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         March 31, 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 April 30, 1997.

  IES Industries Inc. Common Stock, no par value - 30,304,617 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 -
              March 31, 1997 and December 31, 1996                    3 - 4
            Consolidated Statements of Income -
              Three and Twelve Months Ended
              March 31, 1997 and 1996                                   5
            Consolidated Statements of Cash Flows -
              Three and Twelve Months Ended
              March 31, 1997 and 1996                                   6
            Notes to Consolidated Financial Statements                7 - 14
              
          IES Utilities Inc.:
            Consolidated Balance Sheets -
              March 31, 1997 and December 31, 1996                   15 - 16
            Consolidated Statements of Income -
              Three and Twelve Months Ended
              March 31, 1997 and 1996                                  17
            Consolidated Statements of Cash Flows -
              Three and Twelve Months Ended
              March 31, 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 - 32


Part II.  Other Information.                                         33 - 35


Signatures.                                                          36 - 37


                        PART I - FINANCIAL INFORMATION

ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS

                IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS

                                                     March 31,
                                                       1997      December 31,
ASSETS (in thousands)                               (Unaudited)      1996

Property, plant and equipment:
  Utility -
    Plant in service -
      Electric                                       $ 2,015,838  $ 2,007,839
      Gas                                                176,439      175,472
      Other                                              132,421      126,850
                                                       2,324,698    2,310,161
    Less - Accumulated depreciation                    1,054,799    1,030,390
                                                       1,269,899    1,279,771
    Leased nuclear fuel, net of amortization              31,468       34,725
    Construction work in progress                         48,726       43,719
                                                       1,350,093    1,358,215
  Other, net of accumulated depreciation
    and amortization of $74,652 and
    $70,031, respectively                                228,521      223,805
                                                       1,578,614    1,582,020


Current assets:
  Cash and temporary cash investments                     26,625        8,675
  Accounts receivable -
    Customer, less allowance for doubtful
      accounts of $1,165 and $1,087, respectively         34,826       50,821
    Other                                                  9,466       12,040
  Income tax refunds receivable                            9,428        8,890
  Production fuel, at average cost                        12,042       13,323
  Materials and supplies, at average cost                 23,992       22,842
  Adjustment clause balances                                   0       10,752
  Regulatory assets                                       32,067       26,539
  Prepayments and other                                   19,698       24,169
                                                         168,144      178,051


Investments:
  Nuclear decommissioning trust funds                     61,516       59,325
  Investment in foreign entities                          45,142       44,946
  Investment in McLeod, Inc.                              29,200       29,200
  Cash surrender value of life insurance policies         11,562       11,217
  Other                                                    7,207        4,903
                                                         154,627      149,591


Other assets:
  Regulatory assets                                      196,096      201,129
  Deferred charges and other                              15,169       14,771
                                                         211,265      215,900
                                                     $ 2,112,650  $ 2,125,562


          IES INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                                     March 31,
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 30,217,336
    and 30,077,212 shares, respectively              $   412,143  $   407,635
  Retained earnings                                      215,703      219,246
    Total common equity                                  627,846      626,881
  Cumulative preferred stock of IES Utilities Inc.        18,320       18,320
  Long-term debt (excluding current portion)             651,763      701,100
                                                       1,297,929    1,346,301


Current liabilities:
  Short-term borrowings                                  126,000      135,000
  Capital lease obligations                               14,047       15,125
  Maturities and sinking funds                            63,480        8,473
  Accounts payable                                        62,142       99,861
  Dividends payable                                       16,527       16,431
  Accrued interest                                        11,041        8,985
  Accrued taxes                                           71,599       43,926
  Accumulated refueling outage provision                   3,002        1,316
  Adjustment clause balances                               3,759            0
  Environmental liabilities                                5,679        5,679
  Other                                                   17,754       22,087
                                                         395,030      356,883


Long-term liabilities:
  Pension and other benefit obligations                   43,852       39,643
  Capital lease obligations                               17,421       19,600
  Environmental liabilities                               47,560       47,502
  Other                                                   21,959       18,488
                                                         130,792      125,233


Deferred credits:
  Accumulated deferred income taxes                      255,087      262,675
  Accumulated deferred investment tax credits             33,812       34,470
                                                         288,899      297,145


Commitments and contingencies (Note 7)


                                                     $ 2,112,650  $ 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 Twelve
                                          Months Ended             Months Ended
                                            March 31                  March 31
                                        1997         1996         1997         1996
                                         (in thousands, except per share amounts)
<S>                               <C>          <C>          <C>          <C>
Operating revenues:
  Electric                          $ 137,286    $ 125,368    $ 586,191    $ 569,262
  Gas                                  84,106       90,024      268,060      215,381
  Other                                36,295       27,805      134,151      103,173
                                      257,687      243,197      988,402      887,816

Operating expenses:
  Fuel for production                  29,881       20,292       94,168       97,105
  Purchased power                      18,673       14,469       92,553       65,029
  Gas purchased for resale             64,498       67,437      214,412      159,864
  Other operating expenses             52,964       52,525      215,197      205,822
  Maintenance                          13,568       10,833       51,736       44,763
  Depreciation and amortization        28,739       27,384      108,750       99,803
  Taxes other than income taxes        13,295       13,262       48,203       48,836
                                      221,618      206,202      825,019      721,222

Operating income                       36,069       36,995      163,383      166,594

Interest expense and other:
  Interest expense                     14,846       12,906       56,763       51,667
  Allowance for funds used during
    construction                         -394         -690       -1,807       -2,999
  Preferred dividend requirements
    of IES Utilities Inc.                 229          229          914          914
  Miscellaneous, net                     -244       -1,677        3,765       -4,489
                                       14,437       10,768       59,635       45,093

Income before income taxes             21,632       26,227      103,748      121,501

Income taxes:
  Current                              16,138       14,110       40,274       51,506
  Deferred                             -6,163       -1,317        6,988        1,138
  Amortization of investment 
    tax credits                          -658         -661       -2,642       -2,674
                                        9,317       12,132       44,620       49,970

Net income                          $  12,315    $  14,095    $  59,128    $  71,531

Average number of common
  shares outstanding                   30,188       29,645       29,997       29,391

Earnings per average
  common share                      $    0.41    $    0.48    $    1.97    $    2.43

