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    September 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 October 31, 1997.

  IES Industries Inc. Common Stock, no par value - 30,542,669 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 -
             September 30, 1997 and December 31, 1996  .............    3 - 4
           Consolidated Statements of Income -
             Three, Nine and Twelve Months Ended
             September 30, 1997 and 1996  ..........................        5
           Consolidated Statements of Cash Flows -
             Three, Nine and Twelve Months Ended
             September 30, 1997 and 1996  ..........................        6
           Notes to Consolidated Financial Statements  .............   7 - 14
         
         IES Utilities Inc.:
           Consolidated Balance Sheets -
             September 30, 1997 and December 31, 1996  .............  15 - 16
           Consolidated Statements of Income -
             Three, Nine and Twelve Months Ended
             September 30, 1997 and 1996  ..........................       17
           Consolidated Statements of Cash Flows -
             Three, Nine and Twelve Months Ended
             September 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

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

Property, plant and equipment:
  Utility -
    Plant in service -
      Electric                                   $ 2,045,422      $ 2,007,839
      Gas                                            181,995          175,472
      Other                                          131,302          126,850
                                                   2,358,719        2,310,161
    Less - Accumulated depreciation                1,104,678        1,030,390
                                                   1,254,041        1,279,771
    Leased nuclear fuel, net of amortization          37,968           34,725
    Construction work in progress                     61,932           43,719
                                                   1,353,941        1,358,215
  Other, net of accumulated depreciation
    and amortization of  $84,253 and 
    $70,031, respectively                            244,964          223,805
                                                   1,598,905        1,582,020


Current assets:
  Cash and temporary cash investments                 23,046            8,675
  Accounts receivable -
    Customer, less allowance for doubtful 
      accounts of $909 and $1,087, respectively       26,155           50,821
    Other                                              8,593           12,040
  Income tax refunds receivable                       11,364            8,890
  Production fuel, at average cost                    10,801           13,323
  Materials and supplies, at average cost             24,181           22,842
  Adjustment clause balances                               0           10,752
  Regulatory assets                                   36,718           26,539
  Prepayments and other                               21,148           24,169
                                                     162,006          178,051


Investments:
  Investment in McLeodUSA Inc.                       403,027           29,200
  Nuclear decommissioning trust funds                 74,455           59,325
  Investment in foreign entities                      47,726           44,946
  Cash surrender value of life 
    insurance policies                                12,251           11,217
  Other                                                7,037            4,903
                                                     544,496          149,591


Other assets:
  Regulatory assets                                  191,476          201,129
  Deferred charges and other                          16,966           14,771
                                                     208,442          215,900
                                                 $ 2,513,849      $ 2,125,562





       IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                                 September 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 30,467,739 and 30,077,212
    shares, respectively                         $   419,167      $   407,635
  Retained earnings                                  223,871          219,246
  Unrealized security gains (net of taxes)           218,567                0
  Cumulative foreign currency translation 
    adjustments                                          -19                0
    Total common equity                              861,586          626,881
  Cumulative preferred stock of 
    IES Utilities Inc.                                18,320           18,320
  Long-term debt (excluding current portion)         854,468          701,100
                                                   1,734,374        1,346,301


Current liabilities:
  Short-term borrowings                                    0          135,000
  Capital lease obligations                           13,294           15,125
  Maturities and sinking funds                           493            8,473
  Accounts payable                                    49,442           99,861
  Dividends payable                                   16,619           16,431
  Accrued interest                                    12,206            8,985
  Accrued taxes                                       68,833           43,926
  Accumulated refueling outage provision               7,970            1,316
  Adjustment clause balances                             782                0
  Environmental liabilities                            5,607            5,679
  Other                                               18,507           22,087
                                                     193,753          356,883


Long-term liabilities:
  Pension and other benefit obligations               47,331           39,643
  Capital lease obligations                           24,674           19,600
  Environmental liabilities                           47,402           47,502
  Other                                               23,909           18,488
                                                     143,316          125,233


Deferred credits:
  Accumulated deferred income taxes                  409,910          262,675
  Accumulated deferred investment tax credits         32,496           34,470
                                                     442,406          297,145


Commitments and contingencies (Note 7)


                                                 $ 2,513,849      $ 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 Nine         For the Twelve
                                       Months Ended          Months Ended          Months Ended
                                       September 30          September 30          September 30
                                      1997       1996       1997       1996       1997       1996
                                               (in thousands, except per share amounts)
<S>                             <C>        <C>        <C>        <C>        <C>        <C>
Operating revenues:
  Electric                        $ 184,676  $ 173,626  $ 459,653  $ 436,027  $ 597,899  $ 562,996
  Gas                                15,507     28,461    125,381    161,112    238,247    224,666
  Other                              33,639     31,820    101,608     90,617    136,651    116,792
                                    233,822    233,907    686,642    687,756    972,797    904,454

Operating expenses:
  Fuel for production                27,613     29,148     84,026     72,168     96,437     96,733
  Purchased power                    18,749     18,655     52,472     55,125     85,697     68,600
  Gas purchased for resale            7,795     20,841     88,136    120,091    185,396    166,538
  Other operating expenses           59,061     55,554    165,381    160,367    219,772    217,788
  Maintenance                        13,120     14,091     40,169     40,011     49,159     50,067
  Depreciation and amortization      27,664     27,417     84,985     82,025    110,353    105,320
  Taxes other than income taxes      12,248     12,500     38,441     38,503     48,109     47,510
                                    166,250    178,206    553,610    568,290    794,923    752,556

Operating income                     67,572     55,701    133,032    119,466    177,874    151,898

Interest expense and other:
  Interest expense                   16,339     13,666     46,777     39,506     62,093     52,511
  Allowance for funds used
    during construction                -784       -761     -1,551     -2,141     -1,512     -2,904
  Preferred dividend requirements
    of IES Utilities Inc.               229        229        686        686        914        914
  Miscellaneous, net                 -1,929      4,883       -235      2,510       -414      1,132
                                     13,855     18,017     45,677     40,561     61,081     51,653

Income before income taxes           53,717     37,684     87,355     78,905    116,793    100,245

Income taxes:
  Current                            19,913     14,975     40,906     34,551     44,602     45,048
  Deferred                            2,716      2,481     -3,988      3,298      4,548      1,008
  Amortization of investment 
    tax credits                        -658       -661     -1,974     -1,984     -2,635     -2,658
                                     21,971     16,795     34,944     35,865     46,515     43,398

