2015 Climate Risk Disclosure Analysis

Industry Group: Electric Power & Gas Utilities

Standard Industrial Classification: Electric & Other Services Combined

Index Membership: S&P 500, Russell 3000

Financial Year End: Dec 2014

A. GENERALAlliant Energy was incorporated in Wisconsin in 1981 and maintains its principal executive offices in Madison, Wisconsin. Alliant Energy operates as a regulated investor-owned public utility holding company. Alliant Energy's primary focus is to provide regulated electric and natural gas service to approximately 1 million electric and approximately 420,000 natural gas customers in the Midwest through its two public utility subsidiaries, IPL and WPL. The primary first tier wholly-owned subsidiaries of Alliant Energy are: IPL, WPL, Resources and Corporate Services. A brief description of the primary first tier subsidiaries of Alliant Energy is as follows: 1) IPL - was incorporated in 1925 in Iowa as Iowa Railway and Light Corporation. IPL is a public utility engaged principally in the generation and distribution of electricity and the distribution and transportation of natural gas in select markets in Iowa and southern Minnesota. In Iowa, IPL provides utility services to incorporated communities as directed by the IUB and utilizes non-exclusive franchises, which cover the use of public right-of-ways for utility facilities in incorporated communities for a maximum term of 25 years. At December 31, 2014, IPL supplied electric and natural gas service to approximately 529,000 and 235,000 retail customers, respectively. IPL is also engaged in the generation and distribution of steam for two customers in Cedar Rapids, Iowa... 10-K Filing (2015-02-25)

Disclosure Breakdown

Disclosure Rank

96th percentile in Russell 3000

Disclosure Abstract

Audit Committee Audit Committee of the Board of Directors BART Best available retrofit technology Bent Tree Bent Tree - Phase I wind project CA Certificate of authority CAA Clean Air Act CAIR Clean Air Interstate Rule CAO Chief Accounting Officer Cash Balance Plan Alliant Energy Cash Balance Pension Plan CAVR Clean Air Visibility Rule CCR Coal combustion residuals CDD Cooling degree days CEO Chief Executive Officer CFO Chief Financial Officer CO2 Carbon dioxide CO2e Carbon dioxide-equivalent Columbia Columbia Energy Center Corporate Services Alliant Energy Corporate Services, Inc.
Court U.S. District Court for the Western District of Wisconsin CPCN Certificate of Public Convenience and Necessity CRANDIC Cedar Rapids and Iowa City Railway Company CSAPR Cross-State Air Pollution Rule CWIP Construction work in progress DAEC Duane Arnold Energy Center D.C. Circuit Court U.S. Court of Appeals for the D.C. Circuit DCP Alliant Energy Deferred Compensation Plan DLIP Alliant Energy Director Long Term Incentive Plan DNR Department of Natural Resources Dth Dekatherm Edgewater Edgewater Generating Station EECR Energy efficiency cost recovery EEP Energy efficiency plan EGU Electric generating unit Emery Emery Generating Station EPA U.S. Environmental Protection Agency EPB Emissions plan and budget EPS Earnings per weighted average common share EVP Executive Vice President FASB Financial Accounting Standards Board FCS Firm Citygate Supplies FERC Federal Energy Regulatory Commission Financial Statements Consolidated Financial Statements FTIP Act Federal Tax Increase Prevention Act FTR Financial transmission right Fuel-related Electric production fuel and energy purchases FWS U.S. Fish and Wildlife Service GAAP U.S. generally accepted accounting principles GHG Greenhouse gases HAP Hazardous air pollutants HDD Heating degree days 1 Abbreviation or Acronym Definition IBEW International Brotherhood of Electrical Workers IPL Interstate Power and Light Company IRS Internal Revenue Service ITC ITC Midwest LLC
IUB Iowa Utilities Board Jo-Carroll Jo-Carroll Energy, Inc.
KEESA Key Executive Employment and Severance Agreement Kewaunee Kewaunee Nuclear Power Plant KWh Kilowatt-hour MACT Maximum achievable control technology Marshalltown Marshalltown Generating Station MATS Mercury and Air Toxic Standard MDA Management's Discussion and Analysis of Financial Condition and Results of Operations MGP Manufactured gas plant MISO Midcontinent Independent System Operator, Inc.