Dividends declared per
  common share                      $   0.525    $   0.525    $    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 Twelve
                                                           Months Ended            Months Ended
                                                             March 31                March 31
                                                         1997        1996        1997        1996
                                                                      (in thousands)
<S>                                                <C>         <C>         <C>         <C>
Cash flows from operating activities:
  Net income                                         $  12,315   $  14,095   $  59,128   $  71,531
  Adjustments to reconcile net income to
    net cash flows from operating activities -
      Depreciation and amortization                     28,739      27,384     108,750      99,803
      Amortization of principal under capital
        lease obligation                                 3,369       4,624      15,237      17,781
      Deferred taxes and investment tax credits         -6,821      -1,978       4,346      -1,536
      Refueling outage provision                         1,686       2,546      -7,234       3,569
      Amortization of other assets                       3,039       2,913       9,895       9,247
      Other                                              2,279       1,104       2,078       1,040
  Other changes in assets and liabilities -
      Accounts receivable                               18,569      -7,131       3,546     -20,186
      Sale of utility accounts receivable                    0           0       7,000      -6,000
      Production fuel, materials and supplies              916       1,351         687       3,744
      Accounts payable                                 -35,242      -8,620      -5,690      -4,064
      Accrued taxes                                     27,135      16,293      -7,123      20,371
      Provision for rate refunds                             0         166        -272      -7,728
      Adjustment clause balances                        14,511       3,387      -2,776       3,733
      Gas in storage                                     6,073       7,744      -2,825       2,798
      Other                                              1,927         772      12,921      -4,456
          Net cash flows from operating activities      78,495      64,650     197,668     189,647

Cash flows from financing activities:
      Dividends declared on common stock               -15,858     -15,582     -63,015     -61,792
      Proceeds from issuance of common stock             3,479       3,726      13,917      14,696
      Purchase of treasury stock                             0           0        -269           0
      Net change in IES Diversified Inc. credit 
        facility                                         5,695        -995      54,550      52,725
      Proceeds from issuance of other long-term
        debt                                                 0           0      60,000      50,007
      Reductions in other long-term debt                   -79         -79     -15,454     -50,431
      Net change in short-term borrowings               -9,000      -9,000      34,000      64,000
      Principal payments under capital lease
        obligations                                     -2,296      -4,913     -16,491     -15,714
      Other                                                 96         -69        -292      -1,576
          Net cash flows from financing activities     -17,963     -26,912      66,946      51,915

Cash flows from investing activities:
      Construction and acquisition expenditures -
         Utility                                       -19,758     -23,333    -138,684    -121,437
         Other                                         -13,423     -15,359     -94,183     -99,663
      Oil and gas properties held for resale                 0       9,843           0           0
      Deferred energy efficiency expenditures           -4,014      -3,667     -17,204     -18,159
      Nuclear decommissioning trust funds               -1,502      -1,502      -6,008      -6,219
      Proceeds from disposition of assets                  567       1,204       7,658      12,524
      Other                                             -4,452      -1,431          -3      -3,015
          Net cash flows from investing activities     -42,582     -34,245    -248,424    -235,969

Net increase in cash and temporary
  cash investments                                      17,950       3,493      16,190       5,593

Cash and temporary cash investments
  at beginning of period                                 8,675       6,942      10,435       4,842

Cash and temporary cash investments
  at end of period                                   $  26,625   $  10,435   $  26,625   $  10,435

Supplemental cash flow information:
      Cash paid during the period for -
         Interest                                    $  12,308   $  10,544   $  54,811   $  51,615
         Income taxes                                $    -676   $   8,471   $  45,733   $  32,215
      Noncash investing and financing activities -
         Capital lease obligations incurred          $     112   $   2,604   $  11,790   $   4,405


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 March 31, 1997 for each of IES Industries  Inc.  and  IES
Utilities  Inc.  Information contained herein relating to an  individual
registrant  is filed by such registrant on its own behalf.  Accordingly,
except  for its subsidiaries, IES Utilities Inc. makes no representation
as  to  information  relating to IES Industries Inc.  or  to  any  other
companies affiliated with IES Industries Inc.  IES Industries  Inc.  and
its  consolidated subsidiaries may collectively be referred to  as  "the
Company".

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


     IES INDUSTRIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (UNAUDITED)
                                    
                             March 31, 1997

(1)  GENERAL:

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

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

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

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

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


(2)   PROPOSED MERGER OF THE COMPANY:

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


(3)  RATE MATTERS:

     (a)  Electric Price Announcements -

      Utilities   and  its  Iowa-based  proposed  merger  partner,  IPC,
announced  in  1996 their intentions to hold retail electric  prices  to
their current levels until at least January 1, 2000.  The companies made
the   proposal   as  part  of  their  testimony  in  the  merger-related
application  filed  with the Iowa Utilities Board (IUB).   The  proposal
excludes  price  changes due to government-mandated  programs,  such  as
energy  efficiency  cost  recovery, or unforeseen  dramatic  changes  in
operations.   Utilities,  Wisconsin Power & Light Company
(WP&L) and IPC also  proposed  to  freeze  their
wholesale electric prices for four years from the effective date of  the
merger as part of their merger filing with the Federal Energy Regulatory
Commission  (FERC).   The  Company does not  expect  the  merger-related
electric  price  proposals  to have a material  adverse  effect  on  its
financial position or results of operations.

     (b)  Energy Efficiency Cost Recovery -

      Until  recently,  IUB  rules mandated Utilities  to  spend  2%  of
electric  and  1.5%  of gas gross retail operating revenues  for  energy
efficiency  programs.  Under provisions of the IUB rules,  Utilities  is
currently  recovering the energy efficiency costs incurred through  1993
for such 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.
Utilities'  proposed  recovery was for approximately  $53  million  ($42
million  electric and $11 million gas) and was composed of  $34  million
for direct expenditures and carrying costs, $10 million for a return  on
the  expenditures over the recovery period and $9 million for  a  reward
based  on  a  sharing  of  the benefits of such programs.   The  Company
expects  to receive the final order in the proceeding in June 1997  with
recovery of the allowed costs to commence in the third quarter of 1997.

      Iowa  statutory changes enacted in 1996 have
eliminated:  1) the 2% and 1.5% spending requirements described above 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
change  and  a final order in this proceeding was issued in April  1997.
The  new  rules provide that the Company will begin to recover its  1996
expenditures,  and the 1997 expenditures incurred at such  time,  during
the summer of 1997 over a time period yet to be determined.  The Company
would also begin concurrent recovery of its prospective expenditures  at
such time.  The implementation of these changes will gradually eliminate
the  regulatory  asset  which  exists  under  the  current  rate  making
mechanism as these costs are recovered.

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

                                         March 31,     December 31,
                                           1997            1996   
                                              
Costs incurred through 1993              $  10,934      $  12,834
Costs incurred in 1994-1995                 33,612         33,161
Costs  incurred from  1/1/96 - 3/31/97      18,651         15,087
                                         $  63,197      $  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 or for a reward.


(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 March 31, 1997, $65 million  was  sold
under the agreement.

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


(5)  INVESTMENTS:

     (a)  Foreign Entities -

      At March 31, 1997, the Company had $45.1 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  March
31,  1997,  included investments of approximately $31.0 million  in  New
Zealand, $13.7 million in China and $0.4 million in other countries.

     (b)  McLeod, Inc. (McLeod) -

      At  March 31, 1997, the Company had a $20.0 million investment  in
Class A common stock of McLeod and a $9.2 million investment in Class  B
common  stock  as  well  as  vested options that,  if  exercised,  would
represent  an  additional  investment  of  approximately  $2.3  million.
McLeod   provides  local,  long-distance  and  other  telecommunications
services.

