Exhibit 10.16



                          INTERSTATE ENERGY CORPORATION


                    1998 OFFICER INCENTIVE COMPENSATION PLAN

                            Effective January 1, 1998


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   INTERSTATE ENERGY CORPORATION
   1998 OFFICER INCENTIVE COMPENSATION PLAN
   =========================================================================

   I.  Purpose

        The Officer Incentive Compensation Plan (OICP) is based on short-term
   goals that support Interstate Energy Corporation's (IEC) short- and long-
   range plans, focus officers on building the value of the Company and
   ensuring future superior returns to shareholders, reducing costs to
   customers, and supporting an atmosphere of teamwork.  Awards for plan
   participants will be determined by Corporate and Business Unit
   performance.  The CEO reserves the right to modify payouts under the plan.


   II.  Administration

        A)   The OICP shall be administered by the Compensation and Personnel
             Committee ("the Committee") of the Board of Directors of the
             Company.  The Committee may from time to time amend, suspend,
             terminate or reinstate any or all of the provisions of the Plan
             as may seem necessary or advisable in the administration of the
             Plan.

        B)   The Committee shall subject to express provisions of the Plan,
             have the power to construe the Plan, to prescribe rules and
             regulations relating to the Plan and to make all other
             determinations necessary or advisable in the administration of
             the Plan.  The Committee may correct any defect or supple any
             omission or reconcile any inconsistency in the manner and to the
             extent it shall deem expedient to carry it into effect.

        C)   All expenses and costs incurred in connection with the
             administration and operation of the Plan shall be borne by the
             Company.

   II.  Plan Eligibility

        A)   All Interstate Energy Corporation (IEC) officers will be
             eligible for the 1998 OICP.  IEC's officers will be divided into
             one of four designated tiers for participation in the plan. 
             These tiers reflect individual duties and responsibilities in
             the new organization and are shown, along with the projected
             number of participants in each tier, in the table below:

                 Participant Group                   Projected Number of
                                                      Interstate Energy
                                                    Corporation Incumbents
    Chairman of the Board, Vice-Chairman of the               3
    Board, and President and CEO
    Executive Vice Presidents                                 5
    Sr. Vice President & Vice Presidents                      12
    Assistant Vice Presidents                                 2
    Total Participants                                        22


        B)   Prior to the start of each calendar year, or as soon as
             practical thereafter, the CEO shall recommend to the Committee
             those eligible employees who shall participate in the Plan. 
             Designation as a Participant for any particular calendar year
             shall not entitle an individual to participate or share in
             award, with respect to any other calendar year.

        C)   Changes to the participant list:  Following the start of the
             calendar year, the list of the participants and awards for a
             Plan year may be revised upon authorization of the CEO as
             follows:

             1)   Employment:  If an eligible employee participating in the
                  Plan terminates from the Company during the Plan year, the
                  replacement employee of said employee will automatically be
                  eligible to participate in the Plan for the remainder of
                  the year.

             2)   Cessation of Employment:  If an employee terminates
                  employment with the Company during the calendar year, other
                  than on account of death or retirement, the employee may,
                  at the discretion of the CEO, receive a prorated award.

             3)   Proration of Payout: Any participant selected or deleted
                  after the start of the calendar y ear shall participate on
                  a prorata basis, determined by multiplying the maximum
                  incentive opportunity by a fraction, the numerator of which
                  shall be the number of full months of his/her participation
                  in the calendar  year and the denominator of which shall be
                  twelve.

   III.  Payment of Incentive Award Earned

        A)   Payouts for all plan participants shall be at the discretion of
             the CEO.

        B)   The amount of the incentive payout awarded for the calendar year
             shall be paid to each eligible employee after the Company's
             audited financial results are available, but no later than March
             31 of the following year.

        C)   Following the end of the calendar year the CEO will report to
             the Committee the results of the Plan.  At the discretion of the
             CEO and Committee, the award will be paid in cash, discounted
             Company stock or a combination of both.

        D)   Participants may elect to defer a percentage amount of the
             incentive award pursuant to the provisions of the Company's
             Deferred Compensation Plan.  All deferral elections are
             irrevocable, and a written deferral notice must be filed by the
             participant with the Company prior to December 31 of the year
             preceding the Plan year for which the deferral is effective.

        E)   The committee may, following release of the Company's audited
             financial statements, increase, decrease or eliminate awards if
             the Committee decides that the amount of the award is
             unreasonable in view of any unique circumstances or the
             Company's financial performance.  Any decision shall apply to
             all Participants equally.

        F)   OICP payments will be included in 401(k) plan deferrals and
             earnings used to determine retirement benefits.

   IV.  Effective Date

        The plan effective January 1, 1998 shall continue in effect and
   subsequently be amended from time to time, until terminated by the Board
   of Directors.

   V.  Amendment or Termination of Plan

        The Board shall have the right to amend or terminate the Plan at any
   time.

   VI.  Non-Exclusivity of Incentive Compensation

        The Plan shall not be deemed an exclusive method of providing
   incentive compensation to eligible employees; nor shall it preclude the
   Board from authorizing or approving other forms of incentive compensation.

   VII.  Rights of Participants and Forfeiture

        A)   Nothing contained in this Plan shall:

             1)   confer upon any employee any right with respect to
                  continuation of employment with the Company.