MPUC Minnesota Public Utilities Commission MVP Multi-value project MW Megawatt MWh Megawatt-hour N.A. National Association N/A Not applicable NAAQS National Ambient Air Quality Standards NBPL Northern Border Pipeline Company Neenah Neenah Energy Facility Nelson Dewey Nelson Dewey Generating Station Note(s) Combined Notes to Consolidated Financial Statements NGPL Natural Gas Pipeline Co. of America NNG Northern Natural Gas Company NO2 Nitrogen dioxide NOx Nitrogen oxide OIP Alliant Energy 2010 Omnibus Incentive Plan OPEB Other postretirement benefits PJM PJM Interconnection, LLC
PM Particulate matter PPA Purchased power agreement PSCW Public Service Commission of Wisconsin PSD Prevention of Significant Deterioration REC Renewable energy credit Receivables Agreement Receivables Purchase and Sale Agreement RES Renewable energy standards Resources Alliant Energy Resources, LLC
Riverside Riverside Energy Center RMT RMT, Inc.
RPS Renewable portfolio standard SCR Selective catalytic reduction SEC Securities and Exchange Commission Sheboygan Falls Sheboygan Falls Energy Facility SIP State implementation plan SO2 Sulfur dioxide SRP Supplemental Retirement Plan SSR System Support Resource TBD To be determined U.S. United States of America VEBA Voluntary Employees' Beneficiary Association VIE Variable interest entity VP Vice President WACC Weighted-average cost of capital Whiting Petroleum Whiting Petroleum Corporation WPL Wisconsin Power and Light Company WPL Transco WPL Transco, LLC
2 FORWARD-LOOKING STATEMENTSStatements contained in this Annual Report on Form 10-K that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified as such because the statements include words such as 'may,' 'expect,' 'anticipate,' 'plan,' or other words of similar import. Similarly, statements that describe future financial performance or plans or strategies are forward-looking statements. Such forward-looking statements are subject to certain 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 of Alliant Energy, IPL and WPL that could materially affect actual results include:
 * federal and state regulatory or governmental actions, including the impact of energy, tax, financial and health care legislation, and of regulatory agency orders;
 * IPL's and WPL's ability to obtain adequate and timely rate relief to allow for, among other things, the recovery of fuel costs, operating costs, transmission costs, deferred expenditures, capital expenditures, and remaining costs related to EGUs that may be permanently closed, earning their authorized rates of return, and the payments to their parent of expected levels of dividends;
 * the ability to continue cost controls and operational efficiencies;
 * the impact of IPL's retail electric base rate freeze in Iowa during 2015 and 2016;
 * the impact of WPL's retail electric and gas base rate freeze in Wisconsin during 2015 and 2016;
 * weather effects on results of utility operations, including impacts of temperature changes in IPL's and WPL's service territories on customers' demand for electricity and gas;
 * the impact of the economy in IPL's and WPL's service territories and the resulting impacts on sales volumes, margins and the ability to collect unpaid bills;
 * the impact of customer- and third party-owned generation, including alternative electric suppliers, in IPL's and WPL's service territories on system reliability, operating expenses and customers' demand for electricity;
 * the impact of energy efficiency, franchise retention, customer- and third party-owned generation and customer disconnects on sales volumes and margins;
 * developments that adversely impact the ability to implement the strategic plan, including unanticipated issues with new emission controls equipment for various coal-fired EGUs of IPL and WPL, IPL's construction of Marshalltown, WPL's proposed Riverside expansion, various replacements and expansion of IPL's and WPL's natural gas distribution systems, Resources' electricity output and selling price of such output from its Franklin County wind project, the potential decommissioning of certain EGUs of IPL and WPL, and the anticipated sales of IPL's electric and gas distribution assets in Minnesota;
 * issues related to the availability and operations of EGUs, including start-up risks, breakdown or failure of equipment, performance below expected or contracted levels of output or efficiency, operator error, transmission constraints, compliance with mandatory reliability standards and risks related to recovery of resulting incremental costs through rates;
 * disruptions in the supply and delivery of coal, natural gas and purchased electricity;
 * changes in the price of delivered coal, natural gas and purchased electricity due to shifts in supply and demand caused by market conditions and regulations, and the ability to recover and to retain the recovery of related changes in purchased power, fuel and fuel-related costs through rates in a timely manner;
 * the impact that price changes may have on IPL's and WPL's customers' demand for electric, gas and steam services and their ability to pay their bills;
 * issues associated with environmental remediation and environmental compliance, including compliance with the Consent Decree between WPL, the Sierra Club and the EPA, future changes in environmental laws and regulations, including the EPA's recently issued proposed regulations for CO2 emissions reductions from new and existing fossil-fueled EGUs and the final CCR rule, and litigation associated with environmental requirements;