      McLeod  completed an Initial Public Offering (IPO) of its Class  A
common stock in June 1996 and a secondary offering in November 1996.  As
of March 31, 1997, the Company was the beneficial owner of approximately
10.6 million total shares on a fully diluted basis.  Class B shares  are
convertible at the option of the Company into Class A shares at any time
on  a one-for-one basis.  The rights of McLeod Class A common stock  and
Class  B  common stock are substantially identical except that  Class  A
common stock has 1 vote per share and Class B common stock has 0.40 vote
per  share. The Company currently accounts for this investment under the
cost method.

      The  Company  has  entered  into an agreement  with  McLeod  which
provides  that  for two years commencing on June 10, 1996,  the  Company
cannot  sell  or  otherwise dispose of any of its securities  of  McLeod
without  the consent of the McLeod Board of Directors.  This contractual
sale  restriction  results in restricted stock under the  provisions  of
Statement  of  Financial Accounting Standards No. 115  (SFAS  No.  115),
Accounting for Certain Investments in Debt and Equity Securities,  until
such time as the restrictions lapse and such shares became qualified for
sale  within  a  one  year period.  As a result, the  Company  currently
carries this investment at cost.

      The closing price of the McLeod Class A common stock on March  31,
1997,  on the Nasdaq National Market, was $17.75 per share.  The current
market  value of the shares the Company beneficially owns (approximately
10.6  million shares) is impacted by, among other things, the fact  that
the  shares cannot be sold for a period of time.  It is not possible  to
estimate  what the market value of the shares will be at  the  point  in
time  such sale restrictions are lifted.  In addition, any gain upon  an
eventual sale of this investment would likely be subject to a tax.   The
estimated  fair value of the McLeod investment at March 31, 1997,  based
upon the closing price on March 31 of $17.75, was $185 million.

      Under  the provisions of SFAS No. 115, the carrying value  of  the
McLeod  investment will be adjusted to estimated fair value at the  time
such  shares  become qualified for sale within a one year  period;  this
will  occur  on June 10, 1997, which is one year before the  contractual
restrictions  on  sale  are lifted.  At that  time,  the  adjustment  to
reflect the estimated fair value of this investment will be reflected as
an  increase  in the investment carrying value with the unrealized  gain
reported  as  a  net of tax amount in other common shareholders'  equity
until realized (i.e., until the shares are sold by the Company).


(6)  DEBT:

     (a)  Long-Term Debt -

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

      Diversified  has  a  variable rate credit  facility  that  extends
through  November  20,  1999, with two one-year  extensions  potentially
available  to  Diversified.  The unborrowed portion of the agreement  is
also used to support Diversified's commercial paper program.  A combined
maximum of $300 million of borrowings under the agreement and commercial
paper  program  may be outstanding at any one time. Interest  rates  and
maturities are set at the time of borrowing for direct borrowings  under
the  agreement and for issuances of commercial paper.  The interest rate
options  are based upon quoted market rates and the maturities are  less
than  one year.  At March 31, 1997, $28 million was borrowed under  this
facility,  with interest rates ranging from 5.75% to 5.81%, maturing  in
the second quarter of 1997. Diversified had $149.8 million of commercial
paper  outstanding at March 31, 1997, with interest rates  ranging  from
5.47%  to  5.56%  and  maturity dates in the  second  quarter  of  1997.
Diversified intends to continue borrowing under the renewal  options  of
the  facility  and  no conditions exist at March 31,  1997,  that  would
prevent such borrowings.  Accordingly, this debt is classified as  long-
term in the Consolidated Balance Sheets.

     (b)  Short-Term Debt -

     At March 31, 1997, the Company had bank lines of credit aggregating
$146.1  million. Utilities was using $126 million to support  commercial
paper  (weighted  average interest rate of 5.38%) and $11.1  million  to
support certain pollution control obligations.  Commitment fees are paid
to  maintain these lines and there are no conditions which restrict  the
unused  lines  of  credit.  In addition to the above, Utilities  has  an
uncommitted credit facility with a financial institution whereby it  can
borrow up to $40 million. Rates are set at the time of borrowing and  no
fees  are paid to maintain this facility.  At March 31, 1997, there were
no borrowings outstanding under this facility.


(7)  CONTINGENCIES:

     (a)  Environmental Liabilities -

     The Company has recorded environmental liabilities of approximately
$53  million in its Consolidated Balance Sheets at March 31,  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 ten 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  16  sites
and  estimates  the  range  of  additional  costs  to  be  incurred  for
investigation,   remediation  and  monitoring  of  the   sites   to   be
approximately $23 million to $54 million.

      Utilities  has recorded environmental liabilities related  to  the
FMGP  sites  of  approximately $35 million (including  $4.7  million  as
current  liabilities) at March 31, 1997.  These amounts are  based  upon
Utilities'  best  current  estimate of the amount  to  be  incurred  for
investigation,  remediation and monitoring costs for those  sites  where
the  investigation process has been or is substantially  completed,  and
the  minimum  of  the  estimated cost range for those  sites  where  the
investigation is in its earlier stages.  It is possible that future cost
estimates   will   be  greater  than  the  current  estimates   as   the
investigation  process proceeds and as additional  facts  become  known.
Regulatory assets of approximately $35 million, which reflect the future
recovery  that  is  being provided through Utilities' rates,  have  been
recorded  in  the Consolidated Balance Sheets.  Considering the  current
rate treatment allowed by the IUB, management believes that the clean-up
costs  incurred  by  Utilities for these FMGP  sites  will  not  have  a
material  adverse  effect  on  its  financial  position  or  results  of
operations.

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

          National Energy Policy Act of 1992

      The  National Energy Policy Act of 1992 requires owners of nuclear
power  plants  to  pay  a special assessment into a "Uranium  Enrichment
Decontamination and Decommissioning Fund."  The assessment is based upon
prior  nuclear fuel purchases and, for the Duane Arnold Energy Center
(DAEC), averages  $1.4  million
annually  through 2007, of which Utilities' 70% share is  $1.0  million.
Utilities  is  recovering  the  costs associated  with  this  assessment
through  its electric fuel adjustment clauses over the period the  costs
are  assessed.   Utilities'  70% share of the  future  assessment,  $9.9
million  payable through 2007, has been recorded as a liability  in  the
Consolidated Balance Sheets, including $0.9 million included in "Current
liabilities  -  Environmental liabilities," with  a  related  regulatory
asset for the unrecovered amount.

          Oil and Gas Properties Dismantlement and Abandonment Costs

      Whiting Petroleum Corporation (Whiting), a wholly owned subsidiary
under Diversified, is  responsible for certain dismantlement and abandonment
costs  related  to  various off-shore oil and gas properties,  the  most
significant  of  which  is  located off the coast  of  California.   The
Company   estimates  the  total  costs  for  these  properties   to   be
approximately  $16 million and the expenditures are not expected  to  be
incurred  for approximately five 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 $7.8 million at March 31, 1997, in the Consolidated Balance
Sheets.