Net income                        $  31,746  $  20,889  $  52,411  $  43,040  $  70,278  $  56,847

Average number of common
  shares outstanding                 30,452     29,941     30,321     29,796     30,256     29,716

Earnings per average
  common share                  $    1.04  $    0.70  $    1.73  $    1.44  $    2.32  $    1.91

Dividends declared per
  common share                    $   0.525  $   0.525  $   1.575  $   1.575  $    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 Nine     For the Twelve
                                                 Months Ended      Months Ended      Months Ended
                                                 September 30      September 30      September 30
                                                 1997     1996     1997     1996     1997     1996
                                                                  (in thousands)
<S>                                         <C>      <C>      <C>      <C>      <C>      <C>
Cash flows from operating activities:
  Net income                                  $ 31,746 $ 20,889 $ 52,411 $ 43,040 $ 70,278 $ 56,847
  Adjustments to reconcile net income to
    net cash flows from operating 
    activities -
      Depreciation and amortization             27,664   27,417   84,985   82,025  110,353  105,320
      Amortization of principal under
        capital lease obligations                3,559    4,945   10,668   14,195   12,964   19,108
      Deferred taxes and investment
        tax credits                              2,058    1,820   -5,962    1,314    1,913   -1,650
      Refueling outage provision                 2,464    1,831    6,654    6,751   -6,471    9,199
      Amortization of other assets               4,248    2,041    9,474    7,191   12,071    9,845
      Other                                       -274     -751    2,779      542    3,092      262
  Other changes in assets and liabilities -
      Accounts receivable                       -2,571    9,118   28,113   11,418   -5,459     -246
      Sale of utility accounts receivable            0        0        0    7,000        0        0
      Production fuel, materials and
        supplies                                 2,942     -957    1,882     -473    3,005    3,445
      Accounts payable                          -8,530   -1,840  -47,740  -12,078  -14,728    2,527
      Accrued taxes                             29,306   21,164   22,433    8,777   -4,309  -10,860
      Provision for rate refunds                     0      -43        0     -106        0  -12,966
      Adjustment clause balances                -3,533   -3,559   11,534   -3,898    1,532   -1,220
      Gas in storage                            -5,413   -8,610    3,409      635    1,619   -1,523
      Other                                     -1,804   -2,744    3,662    1,980   13,485    3,431
          Net cash flows from operating
            activities                          81,862   70,721  184,302  168,313  199,345  181,519

Cash flows from financing activities:
      Dividends declared on common stock       -15,994  -15,725  -47,786  -46,950  -63,574  -62,438
      Proceeds from issuance of common 
        stock                                    3,225    3,381    9,851   10,780   13,235   14,901
      Purchase of treasury stock                     0        0      -83     -269      -83     -269
      Net change in IES Diversified Inc.
        credit facility                            388   -2,954   19,160    8,016   59,004   44,261
      Proceeds from issuance of other
        long-term debt                         135,000   60,000  190,000   60,000  190,000  110,003
      Reductions in other long-term debt           -84  -15,078  -63,358  -15,374  -63,438  -65,447
      Net change in short-term borrowings     -150,000  -47,000 -135,000  -23,000  -78,000   29,000
      Principal payments under capital 
        lease obligations                       -3,740   -4,626   -9,405  -14,162  -14,351  -19,096
      Other                                       -668     -112     -633     -203     -888   -1,817
          Net cash flows from financing
            activities                         -31,873  -22,114  -37,254  -21,162   41,905   49,098

Cash flows from investing activities:
      Construction and acquisition
      expenditures -
         Utility                               -26,271  -39,701  -74,502  -97,043 -119,717 -133,483
         Other                                  -9,156  -11,859  -44,826  -45,665  -95,281  -79,683
      Oil and gas properties held for 
        resale                                       0        0        0    9,843        0        0
      Deferred energy efficiency
        expenditures                              -920   -3,887   -8,450  -12,643  -12,664  -17,708
      Nuclear decommissioning trust funds       -1,502   -1,502   -4,506   -4,506   -6,008   -6,008
      Proceeds from disposition of assets        2,107    1,984    3,889    3,840    8,344    8,153
      Other                                       -133      204   -4,282      447   -1,244    2,051
          Net cash flows from investing
            activities                         -35,875  -54,761 -132,677 -145,727 -226,570 -226,678

Net increase (decrease) in cash
  and temporary cash investments                14,114   -6,154   14,371    1,424   14,680    3,939

Cash and temporary cash investments
  at beginning of period                         8,932   14,520    8,675    6,942    8,366    4,427

Cash and temporary cash investments
  at end of period                            $ 23,046 $  8,366 $ 23,046 $  8,366 $ 23,046 $  8,366

Supplemental cash flow information:
  Cash paid during the period for - 
    Interest                                  $ 12,041 $ 12,899 $ 41,679 $ 36,435 $ 58,290 $ 52,480
    Income taxes                              $    103 $  3,568 $ 29,300 $ 36,316 $ 47,864 $ 53,206
  Noncash investing and financing 
  activities -
    Capital lease obligations incurred        $ 13,789 $    939 $ 13,912 $ 13,785 $ 14,408 $ 13,896


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 September 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, results of operations from  potential
domestic  and  international investments, the  operating  of  a  nuclear
facility and changes in the rate of inflation.


IES INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                    
                           September 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 the Federal Energy  Regulatory
Commission (FERC) and the SEC.  See Management's Discussion and Analysis
of   Financial  Condition  and  Results  of  Operations  for  a  further
discussion.


(3)  RATE MATTERS:

     (a)  Electric and Gas Prices -

     In  September 1997,  Utilities agreed with the Iowa Utilities Board
(IUB)  to allow Iowa customers a four year retail electric and gas price
freeze  commencing from the effective date of the merger.  The agreement
excluded  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 FERC.  The Company 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.

