v2.4.0.6
Fair Value Measurements
 9 Months Ended
Sep. 30, 2012
Fair Value Measurements
FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments - The carrying amounts of Alliant Energy’s, IPL’s and WPL’s current assets and current liabilities approximate fair value because of the short maturity of such financial instruments. Carrying amounts and the related estimated fair values of other financial instruments were as follows (in millions):
 
Alliant Energy
 
IPL
 
WPL
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$13.6

 

$13.6

 

$1.1

 

$1.1

 

$12.5

 

$12.5

Derivative assets (Note 10)
46.5

 
46.5

 
28.1

 
28.1

 
18.4

 
18.4

Deferred proceeds (sales of receivables) (Note 3)
153.9

 
153.9

 
153.9

 
153.9

 
—

 
—

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities) (Note 7(b))
2,829.5

 
3,598.7

 
1,359.3

 
1,696.1

 
1,082.5

 
1,492.4

Cumulative preferred stock of subsidiaries
205.1

 
215.6

 
145.1

 
154.8

 
60.0

 
60.8

Derivative liabilities (Note 10)
57.3

 
57.3

 
22.8

 
22.8

 
34.5

 
34.5

 
Alliant Energy
 
IPL
 
WPL
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Derivative assets (Note 10)

$15.7

 

$15.7

 

$10.6

 

$10.6

 

$5.1

 

$5.1

Deferred proceeds (sales of receivables) (Note 3)
53.7

 
53.7

 
53.7

 
53.7

 
—

 
—

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities) (Note 7(b))
2,704.5

 
3,325.3

 
1,309.0

 
1,560.4

 
1,082.2

 
1,439.0

Cumulative preferred stock of subsidiaries
205.1

 
222.5

 
145.1

 
164.3

 
60.0

 
58.2

Derivative liabilities (Note 10)
78.0

 
78.0

 
33.6

 
33.6

 
44.4

 
44.4



Valuation Techniques -
Money market fund investments - As of September 30, 2012, money market fund investments were measured at fair value using quoted market prices.

Derivative assets and derivative liabilities - Alliant Energy, IPL and WPL periodically use derivative instruments for risk management purposes to mitigate exposures to fluctuations in certain commodity prices and transmission congestion costs. Alliant Energy, IPL and WPL maintain risk policies that govern the use of derivative instruments. Alliant Energy’s, IPL’s and WPL’s derivative instruments as of September 30, 2012 and December 31, 2011 were not designated as hedging instruments. Alliant Energy’s, IPL’s and WPL’s derivative instruments as of September 30, 2012 and December 31, 2011 included electric physical forward purchase contracts and forward swap contracts to mitigate pricing volatility for the electricity purchased to supply to IPL’s and WPL’s customers; natural gas swap contracts to mitigate pricing volatility for the fuel used to supply to the natural gas-fired electric generating facilities they operate, optimize the value of IPL’s natural gas pipeline capacity and mitigate pricing volatility for natural gas supplied to IPL’s retail customers; natural gas options to mitigate pricing volatility for natural gas supplied to WPL’s retail customers; natural gas physical forward purchase contracts to mitigate pricing volatility for natural gas supplied to IPL’s and WPL’s retail customers; natural gas physical forward purchase and sale contracts to optimize the value of natural gas pipeline capacity; financial transmission rights (FTRs) acquired to manage transmission congestion costs; and a coal supply contract with volumetric optionality to assist in mitigating pricing volatility for fuel used in the coal-fired electric generating facilities they operate.

IPL’s and WPL’s swap, option and physical forward commodity contracts were non-exchange-based derivative instruments and were valued using indicative price quotations available through a pricing vendor that provides daily exchange forward price settlements, from broker or dealer quotations or from on-line exchanges. The indicative price quotations reflected the average of the bid-ask mid-point prices and were obtained from sources believed to provide the most liquid market for the commodity. IPL and WPL corroborated a portion of these indicative price quotations using quoted prices for similar assets or liabilities in active markets and categorized derivative instruments based on such indicative price quotations as Level 2. IPL’s and WPL’s commodity contracts that were valued using indicative price quotations based on significant assumptions such as seasonal or monthly shaping and indicative price quotations that could not be readily corroborated were categorized as Level 3. IPL’s and WPL’s swap, option and physical forward commodity contracts were predominately at liquid trading points. IPL’s and WPL’s FTRs were measured at fair value each reporting date using monthly or annual auction shadow prices from relevant auctions. Refer to Note 10 for additional details of derivative assets and derivative liabilities.

Deferred proceeds (sales of receivables) - The fair value of IPL’s deferred proceeds related to its sales of receivables program was calculated each reporting date using the cost approach valuation technique. The fair value represents the carrying amount of receivables sold less the allowance for doubtful accounts associated with the receivables sold and cash proceeds received from the receivables sold due to the short-term nature of the collection period. Deferred proceeds represent IPL’s maximum exposure to loss related to the receivables sold. Refer to Note 3 for additional information regarding deferred proceeds.