     (b)  Air Quality Issues -

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

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

      The  Act  and  other federal laws also require the  United  States
Environmental  Protection  Agency  (EPA)  to  study  and  regulate,   if
necessary,  additional  issues  that  potentially  affect  the  electric
utility  industry, including emissions relating to NOx, ozone transport,
mercury   and   particulate  control;  toxic  release  inventories   and
modifications  to  the  PCB rules.  In December  1996,  the  EPA  issued
proposed  rules  that  would tighten the National  Ambient  Air  Quality
Standards (NAAQS) for ozone and particulate matter emissions.   Also  in
the  fourth  quarter of 1996, the EPA announced that it  would  issue  a
notice  in  March  1997 requiring the 37 states in the  Ozone  Transport
Assessment  Group  (OTAG),  which includes Iowa,  to  implement  further
controls on NOx.  These proposals could result in the Company having  to
incur additional capital expenditures to further reduce its emissions of
NOx,  ozone and particulate matter.  However, the March 1997 notice  has
not  yet  been issued and it now appears that Iowa may be one of several
states removed from the OTAG process.  The current developments in  this
process  make the impacts of these potential regulations too speculative
to quantify.

     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 has since issued a letter to the EPA stating that a
plan  of  action will be in place with local industry to avoid the  area
being  declared  nonattainment.  In this regard, Utilities  is  entering
into  a Consent Agreement with the Iowa Department of Natural Resources.
The  intent  of this agreement, as currently proposed, is to  develop  a
three-year plan for a process to explore and implement options to modify
one  of  Utilities fossil generating facilities to reduce SO2 emissions.
In  addition, Utilities is proposing to resolve the remainder  of  EPA's
nonattainment concerns by modifying the current stacks or  installing  a
new  stack at the other generating facility contributing to the  modeled
exceedences, at a potential aggregate capital cost of up to $4.5 million
over the next two years.

      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  may
be  required  to  accept  operational limits or  to  install  additional
controls  and  may be subject to liability 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

                                                  March 31,
                                                    1997          December 31,
ASSETS (in thousands)                            (Unaudited)          1996

Property, plant and equipment:
  Utility -
    Plant in service -
        Electric                                 $ 2,015,838      $ 2,007,839
        Gas                                          176,439          175,472
        Other                                        132,421          126,850
                                                   2,324,698        2,310,161
    Less - Accumulated depreciation                1,054,799        1,030,390
                                                   1,269,899        1,279,771
    Leased nuclear fuel, net of amortization          31,468           34,725
    Construction work in progress                     48,726           43,719
                                                   1,350,093        1,358,215
  Other, net of accumulated depreciation 
    and amortization of $1,518 and $1,438,
    respectively                                       5,791            5,872
                                                   1,355,884        1,364,087


Current assets:
  Cash and temporary cash investments                 21,833           11,608
  Accounts receivable -
    Customer, less allowance for doubtful
    accounts of $623 and $546, respectively           25,049           22,461
    Other                                              7,990           11,270
  Income tax refunds receivable                        2,117            2,664
  Production fuel, at average cost                    12,042           13,323
  Materials and supplies, at average cost             22,888           21,716
  Adjustment clause balances                               0           10,752
  Regulatory assets                                   32,067           26,539
  Prepayments and other                               13,558           18,705
                                                     137,544          139,038


Investments:
  Nuclear decommissioning trust funds                 61,516           59,325
  Cash surrender value of life insurance 
    policies                                           4,457            4,281
  Other                                                   88              313
                                                      66,061           63,919


Other assets:
  Regulatory assets                                  196,096          201,129
  Deferred charges and other                          10,808           10,437
                                                     206,904          211,566
                                                 $ 1,766,393      $ 1,778,610





          IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                                    March 31,
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                                  228,959          231,337
      Total common equity                            541,428          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)         462,389          517,334
                                                   1,022,137        1,079,460


Current liabilities:
  Short-term borrowings                              126,000          135,000
  Capital lease obligations                           14,047           15,125
  Maturities and sinking funds                        63,140            8,140
  Accounts payable                                    48,598           76,287
  Accrued interest                                    10,886            8,839
  Accrued taxes                                       68,620           40,953
  Accumulated refueling outage provision               3,002            1,316
  Adjustment clause balances                           3,759                0
  Environmental liabilities                            5,517            5,517
  Other                                               15,074           17,114
                                                     358,643          308,291


Long-term liabilities:
  Pension and other benefit obligations               29,383           25,826
  Capital lease obligations                           17,421           19,600
  Environmental liabilities                           39,565           40,299
  Other                                               17,402           14,030
                                                     103,771           99,755


Deferred credits:
  Accumulated deferred income taxes                  248,030          256,634
  Accumulated deferred investment tax credits         33,812           34,470
                                                     281,842          291,104


Commitments and contingencies (Note 7)

                                                 $ 1,766,393      $ 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 Twelve
                                                              Months Ended                Months Ended
                                                                March 31                    March 31
                                                           1997          1996          1997          1996
                                                                           (in thousands)
<S>                                                  <C>           <C>           <C>           <C>
Operating revenues:
    Electric                                           $  137,286    $  125,368    $  586,191    $  569,262
    Gas                                                    81,428        69,241       173,051       153,358
    Other                                                   7,684         4,159        23,367        13,135
                                                          226,398       198,768       782,609       735,755


Operating expenses:
    Fuel for production                                    29,881        20,292        94,168        97,105
    Purchased power                                        18,673        14,469        92,553        65,029
    Gas purchased for resale                               60,791        47,369       117,298       100,434
    Other operating expenses                               36,296        38,358       147,939       149,196
    Maintenance                                            12,806         9,992        48,684        41,899
    Depreciation and amortization                          23,470        22,024        86,421        80,820
    Taxes other than income taxes                          11,893        12,060        43,436        44,699
                                                          193,810       164,564       630,499       579,182


Operating income                                           32,588        34,204       152,110       156,573


Interest expense and other:
   Interest expense                                        12,306        10,893        45,128        44,895
   Allowance for funds used during construction              -394          -690        -1,807        -2,999
   Miscellaneous, net                                        -420          -963         5,835          -117
                                                           11,492         9,240        49,156        41,779


Income before income taxes                                 21,096        24,964       102,954       114,794


Federal and state income taxes:
    Current                                                17,082        13,361        39,051        48,812
    Deferred                                               -7,179        -1,864         5,093         1,409
    Amortization of investment tax credits                   -658          -661        -2,642        -2,674
                                                            9,245        10,836        41,502        47,547


Net income                                                 11,851        14,128        61,452        67,247
Preferred dividend requirements                               229           229           914           914
Net income available for common stock                  $   11,622    $   13,899    $   60,538    $   66,333