     (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 direct expenditures and carrying costs  as
well  as  a return on the expenditures over the recovery period.   These
costs  are  being  recovered over a four-year period that  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 was created under the prior 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):

                                                September 30,    December 31,
                                                    1997             1996
                                              
Costs incurred through 1993                       $  8,995         $ 12,834
Costs incurred in 1994-1995                         33,085           33,161
Costs incurred from 1/1/96 - 7/31/97                21,450           15,087
(Over)/under collection of concurrent recovery       1,544              -
                                                  $ 65,074         $ 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 September 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)  McLeodUSA Inc. (McLeod) -

      At September 30, 1997, the Company had the following investment in
McLeod, a telecommunications company (all figures are in millions):

                                                        Fair Market
                                  Shares       Cost        Value
 
                                                  
Class A Common Stock                9.0       $ 29.0     $ 354.0
Unexercised Vested Options          1.3          -          51.3
Cost to Exercise Vested Options     N/A         N/A         (2.3)
                                   10.3       $ 29.0     $ 403.0

      During  the  second  quarter of 1997, the  Company  converted  its
investment  in Class B Common Stock into shares of Class A Common  Stock
and  contributed 300,000 shares of its McLeod Class A  shares to the IES
Industries Charitable Foundation.

      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 until September 1998.

      Pursuant to the provisions of SFAS No. 115, the carrying value  of
the  McLeod investment was adjusted from a cost basis to estimated  fair
value  at  September 30, 1997, based on the September 30 closing  price,
given that such shares have become qualified for sale within a one  year
period.   The  adjustment to reflect the estimated fair  value  of  this
investment  did  not  impact  the  Company's  current  earnings  as  the
resulting  unrealized gain, net of taxes, was recorded directly  to  the
common  equity  section  of  the  balance  sheet  ("Unrealized  security
gains").   Under  SFAS  115,  any such gains are  reflected  in  current
earnings  only  at  the time they are realized through  a  sale  by  the
Company.   It is not possible to estimate what the market value  of  the
shares  will be at September 1998 when the current restriction on  sales
expires.

     (b)  Foreign Entities -

     At September 30, 1997, the Company had $47.7 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
September 30, 1997, included investments of approximately $32.7  million
in  New  Zealand,  $14.5  million in China and  $0.5  million  in  other
countries.


(6)  DEBT:

     (a)  Long-Term Debt -

     In October 1997, Diversified entered into a 3-Year Credit Agreement
with  various  banking  institutions which replaced  its  variable  rate
credit facility.  The new agreement will provide Diversified the ability
to  finance  additional business development opportunities,  as  needed.
The agreement extends through October 20, 2000, with one-year extensions
available upon agreement by the parties. The agreement will terminate on
September 1, 1998, however, if the proposed merger discussed in  Note  2
is  not consummated on or prior to May 10, 1998.  The unborrowed portion
of this agreement is also used to support Diversified's commercial paper
program.   A  combined maximum of $450 million of borrowings under  this
agreement and the 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  this  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  September 30, 1997, there were no borrowings outstanding under
the  variable rate credit facility.  Diversified had $191.3  million  of
commercial paper outstanding at September 30, 1997, with interest  rates
ranging from 5.77% to 5.95% and maturity dates in the fourth quarter  of
1997.  Diversified  intends  to continue  borrowing  under  the  renewal
options  of this facility and the new agreement and no conditions  exist
at September 30, 1997, that would prevent such borrowings.  Accordingly,
this debt is classified as long-term in the Consolidated Balance Sheets.

      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.


     (b)  Short-Term Debt -

      In  October  1997, Diversified also entered into a 364-Day  Credit
Agreement  with various banking institutions.  This agreement will  also
provide   Diversified   the  ability  to  finance  additional   business
development  opportunities, as needed.  The  agreement  extends  through
October  20,  1998, with 364 day extensions available upon agreement  by
the  parties.   The  agreement  will terminate  on  September  1,  1998,
however,  if  the proposed merger discussed in Note 2 is not consummated
on  or  prior to May 10, 1998.  The unborrowed portion of this agreement
is  also  used  to  support Diversified's commercial paper  program.   A
combined maximum of $150 million of borrowings under this agreement  and
the  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 this 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  September  30,  1997, the Company had  bank  lines  of  credit
aggregating $45.1 million. Utilities was using $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.  From time to time, the Company may borrow  from
banks and other financial institutions in lieu of commercial paper.  The
Company  has  agreements with several financial  institutions  for  such
borrowings.   There are no commitments associated with these  agreements
and  there  were  no  borrowings outstanding under these  agreements  at
September 30, 1997.


(7)  CONTINGENCIES:

     (a)  Environmental Liabilities -

     The Company has recorded environmental liabilities of approximately
$53  million in its Consolidated Balance Sheets at September  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 $21 million to $52 million.

      Utilities  has recorded environmental liabilities related  to  the
FMGP  sites  of  approximately $33 million (including  $4.7  million  as
current  liabilities) at September 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 $33 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 ten carriers  and  an  agreement  in
principle  has been reached with four 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 at September 30, 1997, $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  $9.4 million at September 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, the possible purchase of  SO2  allowances  and  a
possible  NOx  averaging  plan.  Utilities currently  estimates  capital
expenditures  at approximately $8.6 million, including $0.9  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 July 1997, the  EPA  issued  final
rules  that  would  tighten the National Ambient Air  Quality  Standards
(NAAQS)  for  ozone  and  particulate matter  emissions.   Utilities  is
currently reviewing the rules to determine what impact they may have  on
its operations.

      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.   In
October  1997, the EPA followed these recommendations and excluded  Iowa
from  the  requirement to reduce NOx emissions in  the  State  with  the
understanding  that Iowa will work with Wisconsin in the development  of
the  SE Wisconsin attainment State Implementation Plan (SIP).  Utilities
believes  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  consent  order  is  to  establish  the   necessary
commitments  which will maintain the area in attainment  for  SO2.   Two
primary  commitments were 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.  In September 1997, the EPA
provided  comments to the IDNR on the consent order.  In  October  1997,
Utilities  proposed  certain  modifications  to  the  consent  order  in
response  to  the  EPA  comments.  These proposed modifications  include
revising  the stack option such that the potential aggregate cost  would
only  be approximately $2.5 million over the next two years.  The  final
consent order is expected to be approved by both the IDNR and ultimately
by  the EPA in either the fourth quarter of 1997 or the first quarter of
1998.

