclear power plant decommissioning are changed, the annual provision for
   decommissioning could increase relative to 1997, and the estimated cost
   for decommissioning could be recorded as a liability (rather than as
   accumulated depreciation), with recognition of an increase in the cost of
   the related nuclear power plant.   Assuming no significant change in 
   regulatory treatment, IESU does not believe that such changes, if required,
   would have an adverse effect on its financial position or results of 
   operations due to its ability to recover decommissioning costs through
   rates.


   Inflation

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

   Environmental

   The pollution abatement program of IESU is subject to continuing review
   and is revised from time to time due to changes in environmental
   regulations, changes in construction plans and escalation of construction
   costs.  While IESU cannot precisely forecast the effect of future
   environmental regulations on its operations, it has taken steps to
   anticipate the future while also meeting the requirements of current
   environmental regulations.

   IESU has current or previous ownership interests in properties previously
   associated with the production of gas at manufactured gas plants (MGP) for
   which they may be liable for investigation, remediation and monitoring
   costs relating to the sites.  A summary of information relating to the
   sites is as follows:

    Number of known sites for which liability         34
      may exist
    Liability recorded at March 31, 1998           $32.9
      (millions)
    Regulatory asset recorded at March 31, 1998    $32.9
      (millions)

   IESU is working pursuant to the requirements of various federal and state
   agencies to investigate, mitigate, prevent and remediate, where necessary,
   the environmental impacts to property, including natural resources, at and
   around the sites in order to protect public health and the environment. 
   IESU believes that they have completed the remediation at various sites,
   although they are still in the process of obtaining final approval from
   the applicable environmental agencies for some of these sites.

   IESU has recorded environmental liabilities related to the MGP sites; such
   amounts are based on the 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.  Management currently
   estimates the range of costs to be incurred for the investigation,
   remediation and monitoring of the sites to be approximately $23 million to
   $52 million.  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.   

   The IUB does not allow for the deferral of MGP-related costs  but it has
   permitted utilities to recover  prudently incurred costs.  As a result,
   regulatory assets have been recorded by IESU which reflect the probable
   future rate recovery.  Considering the current rate treatment, and
   assuming no material change therein, IESU believes that the clean-up costs
   incurred for these MGP sites will not have a material adverse effect on
   its financial position or results of operations.

   In April 1996, IESU filed a lawsuit against certain of its insurance
   carriers seeking reimbursement for its MGP-related costs.  Settlement
   discussions are proceeding with its insurance carriers regarding the
   recovery of these costs. Settlement has been reached with sixteen
   carriers, and agreement in principle has been reached with three carriers.
   IESU is continuing to pursue additional recoveries.  Amounts received from
   insurance carriers are being deferred by IESU pending a determination of
   the regulatory treatment of such recoveries.  IESU is unable to predict
   the amount of any additional insurance recoveries it may realize.

   The Clean Air Act Amendments of 1990 (Act) require emission reductions of
   sulfur dioxide (SO2), nitrogen oxides (NOx) and other air pollutants to
   achieve reductions of atmospheric chemicals believed to cause acid rain.
   IESU has met the provisions of Phase I of the Act and is in the process of
   meeting the requirements of Phase II of the Act (effective in the year
   2000).   The Act also governs SO2 allowances, which are defined as an
   authorization for an owner to emit one ton of SO2 into the atmosphere. 
   IESU is reviewing its options to ensure it will have sufficient allowances
   to offset its emissions in the future.  IESU believes that the potential
   costs of complying with these provisions of Title IV of the Act will not
   have a material adverse impact 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 ozone transport, mercury and particulate
   control as well as modifications to the Polychlorinated Biphenyl (PCB)
   rules.  In July 1997, the EPA issued final rules that would tighten the
   National Ambient Air Quality Standards (NAAQS) for ozone and particulate
   matter emissions.  IESU is currently reviewing the rules to determine what
   impact they may have on its 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 suggested that the Cedar Rapids area could be classified
   as "nonattainment" for the NAAQS standards established for SO2.  The
   worst-case modeling suggested that two of IESU's generating facilities
   contributed to the modeled exceedences. As a result of exceedences at a
   monitor near one of IESU's generating facilities, the EPA issued a letter
   to the Iowa Governor's office directing the state to develop a plan of
   action.  In this regard, IESU entered into a consent order with the Iowa
   Department of Natural Resources (IDNR) in the third quarter of 1997 on
   this issue.  IESU agreed to limit the SO2 emissions from the two noted
   generating facilities and to install a new stack (potential aggregate
   capital cost of up to $2.5 million over the next two years of which $1.5
   million is included in the anticipated 1998 capital requirements and the
   remaining $1.0 million is included in the anticipated 1999 capital
   requirements) at one of the facilities. The IDNR approved the consent
   order in the fourth quarter of 1997 and it is expected to be approved by
   the EPA in the second quarter of 1998. 