 * the ability to defend against environmental claims brought by state and federal agencies, such as the EPA, state natural resources agencies or third parties, such as the Sierra Club, and the impact on operating expenses of defending and resolving such claims;
 * the ability to recover through rates all environmental compliance and remediation costs, including costs for projects put on hold due to uncertainty of future environmental laws and regulations;
 * impacts that storms or natural disasters in IPL's and WPL's service territories may have on their operations and recovery of, and rate relief for, costs associated with restoration activities;
 * the direct or indirect effects resulting from terrorist incidents, including physical attacks and cyber attacks, or responses to such incidents;
 * 3 the impact of penalties or third-party claims related to, or in connection with, a failure to maintain the security of personally identifiable information, including associated costs to notify affected persons and to mitigate their information security concerns;
 * the direct or indirect effects resulting from breakdown or failure of equipment in the operation of natural gas distribution systems, such as leaks, explosions and mechanical problems, and compliance with natural gas distribution safety regulations, such as those that may be issued by the Pipeline and Hazardous Materials Safety Administration;
 * risks associated with deployment and integration of a new customer billing and information system expected in 2015;
 * impacts of IPL's future tax benefits from Iowa rate-making practices, including deductions for repairs expenditures and allocation of mixed service costs, and recoverability of the associated regulatory assets from customers, when the differences reverse in future periods;
 * any material post-closing adjustments related to any past asset divestitures, including the sale of RMT, which could result from, among other things, warranties, parental guarantees or litigation;
 * continued access to the capital markets on competitive terms and rates, and the actions of credit rating agencies;
 * inflation and interest rates;
 * changes to the creditworthiness of counterparties with which Alliant Energy, IPL and WPL have contractual arrangements, including participants in the energy markets and fuel suppliers and transporters;
 * issues related to electric transmission, including operating in Regional Transmission Organization energy and ancillary services markets, the impacts of potential future billing adjustments and cost allocation changes from Regional Transmission Organizations and recovery of costs incurred;
 * changes made by FERC to ATC's authorized return on equity;
 * current or future litigation, regulatory investigations, proceedings or inquiries;
 * Alliant Energy's ability to sustain its dividend payout ratio goal;
 * employee workforce factors, including changes in key executives, collective bargaining agreements and negotiations, work stoppages or restructurings;
 * access to technological developments;
 * changes in technology that alter the channels through which electric customers buy or utilize power;
 * material changes in retirement and benefit plan costs;
 * the impact of performance-based compensation plans accruals;
 * the effect of accounting pronouncements issued periodically by standard-setting bodies, including a new revenue recognition standard, which is currently expected to be adopted in 2017;
 * the impact of changes to production tax credits for wind projects;
 * the impact of adjustments made to deferred tax assets and liabilities from state apportionment assumptions;
 * the ability to utilize tax credits and net operating losses generated to date, and those that may be generated in the future, before they expire;
 * the ability to successfully complete tax audits and changes in tax accounting methods, including changes required by new tangible property regulations with no material impact on earnings and cash flows; and factors listed in MDA and Item 1A Risk Factors.
item 1. Business
8 Relevance:
Energy Efficiency Cost Recovery - WPL contributes a certain percentage of its annual utility revenues to help fund Focus on Energy, Wisconsin's state-wide energy efficiency and renewable energy resource program.
9 Relevance:
8 Renewable Energy Cost Recovery Mechanism - In 2011, IPL received an order from the MPUC approving the implementation of an automatic cost recovery rider on a temporary basis to recover costs associated with renewable generation. The renewable energy rider does not require a base rate case for annual revision of rates charged to IPL's Minnesota retail electric customers, but requires that the renewable energy costs incurred be fully reconciled against the revenues collected for such costs.
11 Relevance:
rooftop solar panels), alternative energy sources, and petitions to municipalize (Iowa) as well as service territory expansions by municipal utilities through annexations (Wisconsin). However, IPL and WPL attempt to attract new customers into their service territories in an effort to keep energy rates low for all its customers.