      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


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

Property, plant and equipment:
  Utility -
    Plant in service -
        Electric                               $ 2,045,422        $ 2,007,839
        Gas                                        181,995            175,472
        Other                                      131,302            126,850
                                                 2,358,719          2,310,161
    Less - Accumulated depreciation              1,104,678          1,030,390
                                                 1,254,041          1,279,771
    Leased nuclear fuel, net of amortization        37,968             34,725
    Construction work in progress                   61,932             43,719
                                                 1,353,941          1,358,215
  Other, net of accumulated depreciation
   and amortization of $1,615 and 
   $1,438, respectively                              5,695              5,872
                                                 1,359,636          1,364,087


Current assets:
  Cash and temporary cash investments               15,951             11,608
  Accounts receivable -
    Customer, less allowance for doubtful
    accounts of $709 and $546, respectively         14,144             22,461
    Other                                            8,907             11,270
  Income tax refunds receivable                      2,908              2,664
  Production fuel, at average cost                  10,801             13,323
  Materials and supplies, at average cost           22,759             21,716
  Adjustment clause balances                             0             10,752
  Regulatory assets                                 36,718             26,539
  Prepayments and other                             14,712             18,705
                                                   126,900            139,038


Investments:
  Nuclear decommissioning trust funds               74,455             59,325
  Cash surrender value of life insurance
    policies                                         4,812              4,281
  Other                                                 78                313
                                                    79,345             63,919


Other assets:
  Regulatory assets                                191,476            201,129
  Deferred charges and other                        11,168             10,437
                                                   202,644            211,566
                                               $ 1,768,525        $ 1,778,610



           IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)


                                               September 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                                236,028            231,337
      Total common equity                          548,497            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)       651,781            517,334
                                                 1,218,598          1,079,460


Current liabilities:
  Short-term borrowings                                  0            135,000
  Capital lease obligations                         13,294             15,125
  Maturities and sinking funds                         140              8,140
  Accounts payable                                  37,269             76,287
  Accrued interest                                  12,193              8,839
  Accrued taxes                                     66,288             40,953
  Accumulated refueling outage provision             7,970              1,316
  Adjustment clause balances                           782                  0
  Environmental liabilities                          5,517              5,517
  Other                                             15,335             17,114
                                                   158,788            308,291


Long-term liabilities:
  Pension and other benefit obligations             31,600             25,826
  Capital lease obligations                         24,674             19,600
  Environmental liabilities                         37,844             40,299
  Other                                             19,164             14,030
                                                   113,282             99,755


Deferred credits:
  Accumulated deferred income taxes                245,361            256,634
  Accumulated deferred investment 
    tax credits                                     32,496             34,470
                                                   277,857            291,104


Commitments and contingencies (Note 7)


                                               $ 1,768,525        $ 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 Nine             For the Twelve
                                         Months Ended              Months Ended              Months Ended
                                         September 30              September 30              September 30
                                       1997         1996         1997         1996         1997         1996
                                                                  (in thousands)
<S>                              <C>          <C>          <C>          <C>          <C>          <C>
Operating revenues:
    Electric                       $ 184,676    $ 173,626    $ 459,653    $ 436,027    $ 597,899    $ 562,996
    Gas                               15,507       12,169      122,711      103,854      179,720      151,906
    Other                              5,528        4,375       19,369       13,296       25,915       17,143
                                     205,711      190,170      601,733      553,177      803,534      732,045


Operating expenses:
    Fuel for production               27,613       29,148       84,026       72,168       96,437       96,733
    Purchased power                   18,749       18,655       52,472       55,125       85,697       68,600
    Gas purchased for resale           7,835        5,034       84,413       64,445      123,846       96,116
    Other operating expenses          42,783       37,594      117,242      112,506      154,736      154,902
    Maintenance                       12,224       13,192       37,675       37,516       46,028       46,901
    Depreciation and amortization     21,840       21,908       68,605       65,957       87,623       84,709
    Taxes other than income taxes     10,956       11,386       34,563       34,996       43,170       43,054
                                     142,000      136,917      478,996      442,713      637,537      591,015


Operating income                      63,711       53,253      122,737      110,464      165,997      141,030


Interest expense and other:
   Interest expense                   13,371       11,466       38,446       33,346       48,813       44,375
   Allowance for funds used during
     construction                       -784         -761       -1,551       -2,141       -1,512       -2,904
   Miscellaneous, net                    588        6,230        1,915        5,090        2,117        5,597
                                      13,175       16,935       38,810       36,295       49,418       47,068


Income before income taxes            50,536       36,318       83,927       74,169      116,579       93,962


Federal and state income taxes:
    Current                           21,124       15,132       45,520       33,487       47,362       42,513
    Deferred                           1,434        1,834       -6,996        1,296        2,116          527
    Amortization of investment
      tax credits                       -658         -661       -1,974       -1,984       -2,635       -2,658
                                      21,900       16,305       36,550       32,799       46,843       40,382


Net income                            28,636       20,013       47,377       41,370       69,736       53,580
Preferred dividend requirements          229          229          686          686          914          914
Net income available for
  common stock                     $  28,407    $  19,784    $  46,691    $  40,684    $  68,822    $  52,666


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 Nine       For the Twelve
                                                      Months Ended        Months Ended        Months Ended
                                                      September 30        September 30        September 30
                                                     1997      1996      1997      1996      1997      1996
                                                                         (in thousands)

<S>                                           <C>        <C>       <C>       <C>       <C>       <C>  
Cash flows from operating activities:
  Net income                                     $  28,636 $  20,013 $  47,377 $  41,370 $  69,736 $  53,580
  Adjustments to reconcile net income to
    net cash flows from operating activities -
      Depreciation and amortization                 21,840    21,908    68,605    65,957    87,623    84,709
      Amortization of principal under capital
        lease obligations                            3,559     4,945    10,668    14,195    12,964    19,108
      Deferred taxes and investment tax credits        776     1,173    -8,970      -688      -519    -2,131
      Refueling outage provision                     2,464     1,831     6,654     6,751    -6,471     9,199
      Amortization of other assets                   4,225     2,041     9,406     7,191    11,987     9,845
      Other                                            -36        13       192       -24       496       657
  Other changes in assets and liabilities -
      Accounts receivable                           -1,564     5,466    10,680     6,440    -8,962    -1,146
      Sale of utility accounts receivable                0         0         0     7,000         0         0
      Production fuel, materials and supplies        2,847    -1,118     2,178      -190     3,019     3,560
      Accounts payable                              -9,447     2,353   -36,339   -11,075   -12,379     3,832
      Accrued taxes                                 30,933    21,259    25,091     8,301     5,556   -12,313
      Provision for rate refunds                         0       -43         0      -106         0   -12,966
      Adjustment clause balances                    -3,533    -3,559    11,534    -3,898     1,532    -1,220
      Gas in storage                                -5,413    -8,280     2,806       965     1,289    -1,193
      Other                                           -326    -2,816     7,399     1,607    13,117    -2,058
          Net cash flows from operating 
            activities                              74,961    65,186   157,281   143,796   178,988   151,463