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 Twelve
                                                            Months Ended              Months Ended
                                                               March 31                  March 31
                                                          1997         1996         1997         1996
                                                                         (in thousands)
<S>                                                 <C>          <C>          <C>          <C>
Cash flows from operating activities:
  Net income                                          $  11,851    $  14,128    $  61,452    $  67,247
  Adjustments to reconcile net income to net cash
   flows from operating activities -
     Depreciation and amortization                       23,470       22,024       86,421       80,820
     Amortization of principal under capital
       lease obligations                                  3,369        4,624       15,237       17,781
     Deferred taxes and investment tax credits           -7,837       -2,525        2,451       -1,265
     Refueling outage provision                           1,686        2,546       -7,234        3,569
     Amortization of other assets                         2,952        2,913        9,832        9,247
     Other                                                  280            0          545          447
  Other changes in assets and liabilities -
     Accounts receivable                                    692       -7,459       -5,049      -17,302
     Sale of utility accounts receivable                      0            0        7,000       -6,000
     Production fuel, materials and supplies                894          902          644        2,612
     Accounts payable                                   -25,211      -10,296       -2,033      -10,451
     Accrued taxes                                       28,214       17,070          -90       16,638
     Provision for rate refunds                               0          166         -272       -7,728
     Adjustment clause balances                          14,511        3,387       -2,776        3,733
     Gas in storage                                       5,470        7,744       -2,825        2,798
     Other                                                5,266        1,506       11,047       -6,006
       Net cash flows from operating activities          65,607       56,730      174,350      156,140

Cash flows from financing activities:
  Dividends declared on common stock                    -14,000      -10,000      -48,000      -40,000
  Dividends declared on preferred stock                    -229         -229         -914         -914
  Proceeds from issuance of long-term debt                    0            0       60,000       50,000
  Reductions in long-term debt                                0            0      -15,140      -50,140
  Net change in short-term borrowings                    -9,000      -14,647       30,759       51,697
  Principal payments under capital 
    lease obligations                                    -2,296       -4,913      -16,491      -15,714
  Other                                                       0          -86         -333       -1,910
    Net cash flows from financing activities            -25,525      -29,875        9,881       -6,981

Cash flows from investing activities:
  Construction and acquisition expenditures -
      Utility                                           -19,758      -23,374     -138,765     -121,833
      Other                                                 -12         -197       -1,083       -2,965
  Deferred energy efficiency expenditures                -4,014       -3,667      -17,204      -18,159
  Nuclear decommissioning trust funds                    -1,502       -1,502       -6,008       -6,219
  Other                                                  -4,571         -415          228       -2,039
    Net cash flows from investing activities            -29,857      -29,155     -162,832     -151,215

Net increase (decrease) in cash and temporary
  cash investments                                       10,225       -2,300       21,399       -2,056

Cash and temporary cash investments at 
  beginning of period                                    11,608        2,734          434        2,490

Cash and temporary cash investments at end 
  of period                                           $  21,833    $     434    $  21,833    $     434

Supplemental cash flow information:
  Cash paid during the period for -
    Interest                                          $   9,777    $   8,530    $  43,318    $  44,845
    Income taxes                                      $    -546    $   7,138    $  37,699    $  33,371
  Noncash investing and financing activities -
    Capital lease obligations incurred                $     112    $   2,604    $  11,790    $   4,405

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

</TABLE>



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



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


(1)  GENERAL:

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



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

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


                               COMPETITION

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

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

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

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

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

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

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


                     PROPOSED MERGER OF THE COMPANY

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

      WPLH is a holding company headquartered in Madison, Wisconsin, and
is  the  parent  company  of WP&L and Heartland Development  Corporation
(HDC).  WP&L supplies electric and gas service to approximately  385,000
and  150,000  customers, respectively, in south and  central  Wisconsin.
HDC  and  its principal subsidiaries are engaged in businesses in  three
major   areas:  environmental  engineering  and  consulting,  affordable
housing   and  energy  services.   IPC,  an  operating  public   utility
headquartered  in Dubuque, Iowa, supplies electric and  gas  service  to
approximately 165,000 and 49,000 customers, respectively,  in  northeast
Iowa, northwest Illinois and southern Minnesota.

      The  proposed merger, which will be accounted for as a pooling  of
interests,  was approved by the respective shareowners on  September  5,
1996.   The merger is conditioned on the receipt of approvals of several
federal  and  state 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.   A  final decision is expected in the third or fourth quarter  of
1997.

     On May 7, 1997, the Illinois Commerce Commission issued and order
approving the proposed merger.

     On March 24, 1997, the Minnesota Public Utilities Commission 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 IEC's Minnesota customers.

      A hearing regarding the merger is expected to begin July 14, 1997,
before the Iowa Utilities Board.

      On  May  7,  1997,  WP&L filed testimony with the  Public  Service
Commission of Wisconsin proposing a retail electric, gas and water  rate
freeze from the date of the merger approval through calendar year 2000.

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


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

      The  Company's  net  income decreased ($1.8) million  and  ($12.4)
million  during  the  three  and  twelve  month  periods,  respectively.
Earnings per average common share decreased ($0.07) and ($0.46) for  the
respective  periods.  Utilities' net income available for  common  stock
decreased ($2.3) million and ($5.8) million during the three and  twelve
month  periods,  respectively.   The impact  of  weather  on  Utilities'
electric  and  gas sales contributed significantly to  the  decrease  in
earnings  for both periods.  Weather conditions in the first quarter  of
1997 were milder than normal and weather conditions in the first quarter
of  1996 were colder than normal.  In addition, the twelve month periods
were  impacted  by cooler weather conditions during the summer  of  1996
than the summer of 1995.  Accordingly, in comparing the three and twelve
month  periods, the Company estimates that weather impacted earnings  by
approximately  ($0.06)  per share and ($0.28) per  share,  respectively.
The  decrease in earnings for the twelve month period was also  impacted
by  costs  incurred relating to the successful defense  of  the  hostile
takeover  attempt mounted by MidAmerican Energy Company  (MAEC)  in  the
third  quarter  of  1996 and a higher effective income  tax  rate.   The
Company  estimates that the cost of the hostile takeover defense reduced
earnings  for  the twelve month period by ($0.15) per share.   Increased
operating expenses and interest expense also contributed to the earnings
decrease  for  both  periods.  Increased electric  and  steam  sales  to
industrial  customers  at  Utilities  and  increased  earnings  at   the
Company's   oil  and  gas  subsidiary,  Whiting  Petroleum   Corporation
(Whiting), partially offset these items each period.

      The Company's operating income decreased ($0.9) million and ($3.2)
million  during the three and twelve month periods, respectively,  while
Utilities' operating income decreased ($1.6) million and ($4.5)  million
during the same periods.