Long-term debt (including current maturities) - For long-term debt instruments that are actively traded, the fair value was based upon quoted market prices for similar liabilities on each reporting date. For long-term debt instruments that are not actively traded, the fair value was based on a discounted cash flow methodology and utilizes assumptions of current market pricing curves at each reporting date. Refer to Note 7(b) for additional information regarding long-term debt.

Cumulative preferred stock of subsidiaries - The fair value of IPL’s 8.375% cumulative preferred stock was based on its closing market price quoted by the New York Stock Exchange on each reporting date. The fair value of WPL’s 4.50% cumulative preferred stock was based on the closing market price quoted by the NYSE Amex LLC on each reporting date. The fair value of WPL’s remaining preferred stock was calculated based on the market yield of similar securities on each reporting date.

Valuation Hierarchy - Fair value measurement accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy and examples of each are as follows:

Level 1 - Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date. As of September 30, 2012, Level 1 items included money market fund investments, IPL’s 8.375% cumulative preferred stock and WPL’s 4.50% cumulative preferred stock.

Level 2 - Pricing inputs are quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active as of the reporting date. As of September 30, 2012 and December 31, 2011, Level 2 items included certain of IPL’s and WPL’s non-exchange traded commodity contracts. Level 2 items as of September 30, 2012 also included the remainder of WPL’s cumulative preferred stock and substantially all of the long-term debt instruments.

Level 3 - Pricing inputs are unobservable inputs for assets or liabilities for which little or no market data exist and require significant management judgment or estimation. As of September 30, 2012 and December 31, 2011, Level 3 items included IPL’s deferred proceeds, and IPL’s and WPL’s FTRs and certain non-exchange traded commodity contracts.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. Items subject to fair value measurement disclosure requirements were as follows (Not Applicable (N/A); in millions):
Alliant Energy
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$13.6

 

$13.6

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
46.5

 
—

 
11.9

 
34.6

 
15.7

 
—

 
3.4

 
12.3

Deferred proceeds
153.9

 
—

 
—

 
153.9

 
53.7

 
—

 
—

 
53.7

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities)
3,598.7

 
—

 
3,598.2

 
0.5

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock of subsidiaries
215.6

 
165.2

 
50.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
57.3

 
—

 
40.3

 
17.0

 
78.0

 
—

 
64.8

 
13.2

IPL
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$1.1

 

$1.1

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
28.1

 
—

 
8.1

 
20.0

 
10.6

 
—

 
1.3

 
9.3

Deferred proceeds
153.9

 
—

 
—

 
153.9

 
53.7

 
—

 
—

 
53.7

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,696.1

 
—

 
1,696.1

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock
154.8

 
154.8

 
—

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
22.8

 
—

 
18.3

 
4.5

 
33.6

 
—

 
28.6

 
5.0

WPL
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$12.5

 

$12.5

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
18.4

 
—

 
3.8

 
14.6

 
5.1

 
—

 
2.1

 
3.0

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,492.4

 
—

 
1,492.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock
60.8

 
10.4

 
50.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
34.5

 
—

 
22.0

 
12.5

 
44.4

 
—

 
36.2

 
8.2



Alliant Energy, IPL and WPL generally record gains and losses from IPL’s and WPL’s derivative instruments with offsets to regulatory assets or regulatory liabilities, based on their fuel and natural gas cost recovery mechanisms, as well as other specific regulatory authorizations. Based on these recovery mechanisms, the changes in the fair value of derivative liabilities resulted in comparable changes to regulatory assets, and the changes in the fair value of derivative assets resulted in comparable changes to regulatory liabilities on the Condensed Consolidated Balance Sheets.

The significant unobservable inputs (Level 3 inputs) used in the fair value measurement of IPL’s and WPL’s commodity contracts are forecasted electricity, natural gas and coal prices, and the expected volatility of such prices. Significant changes in any of those inputs would result in a significantly lower or higher fair value measurement. Information for fair value measurements using significant unobservable inputs (Level 3 inputs) for the three and nine months ended September 30 was as follows (in millions):
Alliant Energy
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$18.8

 

$18.1

 

$—

 

$2.1

 

$81.7

 

$66.4

Total net losses (realized/unrealized) included in changes in net assets (a)
(2.3
)
 
(0.1
)
 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(0.4
)
 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
9.3

 
—

 
—

 
—

 
—

 
—

Settlements (d)
(7.8
)
 
(6.1
)
 
—

 
(1.7
)
 
72.2

 
21.0

Ending balance, September 30

$17.6

 

$11.9

 

$—

 

$0.4

 

$153.9

 

$87.4

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($0.7
)
 

($0.1
)
 

$—

 

$—

 

$—

 