             2)   interfere in any way with the right of the Company to
                  terminate his or her employment at any time, or

             3)   confer upon any employee or any other person any claim or
                  right to any distribution under the Plan except in
                  accordance with its terms.

        B)   No right or interest  of any Participation in the Plan shall,
             prior to actual payment or distribution to such Participant, be
             assignable or transferable in whole or in part, either
             voluntarily or by operations of law or otherwise, or be subject
             to payment of debts of any Participant by execution, levy,
             garnishment, attachment, pledge, bankruptcy, or in any other
             manner.

   VIII.  Distribution of Award Upon Death of Participant

        Should a participant die during a calendar year for which an award is
   made, the amount of such Participant's award shall be determined on a
   prorata basis according to Section II, paragraph C3, and such total shall
   be distributed in a lump sum to the participant's estate in the year
   following the calendar year of the Plan.

   IX.  Incentive Targets by Participant Tier

        Incentive award levels are based on IEC's current executive
   compensation strategy of setting pay levels at the median of equally
   weighted utility industry and general industry data.  The table below
   lists each of the designated tiers and their respective incentive targets.

              PARTICIPANT GROUP                 TARGET           MAXIMUM
                                           INCENTIVE LEVEL   INCENTIVE LEVEL
    Chairman of the Board, Vice-Chairman         50%              100%
    of the Board, and President and CEO 
    Executive Vice Presidents                    35%               70%
    Sr. Vice President & Vice Presidents         25%               50%
    Assistant Vice Presidents                    20%               40%

        For all tiers of participants, actual awards under the plan may be as
   great as 200% of the target award for exceptional performance.  No payout
   will occur if performance is significantly below target.

        Total award payouts under the plan may be larger or smaller than the
   sum of all target incentive awards.

   X.  Weighting of Performance Measures

        Each performance measure will be weighted according to the relative
   impact an officer has on Company performance and business unit
   performance.  

                      GROUP                    Corporate     Business Unit/
                                                            Strategic Goals
    Chairman and Vice-Chairman of the Board       100%
    President and CEO                             75%             25%
    Executive Vice Presidents                     50%             50%
    Sr. Vice President & Vice Presidents          50%             50%
    Assistant Vice Presidents                     50%             50%

   XI.  Performance Measures and Methodology

        1.  Corporate Measure - At the beginning of each year, a company-wide
   earnings per share (EPS) target will be established.  The EPS target will
   have a performance threshold that, if not met, will result in no company
   measure payouts being awarded.  EPS of less than $2.00 will result in no
   officer incentives or other employee incentive program payments.   Note:
   EPS numbers will be weather normalized and may be adjusted to reflect
   extraordinary events.  See Appendix A for examples of calculations.


                            EPS               % OF
                                            INCENTIVE
                                              AWARD
    Maximum            $2.40 or more          200%
                        $2.33-$2.39           130%
    Target              $2.30-$2.32           100%
                        $2.25-$2.29            80%
    Minimum             $2.10-$2.24            25%
                        $2.00-$2.09            0%*
                      Less than $2.10       No Payout

        * business unit payouts may still be made.

        2.  Business Unit Measure - Each Business Unit  will have between 3
   and 5 goals that are reviewed and approved by the CEO and Senior Executive
   Group (see Appendix A).  If a Business Unit does not  meet its goal,
   employees are still eligible for the Corporate portion of the award.

   VI.  Individual Participation

        The participation level for each officer is expected to be 100% of
   the award opportunity, as determined by company and business unit
   performance results.  Satisfactory performance on the part of an officer
   will result in full OICP participation.  Based on less than satisfactory
   individual performance, the CEO may reduce an individual's participation
   level by as much as 20%.  In the case of well documented extraordinary
   performance, the CEO may increase an individual's participation level by
   as much as 20%.

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   APPENDIX A

                                  EXAMPLE CALCULATION 

   - Participant Tier:           Vice Presidents

   - Positions in Tier:          Sr. Vice Presidents & Vice Presidents

   - Number of Plan Participants 14

   - Target Bonus Level:         25% of Salary

   - Performance Measure Weighting:


             Measure             Weighting
             Corporate           50%
             Business Unit       50%


   Hypothetical Performance Results

   Example:  Title:  Vice President
             Salary:  $150,000 

   Employee Incentive Target 
      (See Section IX. Incentive Targets)       A. 25%

   1.  Company Measure  (50% of A)              B. 12.5%

        Assuming $2.33 per share: 12.5% (B.) times 130%
            (see section XI) =  16.3%

      Subtotal of Company Measure                           C.   16.3%

   2.  Business Unit Measure  (50% of A)         D. 12.5%

        Assuming business unit measures were met.

        Business Unit Measure portion (Therefore,
          eligible for the whole 12.5%)                     E.  12.5%

   3.  Individual Participation Level:   Satisfactory.  
        Therefore eligible for payout.

   4.  Total Amount of Award Employee is 
         Eligible for (Sum of C + E )                       F.  28.8%


   Individual Award Calculation
          Base Salary  x  Percent  Earned (F Above)  = Incentive Award
          $150,000     x    28.8%             =   $43,200