Electric Operations

Electric margins and Kwh sales for Utilities for the three months  ended
March 31 were as follows:

                               Revenues and Costs          Kwhs Sold
                                 (In thousands)          (In thousands)
                                 1997       1996        1997        1996
Residential and rural      $    52,816 $   49,852      691,010    709,412
General service                 23,820     22,276      310,588    314,491
Large general service           51,100     41,598    1,411,096  1,275,964
Sales for resale and other       7,677      6,961      143,143    149,979
Total, excluding off-                  
  system sales                 135,413    120,687    2,555,837  2,449,846
Off-system sales                 1,873      4,681       46,895    256,557
    Total                      137,286    125,368    2,602,732  2,706,403
                                                                              
Fuel for production                    
  (excluding steam)             24,893     18,163                        
Purchased power                 18,673     14,469                        
Margin                     $    93,720 $   92,736                        

      The  electric margin increased $1.0 million during the three month
period  primarily due to higher large general service Kwh sales relating
to  continuing industrial growth in Utilities' service territory.   This
increase  was  partially offset by lower Kwh sales  to  residential  and
rural  and  general  service customers, largely due  to  the  impact  of
weather.  Under historically normal weather conditions, total Kwh  sales
(excluding  off-system  sales) for the three  month  period  would  have
increased 5.6%, as compared to the actual increase of 4.3%.

Electric margins and Kwh sales for Utilities for the twelve months ended
March 31 were as follows:

                               Revenues and Costs           Kwhs Sold
                                 (In thousands)           (In thousands)
                                 1997       1996         1997        1996
Residential and rural      $   215,763 $  219,683    2,615,302   2,720,333
General service                 99,741    101,672    1,227,212   1,256,724
Large general service          222,724    204,130    5,635,739   5,350,033
Sales for resale and other      31,281     25,327      580,942     586,996
Total, excluding off-      
  system sales                 569,509    550,812   10,059,195   9,914,086
Off-system sales                16,682     18,450    1,021,636   1,084,190
    Total                      586,191    569,262   11,080,831  10,998,276
                                                               
Fuel for production        
  (excluding steam)             81,338     90,680                        
Purchased power                 92,553     65,029                        
Margin                     $   412,300 $  413,553                        

      The  electric  margin decreased ($1.3) million during  the  twelve
month  period primarily due to lower Kwh sales to residential and  rural
and general service customers and a true-up adjustment to unbilled sales
recorded  in 1995.  In addition to the weather conditions for the  three
month period mentioned previously, the twelve month period Kwh sales for
residential  and rural and general service customers were also  impacted
by  cooler  weather conditions during the summer of 1996 as compared  to
the  summer of 1995.  These decreases were partially offset by continued
large  general  service  Kwh  sales growth  and  lower  purchased  power
capacity costs.

       Under   historically  normal  weather  conditions,  total   sales
(excluding  off-system  sales) for the twelve month  period  would  have
increased 4.1%, as compared to the actual increase of 1.5%.

     Refer to Notes 3(a) and 3(b) of the Notes to Consolidated Financial
Statements  for  a  discussion of merger-related  retail  and  wholesale
electric  price  proposals that Utilities has announced and  the  energy
efficiency cost recoveries, respectively.

     Utilities' electric tariffs include energy adjustment clauses (EAC)
that  are designed to currently recover the costs of fuel and the energy
portion of purchased power billings.

Gas Operations

Gas  margins  and dekatherm (Dth) sales for Utilities and  IEA  for  the
three months ended March 31 were as follows:

                              Revenues and Costs          Dths Sold
                                (In thousands)          (In thousands)
                               1997        1996        1997        1996
Utilities -                                                    
  Residential            $    50,587 $    44,428       7,638       8,511
  Commercial                  25,575      21,186       4,333       4,762
  Industrial                   4,240       2,807         835         841
  Transportation and
    other                      1,026         820       2,764       2,826
  Total Utilities             81,428      69,241      15,570      16,940
IEA                            2,678      20,783         975       8,487
  Total                       84,106      90,024      16,545      25,427
                                                               
Gas purchased for resale      64,498      67,437                        
Margin                   $    19,608 $    22,587                        

      Total  gas margin decreased ($3.0) million during the three  month
period due to lower gas margins at both Utilities and IEA.  The decrease
in  Utilities'  margin was primarily due to lower Dth  sales,  resulting
from  the milder weather conditions in 1997.  Under historically  normal
weather  conditions, Utilities' gas sales and transported volumes  would
have decreased (2.8%) during the three month period, as compared to  the
actual decrease of (8.1%).

      IEA's  reported Dth gas sales were significantly lower 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.    Fluctuations  in   gas   prices   and   the
competitiveness  of the gas marketing business also contributed  to  the
lower margin at IEA.

Gas  margins  and Dth sales for Utilities and IEA for the twelve  months
ended March 31 were as follows:

                              Revenues and Costs          Dths Sold
                                (In thousands)          (In thousands)
                               1997        1996        1997        1996
Utilities -                                                    
  Residential            $   103,866 $    95,569      16,807      17,595
  Commercial                  51,356      45,098       9,894      10,168
  Industrial                  13,689       9,195       3,790       3,076
  Transportation and     
    other                      4,140       3,496      10,279      10,908
  Total Utilities            173,051     153,358      40,770      41,747
IEA                           95,009      62,023      35,542      33,284
  Total                      268,060     215,381      76,312      75,031
                                                               
Gas purchased for resale     214,412     159,864                        
Margin                   $    53,648 $    55,517                        

      Total gas margin decreased ($1.9) million during the twelve  month
period  due  to a lower margin at IEA which was partially offset  by  an
increased  margin  at  Utilities.  While IEA's Dth gas  sales  increased
during  this  time  period,  their margins  actually  decreased  due  to
fluctuations  in  gas prices, the competitiveness of the  gas  marketing
business and the formation of the joint venture, as discussed above.

      The  increase in Utilities' margin was primarily due to the impact
of  an annual increase of $6.3 million in Utilities' gas rates that  was
implemented in the fourth quarter of 1995.  This was partially offset by
lower  Dth  sales, largely due to the milder weather conditions.   Under
historically  normal  weather  conditions,  Utilities'  gas  sales   and
transported volumes would have decreased (1.0%) during the twelve  month
period, as compared to the actual decrease of (2.3%).

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

Other Revenues   The Company's other revenues increased $8.5 million and
$31.0  million  during the three and twelve month periods,  respectively
($3.5  million and $10.2 million at Utilities).  The increase  for  both
periods  was primarily because of increased steam revenues at Utilities,
increased operating activities at IEA and increased oil and gas revenues
at  Whiting.  Steam revenues at Utilities increased during both  periods
due  to  an increase in volumes sold resulting from the addition of  new
industrial  customers.   The increase in Whiting  revenues  during  both
periods was primarily due to increases in oil and gas prices.

Operating  Expenses    The Company's other operating expenses  increased
$0.4 million and $9.4 million during the three and twelve month periods,
respectively  (($2.1)  million and ($1.3) million  at  Utilities).   The
increase  for  both periods was primarily due to costs relating  to  the
increased  operating activities at IEA and higher information technology
costs.   These  increases were partially offset by  decreases  in  costs
relating  to  the Company's process improvement programs  and  decreased
operating  expenses at the Duane Arnold Energy Center (DAEC), Utilities'
nuclear  generating facility.  Lower operating expenses at Whiting  also
partially offset the three month increase.  Increases in costs  relating
to  the  pending  merger and higher operating expenses at  Whiting  also
contributed to the twelve month increase.