$—

Alliant Energy
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

($0.9
)
 

$2.8

 

$—

 

$4.7

 

$53.7

 

$152.9

Total net losses (realized/unrealized) included in changes in net assets (a)
(8.3
)
 
—

 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(1.7
)
 
0.2

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
8.3

 
—

 
—

 
—

 
—

 
—

Purchases
35.8

 
21.8

 
—

 
—

 
—

 
—

Settlements (d)
(15.6
)
 
(12.9
)
 
—

 
(4.3
)
 
100.2

 
(65.5
)
Ending balance, September 30

$17.6

 

$11.9

 

$—

 

$0.4

 

$153.9

 

$87.4

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($4.4
)
 

$—

 

$—

 

$—

 

$—

 

$—

IPL
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$14.1

 

$17.5

 

$—

 

$—

 

$81.7

 

$66.4

Total net losses (realized/unrealized) included in changes in net assets (a)
(0.2
)
 
(0.1
)
 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
7.4

 
—

 
—

 
—

 
—

 
—

Settlements (d)
(5.8
)
 
(5.0
)
 
—

 
—

 
72.2

 
21.0

Ending balance, September 30

$15.5

 

$12.4

 

$—

 

$—

 

$153.9

 

$87.4

The amount of total net gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) relating to assets and liabilities held at September 30 (a)

$1.4

 

($0.1
)
 

$—

 

$—

 

$—

 

$—

IPL
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

$4.3

 

$4.3

 

$—

 

$4.8

 

$53.7

 

$152.9

Total net gains (losses) (realized/unrealized) included in changes in net assets (a)
(4.8
)
 
0.4

 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(1.1
)
 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
2.4

 
—

 
—

 
—

 
—

 
—

Purchases
26.8

 
18.1

 
—

 
—

 
—

 
—

Sales (e)
—

 
—

 
—

 
(2.1
)
 
—

 
—

Settlements (d)
(12.1
)
 
(10.4
)
 
—

 
(2.7
)
 
100.2

 
(65.5
)
Ending balance, September 30

$15.5

 

$12.4

 

$—

 

$—

 

$153.9

 

$87.4

The amount of total net gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) relating to assets and liabilities held at September 30 (a)

($0.7
)
 

$0.4

 

$—

 

$—

 

$—

 

$—

WPL
Derivative Assets and (Liabilities), net
 
Commodity Contracts
 
Foreign Contracts
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$4.7

 

$0.6

 

$—

 

$—

Total net losses (realized/unrealized) included in changes in net assets (a)
(2.1
)
 
—

 
—

 
—

Transfers into Level 3 (b)
(0.4
)
 
—

 
—

 
—

Transfers out of Level 3 (c)
1.9

 
—

 
—

 
—

Settlements
(2.0
)
 
(1.1
)
 
—

 
—

Ending balance, September 30

$2.1

 

($0.5
)
 

$—

 

$—

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($2.1
)
 

$—

 

$—

 

$—

WPL
Derivative Assets and (Liabilities), net
 
Commodity Contracts
 
Foreign Contracts
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

($5.2
)
 

($1.5
)
 

$—

 

($0.1
)
Total net losses (realized/unrealized) included in changes in net assets (a)
(3.5
)
 
(0.4
)
 
—

 
—

Transfers into Level 3 (b)
(0.6
)
 
0.2

 
—

 
—

Transfers out of Level 3 (c)
5.9

 
—

 
—

 
—

Purchases
9.0

 
3.7

 
—

 
—

Settlements
(3.5
)
 
(2.5
)
 
—

 
0.1

Ending balance, September 30

$2.1

 

($0.5
)
 

$—

 

$—

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($3.7
)
 

($0.4
)
 

$—

 

$—


(a)
Gains and losses related to derivative assets and derivative liabilities are recorded in “Regulatory assets” and “Regulatory liabilities” on the Condensed Consolidated Balance Sheets.
(b)
Markets for similar assets and liabilities became inactive and observable market inputs became unavailable for transfers into Level 3. The transfers were valued as of the beginning of the period.
(c)
Observable market inputs became available for certain commodity contracts previously classified as Level 3 for transfers out of Level 3. The transfers were valued as of the beginning of the period.
(d)
Settlements related to deferred proceeds are due to the change in the carrying amount of receivables sold less the allowance for doubtful accounts associated with the receivables sold and cash proceeds received from the receivables sold.
(e)
The foreign exchange contract was transferred from IPL to Resources in connection with the sale of wind project assets in the second quarter of 2011.