Renewable Energy Standards - As discussed in greater detail below, the states in which IPL and WPL operate have RES, which establish the amount of energy electric utilities or service providers must supply from renewable resources.
IPL - IPL has requirements to comply with RES in both Iowa and Minnesota and primarily relies upon RECs generated from the wind projects it owns and renewable energy acquired under PPAs to meet such requirements. IPL allocates its portfolio of RECs between its Iowa and Minnesota jurisdictions based on a load-ratio share. IPL has excess RECs in Iowa and a shortfall of RECs in Minnesota. However, the excess RECs in Iowa are much larger than the Minnesota shortfall partially due to the relatively small amount of IPL's load served in Minnesota compared to Iowa. IPL is permitted to use its surplus of RECs in Iowa to meet its deficit of RECs in Minnesota. IPL expects to meet both its Iowa and Minnesota renewable energy requirements on a system-wide basis without the need to purchase additional RECs. Iowa - IPL is required to purchase or own 49.8 MW of nameplate capacity from alternate energy or small hydro facilities located in its service area. IPL currently exceeds this Iowa requirement. Minnesota - IPL's total Minnesota retail electric sales supplied with renewable energy sources must be at least 12% currently and 17% by 2016, 20% by 2020, and 25% by 2025. Utilities in Minnesota may meet the requirements of the RES with renewable energy generated by the utility, renewable energy acquired under PPAs, or the use of accumulated or acquired RECs. IPL has met the 12% requirement and currently expects to satisfy future Minnesota RES requirements with its current wind generation and wind PPAs, supplemented as needed by acquiring additional RECs from its anticipated Iowa excess supply.
In addition to the above Minnesota requirement, IPL's total Minnesota retail electric sales supplied with solar power must be at least 1.5% by 2020. IPL currently estimates that approximately 10 MW of solar power would be needed for compliance with this requirement by 2020.
WPL - The Wisconsin RES requires WPL to increase the portion of its total Wisconsin retail electric sales supplied by renewable energy sources above a benchmark of average retail sales from renewables in 2001, 2002 and 2003. The RES required a 2% increase above the benchmark by 2010 and will require a 6% increase above the benchmark by 2015. Based on this RES, WPL was required to supply a minimum of 5.28% of its total Wisconsin retail electric sales with renewable energy sources by 2010 and will be required to increase this amount to 9.28% by 2015. WPL may reach the RES with renewable energy it generates, it acquires under PPAs or through the use of renewable resource credits.
12 Relevance:
However, unanticipated regional or local reliability issues could still arise in the event of unexpected delays in the construction of new generating and/or transmission facilities, retirement of EGUs, EGU outages, transmission system outages or extended periods of extreme weather conditions.
14 Relevance:
All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with RES or other regulatory requirements, or sold to third parties in the form of RECs or other environmental commodities.
17 Relevance:
(c) All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.
18 Relevance:
(b) All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.
19 Relevance:
(c) All or some of the renewable energy attributes associated with generation from these sources may be used in future years to comply with renewable energy standards or other regulatory requirements, or sold to third parties in the form of renewable energy credits or other environmental commodities.
item 1a. Risk Factors
23 Relevance:
These risks include changes in costs of materials, equipment, commodities, fuel or labor; shortages in materials, equipment and qualified labor; changes to the scope or timing of the projects; general contractors or subcontractors not performing as required under their contracts; the inability to agree to contract terms or disputes in contract terms; poor initial cost estimates; work stoppages; adverse weather conditions; the inability to obtain necessary permits in a timely manner; adverse interpretation or enforcement of permit conditions; changes in applicable laws or regulations; governmental actions; legal action; unforeseen engineering or technology issues; limited access to capital; and other adverse economic conditions.
24 Relevance:
For example, the Consent Decree resulted from allegations originally raised by the Sierra Club that WPL violated various provisions of the Clean Air Act. If we are unsuccessful defending or settling such litigation by governmental agencies, citizen groups, or individuals, we could be subject to restrictions or prohibitions on operating our generation facilities, costly upgrades to our generating facilities, payment of damages or fines, requirements to complete other beneficial environmental projects, and litigation costs, all of which could be material. An adverse result in such legal actions could have a material adverse impact on our financial condition and results of operations. In addition, we may also be subject to third party environmental claims relating to property damage or personal injury that arise from our operations.