      The Company's maintenance expenses increased $2.7 million and $7.0
million  during  the three and twelve month periods, respectively  ($2.8
million  and $6.8 million at Utilities).  The increase for both  periods
was  primarily  due  to increased maintenance activities  at  Utilities'
fossil-fueled  generating  stations.   The  twelve  month  increase  was
partially offset by lower maintenance expenses at the DAEC.

      The Company's depreciation and amortization expense increased $1.4
million  and  $8.9  million during the three and twelve  month  periods,
respectively  ($1.4  million and $5.6 million at  Utilities),  primarily
because  of  increases  in utility plant in service.  The  twelve  month
increase was also due to increases in amortization costs relating to the
future  dismantlement and abandonment of Whiting's offshore oil and  gas
properties.   Depreciation and amortization expenses  for  both  periods
include  a  provision for decommissioning the DAEC, which  is  collected
through rates.  The current annual recovery level is $6.0 million.

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

Interest  Expense  and Other   The Company's interest expense  increased
$1.9 million and $5.1 million during the three and twelve month periods,
respectively  ($1.4  million and $0.2 million at  Utilities),  primarily
because   of  increases  in  the  average  amount  of  short-term   debt
outstanding  at  Utilities,  the  average  amount  of  borrowings  under
Diversified's  credit  facility and a higher amount  of  long-term  debt
outstanding  at  Utilities.   The twelve month  increase  was  partially
offset by lower average interest rates, rate refund interest recorded in
1995 at Utilities and the effects of an interest rate swap agreement  at
Diversified.

      Miscellaneous, net for the Company reflects a comparative decrease
in  income  of  ($8.3)  million during the twelve month  period  (($6.0)
million  at  Utilities), primarily due to approximately $7.8 million  in
costs  incurred  relating  to  the successful  defense  of  the  hostile
takeover  attempt  mounted by MAEC and certain property  write-downs  at
Diversified.   Dividends received from the two New Zealand  entities  in
which the company has equity investments partially offset these items.

Income Taxes   The Company's income tax expense decreased ($2.8) million
and   ($5.4)  million  during  the  three  and  twelve  month   periods,
respectively (($1.6) million and ($6.0) million at Utilities), primarily
due  to  lower pretax income. Also contributing to the decrease for  the
three  month period was a reserve recorded in the first quarter of  1996
related  to an Internal Revenue Service (IRS) audit for tax years  1991-
1993.   The  decrease  for  both periods was  partially  offset  by  the
incurrence  of  certain  merger-related  expenses  which  are  not   tax
deductible.   The  decrease for the twelve month  period  was  partially
offset due to the recording of additional tax expense for the settlement
of the IRS audit in the fourth quarter of 1996.


                     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 2.84 and 3.37 for the  twelve  months  ended
March  31,  1997  and  March 31, 1996, respectively.   Cash  flows  from
operating  activities for the twelve months ended  March  31,  1997  and
March 31, 1996 were $198 million and $190 million, respectively.

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

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

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

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

      At  March  31,  1997, Utilities had approximately $63  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 timing of the filings for the recovery of these costs under  IUB
rules  and  Iowa  statutory changes recently enacted relating  to  these
programs.

      At  March 31, 1997, the Company had a $20.0 million investment  in
Class  A  common  stock  of McLeod, Inc. (McLeod)  and  a  $9.2  million
investment  in Class B common stock as well as vested options  that,  if
exercised,  would  represent an additional investment  of  approximately
$2.3   million.    McLeod  provides  local,  long-distance   and   other
telecommunications services.  See Note 5(b) of the Notes to Consolidated
Financial Statements for further information on the Company's investment
in McLeod.

      The  Company  has financial guarantees amounting to $23.0  million
outstanding  at  March  31,  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.

      At  March  31, 1997, the Company had approximately $45 million  of
investments  in  foreign  entities  (see  Note  5(a)  of  the  Notes  to
Consolidated  Financial  Statements  for  a  further  discussion).    In
addition,  the  Company  also continues to explore  other  international
investment opportunities.  Such investments may carry a higher level  of
risk than the Company's traditional utility investments or Diversified's
domestic  investments.   Such  risks could  include  foreign  government
actions,  foreign economic and currency risks and others.   The  Company
may  also  incur  business development expenses for  potential  projects
pursued  by  the  Company that may never materialize.   The  Company  is
striving to select international investments where these risks are  both
understood and minimized.

      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, two  customers  have
signed  contracts  to  remain with Utilities.  All RPGI  customers  will
continue to purchase transmission services from Utilities after December
31,  1998.  While the Company cannot determine the outcome of this issue
at  this time, the result will not have a material adverse effect on its
financial   position  or  results  of  operations  given  1)  Utilities'
wholesale  sales  only account for approximately 5% of Utilities'  total
electric  sales, excluding off-system sales; 2) Utilities currently  has
to supplement its generating capability with purchased power to meet its
sales load; 3) Utilities' annual electric sales growth rate continues to
be  strong;  and  4)  Utilities will continue  to  realize  transmission
revenues from such customers.

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


                  CONSTRUCTION AND ACQUISITION PROGRAM

      The  Company's  construction and acquisition  program  anticipates
expenditures   of  approximately  $225  million  for  1997,   of   which
approximately  $147  million represents expenditures  at  Utilities  and
approximately  $78 million represents expenditures at  Diversified.   Of
the $147 million of Utilities' expenditures, 39% represents expenditures
for  electric  transmission and distribution facilities, 21%  represents
electric  generation expenditures, 21% represents information technology
expenditures  and  5% represents gas expenditures.   The  remaining  14%
represents  miscellaneous  electric,  steam  and  general  expenditures.
Diversified's anticipated expenditures include approximately $75 million
for   domestic   and   international  energy-related  construction   and
acquisition  expenditures.  The Company had construction and acquisition
expenditures  of  approximately $33 million for the three  months  ended
March   31,  1997,  including  approximately  $20  million  of   utility
expenditures and $13 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  (excluding  the $55 million  of  First  Mortgage  Bonds
retired  prior  to maturity in the second quarter of 1997)  will  mature
prior to December 31, 2001:

                                        (in millions)
         Utilities                         $ 192.2
         Diversified's credit facility       177.8
         Other subsidiaries' debt             11.1
                                           $ 381.1

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

      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.

      Utilities  has entered into an Indenture of Mortgage and  Deed  of
Trust dated 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 March 31, 1997,
such  restrictions  would  have allowed  Utilities  to  issue  at  least
$241 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 and Collateral Trust Bonds.