Electric, Natural Gas and Coal Commodity Contracts - As of September 30, 2012, the fair value of Alliant Energy’s, IPL’s and WPL’s electric, natural gas and coal commodity contracts classified as Level 3, excluding FTRs, were recognized as net derivative liabilities of $5.6 million, $1.2 million and $4.4 million, respectively. These commodity contracts were valued using a market approach technique that utilizes significant observable inputs to estimate forward commodity prices. Forward electric and coal prices are estimated using market information obtained from counterparties and brokers, including bids, offers, historical transactions (including historical price differences between locations with both observable and unobservable prices) and executed trades. Forward natural gas prices are estimated using the most recent quoted observable inputs applied to future months (including historical price differences between locations with both observable and unobservable prices). Observable inputs are obtained from third-party pricing data sources and include bids, offers, historical transactions and executed trades. Forward electric price commodity curves that extend beyond currently available observable inputs utilize market prices for the most recent period for which observable inputs are available. Observable inputs include bids, offers, historical transactions and executed trades.

FTRs - As of September 30, 2012, Alliant Energy’s, IPL’s and WPL’s FTRs classified as Level 3 were recognized as net derivative assets of $23.2 million, $16.7 million and $6.5 million, respectively. These FTRs were measured at fair value using monthly or annual auction shadow prices for identical or similar instruments from relevant closed auctions.
IPL [Member]
  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments - The carrying amounts of Alliant Energy’s, IPL’s and WPL’s current assets and current liabilities approximate fair value because of the short maturity of such financial instruments. Carrying amounts and the related estimated fair values of other financial instruments were as follows (in millions):
 
Alliant Energy
 
IPL
 
WPL
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$13.6

 

$13.6

 

$1.1

 

$1.1

 

$12.5

 

$12.5

Derivative assets (Note 10)
46.5

 
46.5

 
28.1

 
28.1

 
18.4

 
18.4

Deferred proceeds (sales of receivables) (Note 3)
153.9

 
153.9

 
153.9

 
153.9

 
—

 
—

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities) (Note 7(b))
2,829.5

 
3,598.7

 
1,359.3

 
1,696.1

 
1,082.5

 
1,492.4

Cumulative preferred stock of subsidiaries
205.1

 
215.6

 
145.1

 
154.8

 
60.0

 
60.8

Derivative liabilities (Note 10)
57.3

 
57.3

 
22.8

 
22.8

 
34.5

 
34.5

 
Alliant Energy
 
IPL
 
WPL
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Derivative assets (Note 10)

$15.7

 

$15.7

 

$10.6

 

$10.6

 

$5.1

 

$5.1

Deferred proceeds (sales of receivables) (Note 3)
53.7

 
53.7

 
53.7

 
53.7

 
—

 
—

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities) (Note 7(b))
2,704.5

 
3,325.3

 
1,309.0

 
1,560.4

 
1,082.2

 
1,439.0

Cumulative preferred stock of subsidiaries
205.1

 
222.5

 
145.1

 
164.3

 
60.0

 
58.2

Derivative liabilities (Note 10)
78.0

 
78.0

 
33.6

 
33.6

 
44.4

 
44.4



Valuation Techniques -
Money market fund investments - As of September 30, 2012, money market fund investments were measured at fair value using quoted market prices.

Derivative assets and derivative liabilities - Alliant Energy, IPL and WPL periodically use derivative instruments for risk management purposes to mitigate exposures to fluctuations in certain commodity prices and transmission congestion costs. Alliant Energy, IPL and WPL maintain risk policies that govern the use of derivative instruments. Alliant Energy’s, IPL’s and WPL’s derivative instruments as of September 30, 2012 and December 31, 2011 were not designated as hedging instruments. Alliant Energy’s, IPL’s and WPL’s derivative instruments as of September 30, 2012 and December 31, 2011 included electric physical forward purchase contracts and forward swap contracts to mitigate pricing volatility for the electricity purchased to supply to IPL’s and WPL’s customers; natural gas swap contracts to mitigate pricing volatility for the fuel used to supply to the natural gas-fired electric generating facilities they operate, optimize the value of IPL’s natural gas pipeline capacity and mitigate pricing volatility for natural gas supplied to IPL’s retail customers; natural gas options to mitigate pricing volatility for natural gas supplied to WPL’s retail customers; natural gas physical forward purchase contracts to mitigate pricing volatility for natural gas supplied to IPL’s and WPL’s retail customers; natural gas physical forward purchase and sale contracts to optimize the value of natural gas pipeline capacity; financial transmission rights (FTRs) acquired to manage transmission congestion costs; and a coal supply contract with volumetric optionality to assist in mitigating pricing volatility for fuel used in the coal-fired electric generating facilities they operate.