   Pursuant to a routine internal review of documents, IESU determined that
   certain changes undertaken during previous years at one of its generating
   facilities may have required a federal Prevention of Significant
   Deterioration (PSD) permit.  IESU initiated discussions with its
   regulators on the matter, resulting in the submittal of a PSD permit
   application in February 1997.  IESU expects to receive the permit in the
   second quarter of 1998.  IESU may be subject to a penalty for not having
   obtained the permit previously; however, IESU believes that any likely
   actions resulting from this matter will not have a material adverse effect
   on its financial position or results of operation.

   Pursuant to a separate routine internal review of plant operations, IESU
   determined that certain permit limits were exceeded in 1997 at one of its
   generating facilities in Cedar Rapids, Iowa.  IESU has initiated
   discussions with its regulators on the matter and has proposed a
   compliance plan which includes equipment modifications and contemplates
   operational changes.  In addition, IESU has committed to submitting a PSD
   permit application in the second quarter of 1998, if necessary.  IESU may
   be subject to a penalty for exceeding permit limits established for this
   facility; however, management believes that any likely actions resulting
   from this matter will not have a material adverse effect on IESU's
   financial position or results of operations.

   A global treaty has been negotiated that could require reductions of
   greenhouse gas emissions from utility plants.  Negotiators left
   significant implementation and compliance questions open to resolution at
   meetings to be held starting in November 1998.  At this time, management
   is unable to predict whether the United States Congress will ratify the
   treaty.  Given the uncertainty of the treaty ratification and the ultimate
   terms of the final regulations, management cannot currently estimate the
   impact the implementation of the treaty would have on IESU's operations.

   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.  IESU entered into such contract and has made
   the agreed payments to the Nuclear Waste Fund (NWF) held by the U.S.
   Treasury.  IESU was subsequently notified by the DOE that it was not able
   to begin acceptance of spent nuclear fuel by the January 31, 1998
   deadline.  Furthermore, 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.  IESU 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 for interim storage of spent nuclear fuel
   to generators of such spent nuclear fuel, such as IESU.  In accordance
   with this responsibility, IESU has been storing spent nuclear fuel on site
   at DAEC since plant operations began.  DAEC has current on-site capability
   to store spent fuel until 2001.  IESU is currently reviewing its options
   to expand on-site storage capability.  To provide assurance that both the
   operating and post-shutdown storage needs are satisfied, a combination of
   expanding the capacity of the existing fuel pool and construction of a dry
   cask modular facility are being contemplated.  Legislation is being
   considered on the federal level to provide for the establishment of an
   interim storage facility as early as 2002.

   The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandates
   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 six-state Midwest Interstate Low-Level Radioactive Waste
   Compact (Compact) which is responsible for development of any new disposal
   capability within the Compact member states.  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.  Dwindling
   waste volumes and continued access to existing disposal facilities were
   also reasons cited for the decision.  A disposal facility located near
   Barnwell, South Carolina continues to accept the low-level waste and IESU
   currently ships the waste DAEC produces to such site, thereby minimizing
   the amount of low-level waste stored on-site.  In addition, given
   technological advances, waste compaction and the reduction in the amount
   of waste generated, DAEC has on-site storage capability sufficient to
   store low-level waste expected to be generated over at least the next ten
   years, with continuing access to the Barnwell disposal facility extending
   that on-site storage capability indefinitely.

   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.  IESU is recovering the costs associated
   with this assessment through its electric fuel adjustment clauses over the
   period the costs are assessed.  IESU's 70% share of the future assessment
   at March 31, 1998 was $8.9 million and has been recorded as a liability
   with a related regulatory asset for the unrecovered amount.  

   ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 

   Not Applicable.

                           PART II - OTHER INFORMATION

   ITEM 1. LEGAL PROCEEDINGS

        IESU is in discussions with the regulators regarding certain
   environmental permit issues.  For a discussion of these matters, see MD&A
   above, which information is incorporated herein by reference. 

   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits:
                 
                27               Financial Data Schedule 

        (b)    Reports on Form 8-K:  

   IESU filed a Current Report on Form 8-K, dated April 21, 1998, reporting
   (pursuant to Items 5 and 7) that the three-way business combination
   between WPL Holdings, Inc., IES Industries Inc. and Interstate Power
   Company was consummated on April 21, 1998. 

                                   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 on the 14th day of  May 1998.


   IES UTILITIES INC.




   By: /s/ Edward M. Gleason     Vice President, Treasurer and Corporate
       Edward M. Gleason           Secretary (Principal Financial Officer)



   By: /s/ John E. Ebright       Vice President-Controller
       John E. Ebright             (Principal Accounting Officer)