      Utilities  has received authority from the FERC and the Securities
and  Exchange Commission (SEC) to issue up to $250 million of  long-term
debt, and has $135 million of remaining authority under the current FERC
docket through April 1998, and $85 million of remaining authority  under
the current SEC shelf registration.

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

      The Articles of Incorporation of Utilities authorize and limit the
aggregate amount of additional shares of Cumulative Preference Stock and
Cumulative  Preferred  Stock that may be issued.   At  March  31,  1997,
Utilities  could have issued an additional 700,000 shares of  Cumulative
Preference  Stock and 100,000 additional shares of Cumulative  Preferred
Stock.   In  addition,  Industries had 5,000,000  shares  of  Cumulative
Preferred  Stock, no par value, authorized for issuance, none  of  which
were outstanding at March 31, 1997.

      The  Company's  capitalization ratios at March 31,  1997  were  as
follows:

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

      The  ratios include $55 million of long-term debt due in less than
one-year   because  the  Company  refinanced  the  debt  with  long-term
securities in the second quarter of 1997.

     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 March 31, 1997, Utilities had
outstanding short-term borrowings of $126 million.

     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 March 31, 1997, Utilities had sold $65 million under the
agreement.

     At March 31, 1997, the Company had bank lines of credit aggregating
$146.1  million. Utilities was using $126 million to support  commercial
paper  (weighted  average interest rate of 5.38%) and $11.1  million  to
support certain pollution control obligations.  Commitment fees are paid
to  maintain these lines and there are no conditions which restrict  the
unused  lines  of  credit.  In addition to the above, Utilities  has  an
uncommitted credit facility with a financial institution whereby it  can
borrow up to $40 million.  Rates are set at the time of borrowing and no
fees  are paid to maintain this facility.  At March 31, 1997, there were
no borrowings outstanding under this facility.


                          ENVIRONMENTAL MATTERS
                                    
      Utilities has been named as a Potentially Responsible Party  (PRP)
by  various  federal  and  state environmental agencies  for  28  Former
Manufactured   Gas   Plant   (FMGP)  sites.   Utilities   has   recorded
environmental liabilities related to the FMGP sites of approximately $35
million  (including $4.7 million as current liabilities)  at  March  31,
1997.  Regulatory assets of approximately $35 million, which reflect the
future  recovery that is being provided through Utilities'  rates,  have
been  recorded  in  the  Consolidated Balance Sheets.   Considering  the
current rate treatment allowed by the IUB, management believes that  the
clean-up costs incurred by Utilities for these FMGP sites will not  have
a  material  adverse  effect on its financial  position  or  results  of
operations.   Refer to Note 7(a) of the Notes to Consolidated  Financial
Statements for a further discussion, including a discussion of a lawsuit
filed  by  Utilities  seeking recovery of FMGP-related  costs  from  its
insurance carriers.

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

     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.

      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 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 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
aggressively  reviewing  options  for  expanding  on-site  storage   and
according to their current analysis, construction of an on-site  storage
facility with dry cask modular capability is the most favorable  option.
Utilities  continues to evaluate these and other courses  of  action  to
protect  the  interests of its customers and its rights  under  the  DOE
contract.   Utilities  is also evaluating legislation  proposed  to  the
Congress  addressing  this issue.  In July 1996,  the  IUB  initiated  a
Notice of Inquiry (NOI) on spent nuclear fuel.  In April 1997, IUB staff
recommendations  were  accepted by the IUB and concluded  that  a  state
mandated escrowing of utility payments was inappropriate.  The IUB  also
endorsed  the feasibility of Utilities' plans for additional spent  fuel
storage in the state of Iowa.  These recommendations are consistent with
Utilities' comments in the NOI proceeding.

      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
has  joined  the Midwest Interstate Low-Level Radioactive Waste  Compact
Commission (Compact), which is planning a storage facility to be located
in Ohio to store waste generated by the Compact's six member states.  At
March   31,   1997,   Utilities  had  prepaid  costs  of   approximately
$1.1  million  to the Compact for the building of such  a  facility.   A
Compact  disposal  facility  is  anticipated  to  be  in  operation   in
approximately  ten years after approval of new enabling  legislation  by
the  member  states.  Such legislation was approved in 1996 by  all  six
states  that  are members of the Compact.  Final approval  by  the  U.S.
Congress  is now required.  On-site storage capability currently  exists
for  low-level  radioactive waste expected to  be  generated  until  the
Compact  facility is able to accept waste materials.  In  addition,  the
Barnwell,  South  Carolina  disposal  facility  has  reopened   for   an
indefinite time period and Utilities currently intends to ship  to  this
facility  the  waste  it produces as long as the Barnwell  site  remains
open, thereby minimizing the amount of low-level waste stored on-site.

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


                              OTHER MATTERS

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

Financial   Derivatives    The  Company  has  a  policy  that  financial
derivatives are to be used only to mitigate business risks and  not  for
speculative  purposes.  Derivatives have been used by the Company  on  a
very  limited  basis.   At March 31, 1997, the only  material  financial
derivatives  outstanding  for the Company were  an  interest  rate  swap
agreement at Diversified and gas futures contracts at IEA.

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

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 four carriers and  an  agreement  in
principle  has been reached with two other carriers thus  far.   Amounts
received   from  insurance  carriers  are  being  deferred   pending   a
determination of the regulatory treatment of such recoveries.

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

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

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

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

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

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

None.

Item 3.  Default Upon Senior Securities.

None.

Item 4.  Results of Votes of Security Holders.

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:
          March 31, 1997           3.09
          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

(b)  Leland Cox  joined Utilities in April 1997 as Vice President, Sales
     and Service.

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.

     *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.

     *4(c)   Commercial  Paper  Dealer Agreement,  dated  as  of
             November  9,  1994, between IES Diversified Inc. and  Citicorp
             Securities, Inc.

     *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.

     *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).

     *12     Ratio of Earnings to Fixed Charges (IES Utilities Inc.)

     *27(a)  Financial Data Schedule (IES Industries Inc.)

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

     *  Exhibits designated by an asterisk are filed herewith.
     
     
(b)  Reports on Form 8-K -

     IES Industries Inc.

     None.

     IES Utilities Inc.

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


                               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:  May 14, 1997               By /s/      Thomas M. Walker
                                                (Signature)
                                              Thomas M. Walker
                                         Executive Vice President &
                                          Chief Financial Officer




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


                               SIGNATURES




      Pursuant  to  the requirements of the Securities Exchange  Act  of
1934,  the  registrant has duly caused this report to be signed  on  its
behalf by the undersigned thereunto duly authorized.



                                  IES UTILITIES INC.
                                     (Registrant)

                                  


Date:  May 14, 1997               By /s/       Thomas M. Walker
                                                 (Signature)
                                               Thomas M. Walker
                                          Executive Vice President &
                                           Chief Financial Officer
                                  
                                  
                                  
                                                                    
                                  By /s/            John E. Ebright
                                                      (Signature)
                                                    John E. Ebright
                                         Controller & Chief Accounting Officer