We are subject to existing and potential future governmental mandates to provide customers with renewable energy and energy conservation offerings. These mandates are designed in part to mitigate the potential environmental impacts of utility operations. Failure to meet the requirements of these mandates may result in fines or penalties, which could have a material adverse effect on our results of operations. If our regulators do not allow us to recover all or a part of the costs incurred to comply with the mandates, it could have a material adverse effect on our results of operations.
24 Existing environmental laws or regulations may be revised and new laws or regulations seeking to protect the environment and natural resources may be adopted or become applicable to us. Areas in our service territories that are currently attainment areas under National Ambient Air Quality Standards could be designated as non-attainment areas due to new air monitoring results. These revised and new laws or regulations and any areas in our service territories designated as non-attainment may require regulation of mercury, nitrogen oxide, sulfur dioxide, carbon dioxide (CO2) and other greenhouse gases (GHG) emissions, particulates, coal ash and other coal combustion products, wastewater discharges, cooling water intake structures, and threatened, endangered or invasive species.
25 Relevance:
Actions related to global climate change and reducing GHG emissions could negatively impact us - The primary GHG emitted from our utility operations is CO2 from combustion of fossil fuels at our generating facilities, which are primarily coal-fired facilities. We could incur costs or other obligations to comply with any GHG regulations that are adopted in the future, and could become the target of legal claims or challenges, because generating electricity using fossil fuels emits CO2 and other GHGs. In 2013, a series of actions were announced to reduce carbon emissions, prepare the U.S. for the impacts of climate change, and lead international efforts to address global climate change. In November 2014, future targets for GHG emission reductions for the U.S. were announced in anticipation of achieving a global climate agreement.
The following are some proposed regulations that are expected to impact our operations. In January 2014, the EPA published proposed regulations governing GHG emissions from new generating facilities, which would impact IPL's Marshalltown Generating Station in Iowa and WPL's proposed Riverside Energy Center expansion in Wisconsin. In June 2014, the EPA issued its Clean Air Act Section 111(d) proposal to reduce CO2 emissions from existing fossil-fueled generating facilities. The EPA's proposal is based on broad measures to lower CO2 emissions, which could impact the dispatch of existing fossil-fueled generating facilities and the fuel mix used to generate electricity, and require other actions in order to achieve CO2 emission reduction goals. Due to the uncertainty of the final form of the GHG emissions regulations and solutions, including available control technologies, to comply with regulations to reduce GHG emissions, including CO2, we cannot provide any assurance regarding the potential impacts such future regulations would have on our operations.
26 Relevance:
Changes are occurring in the transmission network, which are required to, among other things, accommodate renewable energy and the decommissioning of older coal-fired generating facilities.
28 Relevance:
Storms or other natural disasters may impact our operations in unpredictable ways - Storms and other natural disasters, including events such as floods, tornadoes, blizzards, ice storms, or droughts may adversely impact our ability to generate, purchase or distribute electric energy or obtain fuel sources.
28 Relevance:
In addition, a variety of operating parameters, including adverse weather conditions, transmission constraints and breakdown or failure of equipment, could result in a material adverse impact on our financial condition and results of operations.
29 Relevance:
A variety of operating and economic parameters, including significant transmission constraints, adverse weather conditions and breakdown or failure of equipment, could significantly reduce the production tax credits generated by our wind projects resulting in a material adverse impact on our financial condition and results of operations.
item 6. Selected Consolidated Financial Data
41 Relevance:
Renewables - operating hydroelectric generators and current wind projects, as well as evaluating the development of future wind sites and solar projects. IPL and WPL currently have up to 400 MW and 200 MW of undeveloped wind sites, respectively, available for future wind projects. Alliant Energy, IPL and WPL are also exploring opportunities to integrate solar projects into the portfolio of energy resources as the cost to produce solar energy continues to decline.
Installing emission controls at the more efficient coal-fired EGUs, increasing levels of energy produced by natural gas-fired EGUs, and increasing levels of energy produced by wind projects and other renewable energy resources results in significant environmental benefits. As a result of these efforts, SO2 and NOx emissions are currently expected to be reduced by approximately 90% and 80%, respectively, from 2005 levels by 2025. Mercury emissions are currently expected to be reduced by approximately 90% from 2009 levels by 2025. CO2 emissions have been reduced by approximately 15% from 2005 levels.