IPL’s and WPL’s swap, option and physical forward commodity contracts were non-exchange-based derivative instruments and were valued using indicative price quotations available through a pricing vendor that provides daily exchange forward price settlements, from broker or dealer quotations or from on-line exchanges. The indicative price quotations reflected the average of the bid-ask mid-point prices and were obtained from sources believed to provide the most liquid market for the commodity. IPL and WPL corroborated a portion of these indicative price quotations using quoted prices for similar assets or liabilities in active markets and categorized derivative instruments based on such indicative price quotations as Level 2. IPL’s and WPL’s commodity contracts that were valued using indicative price quotations based on significant assumptions such as seasonal or monthly shaping and indicative price quotations that could not be readily corroborated were categorized as Level 3. IPL’s and WPL’s swap, option and physical forward commodity contracts were predominately at liquid trading points. IPL’s and WPL’s FTRs were measured at fair value each reporting date using monthly or annual auction shadow prices from relevant auctions. Refer to Note 10 for additional details of derivative assets and derivative liabilities.

Deferred proceeds (sales of receivables) - The fair value of IPL’s deferred proceeds related to its sales of receivables program was calculated each reporting date using the cost approach valuation technique. The fair value represents the carrying amount of receivables sold less the allowance for doubtful accounts associated with the receivables sold and cash proceeds received from the receivables sold due to the short-term nature of the collection period. Deferred proceeds represent IPL’s maximum exposure to loss related to the receivables sold. Refer to Note 3 for additional information regarding deferred proceeds.

Long-term debt (including current maturities) - For long-term debt instruments that are actively traded, the fair value was based upon quoted market prices for similar liabilities on each reporting date. For long-term debt instruments that are not actively traded, the fair value was based on a discounted cash flow methodology and utilizes assumptions of current market pricing curves at each reporting date. Refer to Note 7(b) for additional information regarding long-term debt.

Cumulative preferred stock of subsidiaries - The fair value of IPL’s 8.375% cumulative preferred stock was based on its closing market price quoted by the New York Stock Exchange on each reporting date. The fair value of WPL’s 4.50% cumulative preferred stock was based on the closing market price quoted by the NYSE Amex LLC on each reporting date. The fair value of WPL’s remaining preferred stock was calculated based on the market yield of similar securities on each reporting date.

Valuation Hierarchy - Fair value measurement accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy and examples of each are as follows:

Level 1 - Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date. As of September 30, 2012, Level 1 items included money market fund investments, IPL’s 8.375% cumulative preferred stock and WPL’s 4.50% cumulative preferred stock.

Level 2 - Pricing inputs are quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active as of the reporting date. As of September 30, 2012 and December 31, 2011, Level 2 items included certain of IPL’s and WPL’s non-exchange traded commodity contracts. Level 2 items as of September 30, 2012 also included the remainder of WPL’s cumulative preferred stock and substantially all of the long-term debt instruments.

Level 3 - Pricing inputs are unobservable inputs for assets or liabilities for which little or no market data exist and require significant management judgment or estimation. As of September 30, 2012 and December 31, 2011, Level 3 items included IPL’s deferred proceeds, and IPL’s and WPL’s FTRs and certain non-exchange traded commodity contracts.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. Items subject to fair value measurement disclosure requirements were as follows (Not Applicable (N/A); in millions):
Alliant Energy
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$13.6

 

$13.6

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
46.5

 
—

 
11.9

 
34.6

 
15.7

 
—

 
3.4

 
12.3

Deferred proceeds
153.9

 
—

 
—

 
153.9

 
53.7

 
—

 
—

 
53.7

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities)
3,598.7

 
—

 
3,598.2

 
0.5

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock of subsidiaries
215.6

 
165.2

 
50.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
57.3

 
—

 
40.3

 
17.0

 
78.0

 
—

 
64.8

 
13.2

IPL
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$1.1

 

$1.1

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
28.1

 
—

 
8.1

 
20.0

 
10.6

 
—

 
1.3

 
9.3

Deferred proceeds
153.9

 
—

 
—

 
153.9

 
53.7

 
—

 
—

 
53.7

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,696.1

 
—

 
1,696.1

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock
154.8

 
154.8

 
—

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
22.8

 
—

 
18.3

 
4.5

 
33.6

 
—

 
28.6

 
5.0

WPL
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$12.5

 

$12.5

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
18.4

 
—

 
3.8

 
14.6

 
5.1

 
—

 
2.1

 
3.0

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,492.4

 
—

 
1,492.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock
60.8

 
10.4

 
50.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
34.5

 
—

 
22.0

 
12.5

 
44.4

 
—

 
36.2

 
8.2



Alliant Energy, IPL and WPL generally record gains and losses from IPL’s and WPL’s derivative instruments with offsets to regulatory assets or regulatory liabilities, based on their fuel and natural gas cost recovery mechanisms, as well as other specific regulatory authorizations. Based on these recovery mechanisms, the changes in the fair value of derivative liabilities resulted in comparable changes to regulatory assets, and the changes in the fair value of derivative assets resulted in comparable changes to regulatory liabilities on the Condensed Consolidated Balance Sheets.