Cash flows from financing activities:
      Dividends declared on common stock           -14,000   -12,000   -42,000   -34,000   -52,000   -44,000
      Dividends declared on preferred stock           -229      -229      -686      -686      -914      -914
      Proceeds from issuance of long-term 
        debt                                       135,000    60,000   190,000    60,000   190,000   110,000
      Reductions in long-term debt                       0   -15,000   -63,140   -15,140   -63,140   -65,140
      Net change in short-term borrowings         -150,000   -47,345  -135,000   -27,658   -82,230    23,426
      Principal payments under capital 
        lease obligations                           -3,740    -4,626    -9,405   -14,162   -14,351   -19,096
      Other                                           -711      -182      -821      -354      -887    -2,056
          Net cash flows from financing 
            activities                             -33,680   -19,382   -61,052   -32,000   -23,522     2,220

Cash flows from investing activities:
      Construction and acquisition 
      expenditures -
         Utility                                   -26,271   -39,701   -74,521   -97,084  -119,819  -133,524
         Other                                           0        -2        -8      -344      -930      -902
      Deferred energy efficiency 
        expenditures                                  -920    -3,887    -8,450   -12,643   -12,664   -17,708
      Nuclear decommissioning trust funds           -1,502    -1,502    -4,506    -4,506    -6,008    -6,008
      Other                                            -18       272    -4,401     1,149    -1,196     3,137
          Net cash flows from investing 
            activities                             -28,711   -44,820   -91,886  -113,428  -140,617  -155,005

Net increase (decrease) in cash and 
  temporary cash investments                        12,570       984     4,343    -1,632    14,849    -1,322

Cash and temporary cash investments
  at beginning of period                             3,381       118    11,608     2,734     1,102     2,424

Cash and temporary cash investments
  at end of period                               $  15,951 $   1,102 $  15,951 $   1,102 $  15,951 $   1,102

Supplemental cash flow information:
      Cash paid during the period for -
         Interest                                $   9,073 $  10,866 $  33,215 $  30,443 $  44,842 $  44,511
         Income taxes                            $       0 $   3,921 $  31,875 $  35,489 $  41,770 $  51,691
      Noncash investing and financing 
      activities -
         Capital lease obligations incurred      $  13,789 $     939 $  13,912 $  13,785 $  14,408 $  13,896


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.  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.  Included in the IUB's process
was  the  creation of an advisory panel, of which Utilities is a member.
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
current  level  of  relative prices.  However, they are  continuing  the
analysis and debate on restructuring and retail competition in Iowa.

      Recently, the IUB has taken several actions.  On August 18,  1997,
the  IUB  issued  an  order  that promulgated draft  principles  for  an
independent  system operator and invited public comment.   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 and so there is a need for the IUB to design
a  model that suits Iowa's needs.  The action plan is to be developed by
the  IUB's staff, with outside assistance as needed, and with review and
comment by the IUB's advisory group.  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 for written comment a set of  proposed
guidelines  for an Iowa-specific pilot project that would  allow  retail
access to a "subset of all customer classes."

      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.  The Public Service Commission of Wisconsin  (PSCW)
has  conditioned  the merger on the filing of a PSCW-approved  ISO  with
FERC.

      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, Utilities 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.


                     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
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.

     On September 26, 1997, the IUB issued an order stating that it does
not  disapprove of the proposed merger.  The order included a number  of
conditions,  which the parties are willing to meet, including  a  4-year
rate freeze.

      On  November  4,  1997,  the PSCW issued an  order  approving  the
proposed  merger.   The approval included a number of conditions,  which
the parties are willing to meet, including a 4-year rate freeze.

      The  SEC comment period ended November 5, 1996.  Final review will
commence following FERC approval.

      The  merger  partners have submitted 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 and all requirements of such review were satisfied.

      The Nuclear Regulatory Commission (NRC) published its order in the
Federal  Register on August 28, 1997, allowing principal  ownership  and
operations  of  the  Duane Arnold Energy Center (DAEC)  to  transfer  to
Interstate Energy Corporation.

      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 freezes at Utilities.


                  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 $10.9 million, $9.4 million and
$13.4   million  during  the  three,  nine  and  twelve  month  periods,
respectively.  Earnings per average common share increased $0.34,  $0.29
and  $0.41  for the respective periods.  Utilities' net income available
for  common stock increased $8.6 million, $6.0 million and $16.2 million
during   the   three,  nine  and  twelve  month  periods,  respectively.
Increased  electric  sales (excluding off-system sales)  resulting  from
continuing  growth  in Utilities' service territory and  more  favorable
weather  conditions  contributed to the increase  in  earnings  for  all
periods.  In comparing the three, nine and twelve month periods with the
prior  periods, the Company estimates that the weather impacted earnings
per  share  by approximately $0.15, $0.10 and $0.12, respectively.   The
increase  in  earnings  for all periods was also  due  to  the  takeover
defense  costs (approximately $0.15 per share) that the company incurred
in  the third quarter of 1996 and a lower effective tax rate.  Partially
offsetting  the  increase for all periods were  increased  interest  and
depreciation  expenses.  The nine and twelve month increases  were  also
partially  offset by the recording of a $2.5 million loss on non-utility
investments at Utilities during the second quarter of 1997.

      The  Company's  operating income increased  $11.9  million,  $13.6
million  and  $26.0  million during the three,  nine  and  twelve  month
periods, respectively, while Utilities' operating income increased $10.5
million, $12.3 million and $25.0 million during the same periods.