42 Relevance:
Some of these external factors include regulatory policies and decisions, changes in long-term projections of customer demand, availability and cost effectiveness of different generation technologies, forward market prices for fossil fuels, market conditions for obtaining financing, developments related to federal and state RPS, environmental requirements, such as any future requirements relating to GHG emissions or renewable energy sources, and federal and state tax incentives.
45 Relevance:
Baghouse, including carbon injection, is a post-combustion process that injects carbon particles into the stream of gases leaving the EGU boiler to facilitate the capture of mercury in filters or bags.
46 Relevance:
Focus on Energy Program - In 2014 and 2013, WPL contributed 1.2% of annual utility revenues to help fund Focus on Energy, Wisconsin's state-wide energy efficiency and renewable energy resource program.
49 Relevance:
(e) Average rate base amounts do not include Whispering Willow - East capital costs, which are currently being recovered through a temporary renewable energy rider approved by the MPUC.
50 Relevance:
CSAPR - CSAPR is a regional SO2 and NOx cap-and-trade program, where compliance with emission limits may be achieved by purchasing emission allowances and/or reducing emissions through changes in operations or the additions of emission controls. In 2015, CSAPR replaced CAIR. Compliance with CSAPR emissions limits began in 2015, with additional emissions limits reductions beginning in 2017. The emission allowances used for Acid Rain and CAIR program compliance cannot be used for compliance with CSAPR. CSAPR emission allowances may be banked for future year compliance. Alliant Energy, IPL and WPL will continue to monitor legal and regulatory developments related to CSAPR and currently expect to meet the final compliance requirements based on planned and completed emission controls projects for various EGUs.
CAVR - CAVR requires states to develop and implement plans to address visibility impairment in designated national parks and wilderness areas across the U.S. with a national goal of no impairment by 2064. These implementation plans require BART emission controls at certain IPL and WPL fossil-fueled EGUs that were built between 1962 and 1977 and other additional measures needed for reducing state contributions to regional haze.
52 Relevance:
GHG Emissions - Climate change continues to be assessed by policymakers including consideration of the appropriate actions to mitigate global warming. There is continued debate regarding the public policy response that the U.S. should adopt, involving both domestic actions and international efforts.
In 2009, the EPA issued a finding that GHG emissions contribute to climate change, and therefore, threaten public health and welfare. This enabled the EPA to issue rules to report and regulate GHG emissions under the authority of the CAA. The EPA Mandatory GHG Reporting rule requires sources above certain threshold levels to monitor and report emissions. The primary GHG emitted from Alliant Energy's, IPL's and WPL's utility operations is CO2 from the combustion of fossil fuels at their larger EGUs. Emissions of GHG are reported at the facility level in CO2e and include those facilities that emit 25,000 metric tons or more of CO2e annually. Annual emissions reported to the EPA for electric utility and natural gas distribution operations, in terms of total mass of CO2e, were as follows (in millions of metric tons):
Alliant Energy IPL WPL
2013 2012 2011 2013 2012 2011 2013 2012 2011
CO2e emissions (a) 26.6 25.2 26.7 10.9 10.8 12.1 15.7 14.4 14.6
(a) CO2e emissions reported to the EPA represent all emissions from the facilities operated by IPL and WPL and do not reflect their share of co-owned facilities operated by other companies. GHG Tailoring Rule - In 2010, the EPA issued the GHG Tailoring Rule, which establishes a GHG emissions threshold for major sources under the PSD construction permit and Title V operation permit. In June 2014, the Supreme Court ruled that the EPA may not treat GHG emissions as 'air pollutants' for determining whether a major source is required to obtain a PSD or Title V permit, but held that the EPA can continue requiring Best Available Control Technology for GHG emissions from sources otherwise subject to review under the PSD program. This rule remains subject to legal challenges and further rulemaking may also be required to update state regulations implementing the GHG Tailoring Rule to make the Supreme Court's decision effective.