The significant unobservable inputs (Level 3 inputs) used in the fair value measurement of IPL’s and WPL’s commodity contracts are forecasted electricity, natural gas and coal prices, and the expected volatility of such prices. Significant changes in any of those inputs would result in a significantly lower or higher fair value measurement. Information for fair value measurements using significant unobservable inputs (Level 3 inputs) for the three and nine months ended September 30 was as follows (in millions):
Alliant Energy
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$18.8

 

$18.1

 

$—

 

$2.1

 

$81.7

 

$66.4

Total net losses (realized/unrealized) included in changes in net assets (a)
(2.3
)
 
(0.1
)
 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(0.4
)
 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
9.3

 
—

 
—

 
—

 
—

 
—

Settlements (d)
(7.8
)
 
(6.1
)
 
—

 
(1.7
)
 
72.2

 
21.0

Ending balance, September 30

$17.6

 

$11.9

 

$—

 

$0.4

 

$153.9

 

$87.4

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($0.7
)
 

($0.1
)
 

$—

 

$—

 

$—

 

$—

Alliant Energy
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

($0.9
)
 

$2.8

 

$—

 

$4.7

 

$53.7

 

$152.9

Total net losses (realized/unrealized) included in changes in net assets (a)
(8.3
)
 
—

 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(1.7
)
 
0.2

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
8.3

 
—

 
—

 
—

 
—

 
—

Purchases
35.8

 
21.8

 
—

 
—

 
—

 
—

Settlements (d)
(15.6
)
 
(12.9
)
 
—

 
(4.3
)
 
100.2

 
(65.5
)
Ending balance, September 30

$17.6

 

$11.9

 

$—

 

$0.4

 

$153.9

 

$87.4

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($4.4
)
 

$—

 

$—

 

$—

 

$—

 

$—

IPL
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$14.1

 

$17.5

 

$—

 

$—

 

$81.7

 

$66.4

Total net losses (realized/unrealized) included in changes in net assets (a)
(0.2
)
 
(0.1
)
 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
7.4

 
—

 
—

 
—

 
—

 
—

Settlements (d)
(5.8
)
 
(5.0
)
 
—

 
—

 
72.2

 
21.0

Ending balance, September 30

$15.5

 

$12.4

 

$—

 

$—

 

$153.9

 

$87.4

The amount of total net gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) relating to assets and liabilities held at September 30 (a)

$1.4

 

($0.1
)
 

$—

 

$—

 

$—

 

$—

IPL
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

$4.3

 

$4.3

 

$—

 

$4.8

 

$53.7

 

$152.9

Total net gains (losses) (realized/unrealized) included in changes in net assets (a)
(4.8
)
 
0.4

 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(1.1
)
 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
2.4

 
—

 
—

 
—

 
—

 
—

Purchases
26.8

 
18.1

 
—

 
—

 
—

 
—

Sales (e)
—

 
—

 
—

 
(2.1
)
 
—

 
—

Settlements (d)
(12.1
)
 
(10.4
)
 
—

 
(2.7
)
 
100.2

 
(65.5
)
Ending balance, September 30

$15.5

 

$12.4

 

$—

 

$—

 

$153.9

 

$87.4

The amount of total net gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) relating to assets and liabilities held at September 30 (a)

($0.7
)
 

$0.4

 

$—

 

$—

 

$—

 

$—

WPL
Derivative Assets and (Liabilities), net
 
Commodity Contracts
 
Foreign Contracts
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$4.7

 

$0.6

 

$—

 

$—

Total net losses (realized/unrealized) included in changes in net assets (a)
(2.1
)
 
—

 
—

 
—

Transfers into Level 3 (b)
(0.4
)
 
—

 
—

 
—

Transfers out of Level 3 (c)
1.9

 
—

 
—

 
—

Settlements
(2.0
)
 
(1.1
)
 
—

 
—

Ending balance, September 30

$2.1

 

($0.5
)
 

$—

 

$—

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($2.1
)
 

$—

 

$—

 

$—

WPL
Derivative Assets and (Liabilities), net
 
Commodity Contracts
 
Foreign Contracts
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

($5.2
)
 

($1.5
)
 

$—

 

($0.1
)
Total net losses (realized/unrealized) included in changes in net assets (a)
(3.5
)
 
(0.4
)
 
—

 
—

Transfers into Level 3 (b)
(0.6
)
 
0.2

 
—

 
—

Transfers out of Level 3 (c)
5.9

 
—

 
—

 
—

Purchases
9.0

 
3.7

 
—

 
—

Settlements
(3.5
)
 
(2.5
)
 
—

 
0.1

Ending balance, September 30

$2.1

 

($0.5
)
 

$—

 

$—

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($3.7
)
 

($0.4
)
 

$—

 

$—


(a)
Gains and losses related to derivative assets and derivative liabilities are recorded in “Regulatory assets” and “Regulatory liabilities” on the Condensed Consolidated Balance Sheets.
(b)
Markets for similar assets and liabilities became inactive and observable market inputs became unavailable for transfers into Level 3. The transfers were valued as of the beginning of the period.
(c)
Observable market inputs became available for certain commodity contracts previously classified as Level 3 for transfers out of Level 3. The transfers were valued as of the beginning of the period.
(d)
Settlements related to deferred proceeds are due to the change in the carrying amount of receivables sold less the allowance for doubtful accounts associated with the receivables sold and cash proceeds received from the receivables sold.
(e)
The foreign exchange contract was transferred from IPL to Resources in connection with the sale of wind project assets in the second quarter of 2011.