Electric Operations

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

                                 Revenues and Costs           Kwhs Sold
                                   (In thousands)          (In thousands)
                                   1997        1996         1997       1996
Residential and rural         $   71,252  $   63,594      734,577    667,458
General service                   30,670      28,085      318,645    295,997
Large general service             72,525      68,809    1,490,581  1,432,420
Sales for resale and other         9,384       9,066      148,108    148,369
Total, excluding off-
  system sales                   183,831     169,554    2,691,911  2,544,244
Off-system sales                     845       4,072       31,604    288,561
    Total                        184,676     173,626    2,723,515  2,832,805
                                                               
Fuel for production
  (excluding steam)               24,458      27,106                        
Purchased power                   18,749      18,655                        
Margin                        $  141,469  $  127,865                        
                                          
                                          
Electric  margins and Kwh sales for Utilities for the nine months  ended
September 30 were as follows:              
                                          
                                Revenues and Costs            Kwhs Sold
                                  (In thousands)           (In thousands)
                                   1997        1996         1997       1996
Residential and rural         $  174,245  $  162,665    2,026,344  1,968,766
General service                   77,687      72,622      920,048    886,972
Large general service            179,234     163,341    4,346,519  4,072,837
Sales for resale and other        24,469      23,080      420,995    435,340
Total, excluding off-
  system sales                   455,635     421,708    7,713,906  7,363,915
Off-system sales                   4,018      14,319      151,597    929,784
    Total                        459,653     436,027    7,865,503  8,293,699
                                                               
Fuel for production                                
  (excluding steam)               72,507      65,734                        
Purchased power                   52,472      55,125                        
Margin                        $  334,674  $  315,168                        


Electric margins and Kwh sales for Utilities for the twelve months ended
September 30 were as follows:

                                Revenues and Costs            Kwhs Sold
                                  (In thousands)           (In thousands)
                                   1997        1996         1997       1996
Residential and rural         $  224,380  $  208,313    2,691,282  2,582,785
General service                  103,261      96,340    1,264,192  1,215,829
Large general service            229,115     208,406    5,774,288  5,419,536
Sales for resale and other        31,954      30,058      573,434    581,446
Total, excluding off-
  system sales                   588,710     543,117   10,303,196  9,799,596
Off-system sales                   9,189      19,879      453,110  1,285,161
    Total                        597,899     562,996   10,756,306 11,084,757
                                                               
Fuel for production                                
  (excluding steam)               81,381      88,728                        
Purchased power                   85,697      68,600                        
Margin                        $  430,821  $  405,668                        


      The  electric  margin increased $13.6 million, $19.5  million  and
$25.2   million  during  the  three,  nine  and  twelve  month  periods,
respectively,  primarily due to higher Kwh sales  (excluding  off-system
sales).   The sales increases during all periods were due to  continuing
sales  growth in Utilities' service territory and more favorable weather
conditions.   Revenues also increased significantly due to the  recovery
of previously deferred expenditures for state mandated energy efficiency
programs pursuant to an IUB order (the majority of these recoveries  are
also amortized to expense in other operating expenses).  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,  nine  and  twelve  month
periods  would  have  increased 1.5%, 3.4% and  4.0%,  respectively,  as
compared to actual increases of 5.8%, 4.8% and 5.1%.

     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  freezes  at Utilities 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  Industrial
Energy  Applications,  Inc.  (IEA),  a  wholly-owned  subsidiary   under
Diversified, for the three months ended September 30 were as follows:

                                 Revenues and Costs           Dths Sold
                                   (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Utilities -                                                    
  Residential                 $    8,802  $    6,968       1,025       1,013
  Commercial                       4,259       3,031         758         711
  Industrial                       1,656       1,364         440         472
  Transportation and
    other                            790         806       2,287       2,308
  Total Utilities                 15,507      12,169       4,510       4,504
IEA                                  -        16,292         -         6,777
  Total                           15,507      28,461       4,510      11,281
                                                               
Gas purchased for resale           7,795      20,841                        
Margin                        $    7,712  $    7,620                        
                                                     
                                                   
Gas  margins  and  Dth sales for Utilities and IEA for the  nine  months
ended September 30 were as follows:                
                                                    
                                 Revenues and Costs           Dths Sold
                                   (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Utilities -                                                    
  Residential                 $   75,037  $   64,754      11,140      11,894
  Commercial                      37,078      30,322       6,520       6,838
  Industrial                       7,926       6,027       1,874       1,885
  Transportation and                      
    other                          2,670       2,751       7,507       7,613
  Total Utilities                122,711     103,854      27,041      28,230
IEA                                2,670      57,258         978      23,914
  Total                          125,381     161,112      28,019      52,144
                                                               
Gas purchased for resale          88,136     120,091
Margin                        $   37,245  $   41,021 
                                                    
                                                   
Gas  margins  and Dth sales for Utilities and IEA for the twelve  months
ended September 30 were as follows:                
                                                    
                                 Revenues and Costs           Dths Sold
                                   (In thousands)           (In thousands)
                                   1997        1996        1997        1996
Utilities -                                                     
  Residential                 $  107,991  $   94,586      16,927      17,546
  Commercial                      53,722      44,061      10,005      10,075
  Industrial                      14,155       9,583       3,784       3,139
  Transportation and                      
    other                          3,852       3,676      10,235      10,355
  Total Utilities                179,720     151,906      40,951      41,115
IEA                               58,527      72,760      20,118      32,241
  Total                          238,247     224,666      61,069      73,356
                                                               
Gas purchased for resale         185,396     166,538
Margin                        $   52,851  $   58,128 


      Total  gas  margin increased or (decreased) $0.1  million,  ($3.8)
million  and  ($5.3)  million during the three, nine  and  twelve  month
periods,  respectively.  The decreases during the nine and twelve  month
periods  were 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) $0.5 million, ($1.1)
million  and  $0.1  million  during the three,  nine  and  twelve  month
periods,  respectively.  The decrease in Utilities'  margin  during  the
nine  month  period was primarily due to lower Dth sales resulting  from
less  favorable  weather conditions in 1997.  Under historically  normal
weather  conditions, Utilities' gas sales and transported volumes  would
have  increased or (decreased) 1.2%, (1.2%) and 1.0% during  the  three,
nine  and  twelve  month periods, respectively, as  compared  to  actual
increases or (decreases) of 0.1%, (4.2%) and (0.4%).

      The contrasting relationship between the change in Utilities'  gas
revenues  and  Dths  sold during the nine 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.