Clean Air Act Section 111(d) - In June 2014, the EPA issued proposed standards under Section 111(d) of the CAA to reduce CO2 emissions from existing fossil-fueled EGUs. The EPA's proposal is based on broad measures that can reduce CO2 emissions from existing fossil-fueled EGUs, including making existing coal-fired EGUs more efficient, increasing dispatch of existing combined-cycle natural gas-fired EGUs, maintaining or expanding zero- or low-CO2 energy resources such as renewables and nuclear, and reducing customer demand for electricity through energy efficiency programs. The state-specific goals are based on an emissions rate basis measured in pounds per net MWh. The EPA is proposing a two-part goal structure: an 'interim goal' that each state meets an average threshold over the period from 2020 through 2029, and a 'final goal' based on a three-year rolling average that each state meets beginning in 2030.
State plans will determine the specific compliance requirements applicable to EGUs. Each state has flexibility in determining how to achieve the goals, which can include the broad measures included by the EPA as well as any other enforceable measures that the state can demonstrate will reduce CO2 emissions from existing fossil-fueled EGUs. The EPA also proposed to give states the option to convert the rate-based goal to a mass-based goal measured in tons. States can develop a state-only plan or collaborate in developing regional multi-state plans. State plans that provide details of how these guidelines are to be met would be required by June 30, 2016. If a state needs additional time and provides proper notification and explanation, the EPA's proposal allows for a one-year extension to submit state-only plans and a two-year extension if a state elects to join a regional multi-state program. In August 2014, the EPA's legal authority to issue the proposed standards under Section 111(d) of the CAA was challenged. The EPA is currently expected to issue final standards in 2015. Depending on the measures included in state plans for Iowa and Wisconsin, the expected dates for the retirement and fuel switching of certain of IPL's and WPL's coal-fired EGUs may be impacted by the new requirements. The implications of these new 52 requirements and the resolution of legal challenges remain highly uncertain, and as a result Alliant Energy, IPL and WPL are currently unable to predict with certainty the final outcome of these standards, but expect that expenditures to comply with any regulations to reduce GHG emissions could be significant.
Clean Air Act Section 111(b) - In January 2014, the EPA published revised proposed New Source Performance Standards under Section 111(b) of the CAA for GHG emissions, which would establish CO2 emissions limits for certain new fossil-fueled EGUs.
57 Relevance:
2014 vs. 2013 Summary - Electric production fuel expense increased $13 million in 2014 primarily due to the unseasonably cold weather conditions in Alliant Energy's service territory in the first quarter of 2014, which resulted in higher commodity prices and increased customer demand in the first quarter of 2014. This contributed to higher MISO dispatch of IPL's and WPL's EGUs in the first quarter of 2014. The increase in 2014 was also due to changes in the under-/over-collection of fuel-related costs at IPL. These items were partially offset by deferred fuel-related costs incurred that fell outside the approved bandwidth for 2014 at WPL, as well as lower dispatch at WPL's coal-fired EGUs during the third quarter of 2014, which included impacts of lower than planned coal deliveries.
Energy purchases expense increased $114 million in 2014 primarily due to increased prices for electricity, partially resulting from IPL's new DAEC PPA and the expiration of WPL's Kewaunee PPA, and increased volumes partially due to lower dispatch of WPL's coal-fired EGUs during the third quarter of 2014. The increase was also due to extremely cold temperatures in the first quarter of 2014 contributing to higher prices for electricity purchased by IPL and WPL from wholesale energy markets (primarily MISO) for 2014.
57 Relevance:
These increases were partially offset by the impact weather conditions had on electric sales in 2014. The unseasonably cold weather conditions in IPL's and WPL's service territories in the first quarter of 2014 increased sales and the cooler than normal summer temperatures during the third quarter of 2014 decreased sales. In comparison, temperatures during the third quarter of 2013 were warmer than normal resulting in increased sales. These changes in weather conditions caused an overall decrease in residential and commercial sales in 2014 compared to 2013. The 2013 increase was due to increases in weather-normalized retail sales volumes primarily at WPL related to economic recovery and modest customer growth experienced in WPL's service territory. These increases were partially offset by the unseasonably warm weather conditions during the third quarter of 2012 and a decrease in industrial sales volumes at IPL in 2013 due to lower co-generation customer requirements.