Electric, Natural Gas and Coal Commodity Contracts - As of September 30, 2012, the fair value of Alliant Energy’s, IPL’s and WPL’s electric, natural gas and coal commodity contracts classified as Level 3, excluding FTRs, were recognized as net derivative liabilities of $5.6 million, $1.2 million and $4.4 million, respectively. These commodity contracts were valued using a market approach technique that utilizes significant observable inputs to estimate forward commodity prices. Forward electric and coal prices are estimated using market information obtained from counterparties and brokers, including bids, offers, historical transactions (including historical price differences between locations with both observable and unobservable prices) and executed trades. Forward natural gas prices are estimated using the most recent quoted observable inputs applied to future months (including historical price differences between locations with both observable and unobservable prices). Observable inputs are obtained from third-party pricing data sources and include bids, offers, historical transactions and executed trades. Forward electric price commodity curves that extend beyond currently available observable inputs utilize market prices for the most recent period for which observable inputs are available. Observable inputs include bids, offers, historical transactions and executed trades.

FTRs - As of September 30, 2012, Alliant Energy’s, IPL’s and WPL’s FTRs classified as Level 3 were recognized as net derivative assets of $23.2 million, $16.7 million and $6.5 million, respectively. These FTRs were measured at fair value using monthly or annual auction shadow prices for identical or similar instruments from relevant closed auctions.
WPL [Member]
  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments - The carrying amounts of Alliant Energy’s, IPL’s and WPL’s current assets and current liabilities approximate fair value because of the short maturity of such financial instruments. Carrying amounts and the related estimated fair values of other financial instruments were as follows (in millions):
 
Alliant Energy
 
IPL
 
WPL
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
September 30, 2012
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$13.6

 

$13.6

 

$1.1

 

$1.1

 

$12.5

 

$12.5

Derivative assets (Note 10)
46.5

 
46.5

 
28.1

 
28.1

 
18.4

 
18.4

Deferred proceeds (sales of receivables) (Note 3)
153.9

 
153.9

 
153.9

 
153.9

 
—

 
—

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities) (Note 7(b))
2,829.5

 
3,598.7

 
1,359.3

 
1,696.1

 
1,082.5

 
1,492.4

Cumulative preferred stock of subsidiaries
205.1

 
215.6

 
145.1

 
154.8

 
60.0

 
60.8

Derivative liabilities (Note 10)
57.3

 
57.3

 
22.8

 
22.8

 
34.5

 
34.5

 
Alliant Energy
 
IPL
 
WPL
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
 
Derivative assets (Note 10)

$15.7

 

$15.7

 

$10.6

 

$10.6

 

$5.1

 

$5.1

Deferred proceeds (sales of receivables) (Note 3)
53.7

 
53.7

 
53.7

 
53.7

 
—

 
—

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities) (Note 7(b))
2,704.5

 
3,325.3

 
1,309.0

 
1,560.4

 
1,082.2

 
1,439.0

Cumulative preferred stock of subsidiaries
205.1

 
222.5

 
145.1

 
164.3

 
60.0

 
58.2

Derivative liabilities (Note 10)
78.0

 
78.0

 
33.6

 
33.6

 
44.4

 
44.4



Valuation Techniques -
Money market fund investments - As of September 30, 2012, money market fund investments were measured at fair value using quoted market prices.

Derivative assets and derivative liabilities - Alliant Energy, IPL and WPL periodically use derivative instruments for risk management purposes to mitigate exposures to fluctuations in certain commodity prices and transmission congestion costs. Alliant Energy, IPL and WPL maintain risk policies that govern the use of derivative instruments. Alliant Energy’s, IPL’s and WPL’s derivative instruments as of September 30, 2012 and December 31, 2011 were not designated as hedging instruments. Alliant Energy’s, IPL’s and WPL’s derivative instruments as of September 30, 2012 and December 31, 2011 included electric physical forward purchase contracts and forward swap contracts to mitigate pricing volatility for the electricity purchased to supply to IPL’s and WPL’s customers; natural gas swap contracts to mitigate pricing volatility for the fuel used to supply to the natural gas-fired electric generating facilities they operate, optimize the value of IPL’s natural gas pipeline capacity and mitigate pricing volatility for natural gas supplied to IPL’s retail customers; natural gas options to mitigate pricing volatility for natural gas supplied to WPL’s retail customers; natural gas physical forward purchase contracts to mitigate pricing volatility for natural gas supplied to IPL’s and WPL’s retail customers; natural gas physical forward purchase and sale contracts to optimize the value of natural gas pipeline capacity; financial transmission rights (FTRs) acquired to manage transmission congestion costs; and a coal supply contract with volumetric optionality to assist in mitigating pricing volatility for fuel used in the coal-fired electric generating facilities they operate.