      Refer  to  Note  3(a)  of  the  Notes  to  Consolidated  Financial
Statements  for  a discussion of a merger-related gas  price  freeze  at
Utilities.

Other  Revenues   The Company's other revenues increased  $1.8  million,
$11.0  million and $19.9 million during the three, nine and twelve month
periods,  respectively ($1.2 million, $6.1 million and $8.8  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 increases
during the nine and twelve month periods.

Operating Expenses   The Company's other operating expenses increased or
(decreased)  $3.5  million, $5.0 million and  $2.0  million  during  the
three,  nine and twelve month periods, respectively ($5.2 million,  $4.7
and  ($0.2)  million at Utilities).  The increase for  all  periods  was
primarily  due  to increased amortization of previously deferred  energy
efficiency  expenditures  at Utilities and increased  international  and
domestic  business  development  activities  at  Diversified,  partially
offset  by  lower  operating expenses at Whiting.  The nine  and  twelve
month  increases were also due to the increased operating activities  at
IEA,  partially  offset  by decreased operating expenses  at  the  DAEC,
Utilities' nuclear generating facility.

      The  Company's  and Utilities' maintenance expenses  increased  or
(decreased) ($1.0) million, $0.2 million and ($0.9) million  during  the
three,  nine  and twelve month periods, respectively.  The  three  month
decrease  was  primarily  due  to decreased  maintenance  activities  at
Utilities' fossil-fueled generating stations.  The twelve month decrease
was  primarily due to lower maintenance expenses at the DAEC,  partially
offset  by  increased maintenance activities on Utilities'  transmission
and distribution facilities.

      The Company's depreciation and amortization expense increased $0.2
million, $3.0 million and $5.0 million during the three, nine and twelve
month  periods,  respectively (($0.1) million,  $2.6  million  and  $2.9
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  all  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, $7.3 million and $9.6 million during the three, nine  and
twelve month periods, respectively ($1.9 million, $5.1 million and  $4.4
million  at  Utilities), primarily because of increases in  the  average
amount  of  borrowings at Diversified and the amount of  long-term  debt
outstanding at Utilities.  The three month increase was partially offset
by  decreases  in the average amount of short-term debt  outstanding  at
Utilities.

      Miscellaneous, net for the Company reflects comparative  increases
in  income  of  $6.8 million, $2.7 million and $1.5 million  during  the
three,  nine and twelve month periods, respectively ($5.6 million,  $3.2
million  and $3.5 million at Utilities).  Approximately $7.5 million  of
costs  were  incurred during the three month period ended September  30,
1996  relating to the successful defense of the hostile takeover attempt
mounted  by  MidAmerican  Energy Company.  The  nine  and  twelve  month
increases were partially offset by the recording of a $2.5 million  loss
on  non-utility  investments at Utilities during the second  quarter  of
1997 and certain property write-downs.

Income Taxes   The Company's income tax expense increased or (decreased)
$5.2 million, ($0.9) million and $3.1 million during the three, nine and
twelve month periods, respectively ($5.6 million, $3.8 million and  $6.5
million  at Utilities).  Higher pre-tax income contributed to the  three
and twelve month increases and partially offset the nine month decrease.
The impact of a tax deduction resulting from the contribution of 300,000
shares of the Company's investment in McLeodUSA Inc. (McLeod) to the IES
Charitable  Foundation  partially offset  the  three  and  twelve  month
increases and contributed to the nine month decrease.  Reserves recorded
during  the  first and second quarters of 1996 related  to  an  Internal
Revenue Service (IRS) audit for tax years 1991-1993 also contributed  to
the nine month decrease and partially offset the twelve month increase.

                       CONSOLIDATED BALANCE SHEETS
                                    
     Pursuant to the provisions of SFAS No. 115, "Accounting for Certain
Investments  in Debt and Equity Securities", the carrying value  of  the
McLeod investment was adjusted from a cost basis to estimated fair value
at  September  30, 1997, based on the September 30 closing price,  given
that  the McLeod shares have become qualified for sale within a one year
period.  The adjustment included an increase to "Investment in McLeodUSA
Inc." of $374 million, an increase to "Unrealized security gains (net of
taxes)" of $219 million and an increase to "Accumulated deferred  income
taxes"  of $155 million. (See note 5(a) for a further discussion of  the
McLeod  investment).  The $50 million decrease in "Accounts payable"  at
September 30, 1997, compared to December 31, 1996, was primarily due  to
a  decrease in natural gas payables caused by the seasonal nature of the
natural  gas  business and the accounting change for IEA's gas  business
resulting from the formation of the joint venture.


                     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 2.90 and 2.93 for the  twelve  months  ended
September  30,  1997 and September 30, 1996, respectively.   Cash  flows
from operating activities for the twelve months ended September 30, 1997
and September 30, 1996 were $199 million and $182 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   - Secured long-term debt       A2                A+
                 - Unsecured long-term debt     A3                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 September 30, 1997, Utilities had approximately $65 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  September 30, 1997, the Company had an investment in McLeodUSA
Inc.,  a  telecommunications company, valued at $403.0 million based  on
the  September  30  closing  price.  See  Note  5(a)  of  the  Notes  to
Consolidated Financial Statements for further information concerning the
Company's investment in McLeodUSA, including recent accounting changes.

      The  Company  has financial guarantees amounting to $18.8  million
outstanding  at  September  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 September 30, 1997, the Company had approximately $47.7 million
of  investments  in  foreign entities (see Note 5(b)  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 domestic 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  Board
of  Directors  recently  authorized the Company to  pursue  and  propose
additional  foreign investments, not to exceed $300 million, in  Brazil,
which  is  undergoing  a privatization of its electric  companies.   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 of the  thirty
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.    In   addition   to   these   anticipated
expenditures, the Board of Directors recently authorized the Company  to
pursue  and  propose additional foreign investments, not to exceed  $300
million,  in Brazil, which is undergoing a privatization of its electric
companies.  The Company had construction and acquisition expenditures of
approximately $119 million for the nine months ended September 30, 1997,
including  approximately  $74 million of utility  expenditures  and  $45
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       191.3
         Other subsidiaries' debt             10.9
                                           $ 386.2

      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  September
30,  1997,  such restrictions would have allowed Utilities to  issue  at
least $229 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.