59 Relevance:
Variances between periods in gas margins were as follows (in millions):
2014 vs. 2013 Summary: Alliant Energy IPL WPL
Estimated increase from changes in sales caused by weather conditions $4 $2 $2
Lower revenues at IPL related to changes in recovery amounts for energy efficiency costs through the energy efficiency rider (a) (4) (4)
Other 2 (1) 2
$2 ($3) $4
2013 vs. 2012 Summary: Alliant Energy IPL WPL
Estimated increase from changes in sales caused by weather conditions $19 $9 $10
Higher revenues at IPL related to changes in recovery amounts for energy efficiency costs through the energy efficiency rider (a) 5 5
Lower revenues at IPL due to credits on Iowa retail gas customers' bills resulting from the gas tax benefit rider in 2013 (11) (11)
Higher (lower) revenues due to the impact of changes in retail gas base rates effective January 2013 (9) 6 (15)
Other 5 3 2
$9 $12 ($3)
(a) Changes in energy efficiency revenues were mostly offset by changes in energy efficiency expense included in other operation and maintenance expenses.
58 Natural Gas Cost Recoveries - Cost of gas sold increased $51 million in 2014 and $60 million in 2013. These increases were primarily due to higher retail gas volumes caused by weather discussed below. Refer to Note 1(g) for additional information relating to natural gas cost recoveries.
Weather Conditions - Gas sales demand follows a seasonal pattern with an annual base load of gas and a large heating peak occurring during the winter season. HDD data is used to measure the variability of temperatures during winter months and is correlated with gas sales demand. Refer to 'Utility Electric Margins' for HDD data details.
Estimated increases (decreases) to gas margins from the impacts of weather were as follows (in millions):
2014 2013 2012
IPL $5 $3 ($6)
WPL 5 3 (7)
Total Alliant Energy $10 $6 ($13)
Refer to 'Rate Matters' for discussion of IPL's gas tax benefit rider and retail rate cases, including an interim retail gas base rate increase effective June 2012 and final retail gas base rate increase effective January 2013 for IPL's Iowa customers and retail gas base rate decreases for WPL's customers effective January 2013 and 2015.
Utility Other Revenues - Variances between periods in utility other revenues were as follows (in millions):
2014 vs. 2013 Summary: Alliant Energy IPL WPL
Lower coal sales at WPL (a) ($7) $($7)
Higher margins from IPL's sharing mechanism related to optimizing gas capacity contracts (b) 4 4
Other (2) 1 (3)
($5) $5 ($10)
2013 vs. 2012 Summary: Alliant Energy IPL WPL
Higher coal sales at WPL (a) $7 $$7
Capacity revenues recognized by WPL in 2013 (c) 6 6
Other 2 1 1
$15 $1 $14
(a) Changes in utility other revenues related to coal sales were largely offset by changes in utility other operation and maintenance expenses related to coal sales.
(b) Approximately 50% of all margins earned from IPL's sharing mechanism relating to optimizing gas capacity contracts flow through the purchased gas adjustment clause to reduce retail gas customer bills in Iowa. The remaining margins are retained by IPL and recorded in utility other revenues. Due to the extreme cold temperatures causing natural gas price fluctuations in the first quarter of 2014, margins were higher than normal in 2014.
62 Relevance:
These items were partially offset by electric customer billing credits related to a rate case settlement approved in 2014, lower retail electric sales due to changes in weather conditions in IPL's service territory and higher interest, depreciation and other operation and maintenance expenses.
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2013 vs. 2012 - Alliant Energy's cash flows from operating activities decreased $110 million primarily due to $91 million of lower cash flows from changes in the level of IPL's accounts receivable sold during 2013 and 2012, $63 million of cash flows from operations at RMT in 2012 due to changes in working capital requirements associated with renewable energy projects, lower cash flows from changes in prepaid gas and inventory levels of gas stored underground at IPL and WPL, and refunds paid by WPL to its retail electric customers during 2013 for over-collected fuel-related costs during 2012.
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Such future wind energy demand is dependent on various factors including future government incentives for wind projects, energy policy and legislation including federal and state renewable energy standards and regulation of carbon emissions, electricity and fossil fuel prices, transmission constraints in the region where the wind site is located and further technological advancements for wind generation.
item 7a. Quantitative and Qualitative Disclosures about Market Risk
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(c) Legal Proceedings -Flood Damage Claims - In June 2013, several plaintiffs purporting to represent a class of residential and commercial property owners filed a complaint against CRANDIC, Alliant Energy and various other defendants in the Iowa District Court for Linn County.
156 Relevance:
RMT provided renewable energy services, including construction and high voltage connection services for wind and solar projects.

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