     In October 1997, Diversified entered into a 3-Year Credit Agreement
with  various  banking  institutions which replaced  its  variable  rate
credit  facility.   Refer  to  Note 6(a) of the  Notes  to  Consolidated
Financial Statements for a further discussion of this agreement.

      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 September  30,  1997,
Utilities  could have issued an additional 700,000 shares of  Cumulative
Preference Stock and no 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 September 30, 1997.

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

                        
      Long-term debt      49%
      Preferred stock      1
      Common equity       50
                         100%

      The  Company's  capitalization ratios were significantly  impacted
during the third quarter of 1997 by: 1) the issuance of $135 million  of
6-5/8%  Senior Debentures, and 2) the recognition of unrealized security
gains  relating to the investment in McLeod which was recorded,  net  of
tax, directly in the common equity section on the balance sheet.

     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 September 30, 1997, Utilities
had no outstanding 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 September 30, 1997, Utilities had sold $65 million under
the agreement.

      In  October  1997,  Diversified  entered  into  a  364-Day  Credit
Agreement with various banking institutions which replaced its  variable
rate  credit  facility.  Refer to Note 6(b) of the Notes to Consolidated
Financial Statements for a further discussion of this agreement.

      At  September  30,  1997, the Company had  bank  lines  of  credit
aggregating $45.1 million. Utilities was using $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.  From time to time, the Company may borrow  from
banks and other financial institutions in lieu of commercial paper.  The
Company  has  agreements with several financial  institutions  for  such
borrowings.   There are no commitments associated with these  agreements
and  there  were  no  borrowings outstanding under these  agreements  at
September 30, 1997.


                          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 $33 million (including $4.7 million as  current
liabilities)  at September 30, 1997.  Regulatory assets of approximately
$33  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 (IDNR) in the third quarter of  1997  on
this  issue and has subsequently proposed certain modifications  to  the
consent order in response to comments provided by the EPA to the IDNR.

      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  currently  reviewing
options  for expanding on-site storage capability.  To provide assurance
that  both  the  short  and long term storage  needs  are  satisfied,  a
combination  of  expanding the capacity of the existing  fuel  pool  and
construction  of  a  dry  cask modular facility  may  provide  the  best
solution.  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 September  30,  1997,  Utilities  had
prepaid  costs of approximately $1.1 million to the Compact.   Utilities
expects to receive these funds back from the Compact by the end  of  the
year.   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

Year  2000  The Company utilizes software, embedded systems, and related
technologies throughout its businesses that will be affected by the date
change in the Year 2000.  An internal project is currently under way  to
determine the full scope, work plan and related costs to insure that its
systems  continue to meet its customer and internal needs.  The  Company
has  begun to incur expenses to resolve this issue.  These expenses  may
continue through the year 1999 and may be significant.

Labor  Issues   Utilities  has  six  collective  bargaining  agreements,
covering  approximately 54% of its workforce.  None  of  the  agreements
expires  in  1997.   Two of the agreements, covering  less  than  5%  of
Utilities' workforce, will expire in 1998.

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 September 30, 1997, the Company did not have any
material financial derivatives outstanding.

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  fourth
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 ten carriers  and  an  agreement  in
principle  has been reached with four 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  alleged  that  Utilities  was
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  was unlawfully attempting to provide retail electrical  services
in  Utilities' exclusive service territory.  On August 25, 1997, the IUB
issued  its  Final Decision and Order rejecting Lambda's complaint.   On
October  10,  1997,  the  IUB  issued its rehearing  order  which  again
rejected Lambda's complaint.

      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  (CIPCO)  alleging that it, too,  inter  alia  had  violated
Iowa's trade secret act, and had tortiously interfered with existing and
prospective  business  advantage.   Utilities  is  in  the  process   of
dismissing CIPCO from the suit.

      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.

      Under  provisions  of  the  3-Year and 364-Day  Credit  Agreements
recently entered into by Diversified, declaration of common dividends by
Industries  could be restricted prior to its pending merger  if  certain
provisions are not met.  The Company does not anticipate such provisions
will restrict any future dividend payments.

Item 3.  Default Upon Senior Securities.

None.

Item 4.  Results of Votes of Security Holders.

None.

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:
          September 30, 1997       3.19
          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).
   
  *4(f)   3-Year Credit Agreement dated as of October 20, 1997
          among  IES Diversified Inc. as Borrower, certain banks,  First
          Chicago  Capital  Markets,  Inc.  as  Syndication  Agent   and
          Citibank, N.A. as Agent.
   
  *4(g)   364-Day Credit Agreement dated as of  October  20,
          1997  among  IES Diversified Inc. as Borrower, certain  banks,
          First  Chicago Capital Markets, Inc. as Syndication Agent  and
          Citibank, N.A. as Agent.
   
  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.  (Filed as Exhibit  10(b)
          to  Industries' Form 10-Q for the quarter ended June 30,  1997
          (File No. 1-9187)).
   
 *10(c)   IES Industries Inc. Grantor Trust for Director Retirement
          Plan.
   
 *10(d)   IES   Industries  Inc.  Grantor   Trust   for   Deferred
          Compensation Agreements.
   
 *10(e)   IES  Industries  Inc.  Grantor  Trust  for  Supplemental
          Retirement Agreements.
   
 *10(f)   IES Utilities Inc. Grantor Trust for Deferred Compensation
          Agreements.
   
 *10(g)   IES   Utilities  Inc.  Grantor  Trust  for  Supplemental
          Retirement Agreements.
     
 *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.

          Items Reported       Financial Statements       Date of Report     
                                                               
                5                      None               October 30, 1997
                                                          
                                                          
     IES Utilities Inc.                                   
                                                          
          Items Reported       Financial Statements       Date of Report    
                                                               
                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:  November 12, 1997          By /s/         Stephen W. Southwick
                                                     (Signature)
                                                 Stephen W. Southwick
                                           Vice President, General Counsel &
                                                       Secretary
                                  



                                  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:  November 12, 1997           By /s/       Stephen W. Southwick
                                                    (Signature)
                                                Stephen W. Southwick
                                          Vice President, General Counsel &
                                                      Secretary




                                    By /s/          John E. Ebright
                                                      (Signature)
                                                    John E. Ebright
                                         Controller & Chief Accounting Officer