IPL’s and WPL’s swap, option and physical forward commodity contracts were non-exchange-based derivative instruments and were valued using indicative price quotations available through a pricing vendor that provides daily exchange forward price settlements, from broker or dealer quotations or from on-line exchanges. The indicative price quotations reflected the average of the bid-ask mid-point prices and were obtained from sources believed to provide the most liquid market for the commodity. IPL and WPL corroborated a portion of these indicative price quotations using quoted prices for similar assets or liabilities in active markets and categorized derivative instruments based on such indicative price quotations as Level 2. IPL’s and WPL’s commodity contracts that were valued using indicative price quotations based on significant assumptions such as seasonal or monthly shaping and indicative price quotations that could not be readily corroborated were categorized as Level 3. IPL’s and WPL’s swap, option and physical forward commodity contracts were predominately at liquid trading points. IPL’s and WPL’s FTRs were measured at fair value each reporting date using monthly or annual auction shadow prices from relevant auctions. Refer to Note 10 for additional details of derivative assets and derivative liabilities.

Deferred proceeds (sales of receivables) - The fair value of IPL’s deferred proceeds related to its sales of receivables program was calculated each reporting date using the cost approach valuation technique. The fair value represents the carrying amount of receivables sold less the allowance for doubtful accounts associated with the receivables sold and cash proceeds received from the receivables sold due to the short-term nature of the collection period. Deferred proceeds represent IPL’s maximum exposure to loss related to the receivables sold. Refer to Note 3 for additional information regarding deferred proceeds.

Long-term debt (including current maturities) - For long-term debt instruments that are actively traded, the fair value was based upon quoted market prices for similar liabilities on each reporting date. For long-term debt instruments that are not actively traded, the fair value was based on a discounted cash flow methodology and utilizes assumptions of current market pricing curves at each reporting date. Refer to Note 7(b) for additional information regarding long-term debt.

Cumulative preferred stock of subsidiaries - The fair value of IPL’s 8.375% cumulative preferred stock was based on its closing market price quoted by the New York Stock Exchange on each reporting date. The fair value of WPL’s 4.50% cumulative preferred stock was based on the closing market price quoted by the NYSE Amex LLC on each reporting date. The fair value of WPL’s remaining preferred stock was calculated based on the market yield of similar securities on each reporting date.

Valuation Hierarchy - Fair value measurement accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy and examples of each are as follows:

Level 1 - Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date. As of September 30, 2012, Level 1 items included money market fund investments, IPL’s 8.375% cumulative preferred stock and WPL’s 4.50% cumulative preferred stock.

Level 2 - Pricing inputs are quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active as of the reporting date. As of September 30, 2012 and December 31, 2011, Level 2 items included certain of IPL’s and WPL’s non-exchange traded commodity contracts. Level 2 items as of September 30, 2012 also included the remainder of WPL’s cumulative preferred stock and substantially all of the long-term debt instruments.

Level 3 - Pricing inputs are unobservable inputs for assets or liabilities for which little or no market data exist and require significant management judgment or estimation. As of September 30, 2012 and December 31, 2011, Level 3 items included IPL’s deferred proceeds, and IPL’s and WPL’s FTRs and certain non-exchange traded commodity contracts.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The lowest level input that is significant to a fair value measurement in its entirety determines the applicable level in the fair value hierarchy. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability. Items subject to fair value measurement disclosure requirements were as follows (Not Applicable (N/A); in millions):
Alliant Energy
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$13.6

 

$13.6

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
46.5

 
—

 
11.9

 
34.6

 
15.7

 
—

 
3.4

 
12.3

Deferred proceeds
153.9

 
—

 
—

 
153.9

 
53.7

 
—

 
—

 
53.7

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt (including current maturities)
3,598.7

 
—

 
3,598.2

 
0.5

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock of subsidiaries
215.6

 
165.2

 
50.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
57.3

 
—

 
40.3

 
17.0

 
78.0

 
—

 
64.8

 
13.2

IPL
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$1.1

 

$1.1

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
28.1

 
—

 
8.1

 
20.0

 
10.6

 
—

 
1.3

 
9.3

Deferred proceeds
153.9

 
—

 
—

 
153.9

 
53.7

 
—

 
—

 
53.7

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,696.1

 
—

 
1,696.1

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock
154.8

 
154.8

 
—

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
22.8

 
—

 
18.3

 
4.5

 
33.6

 
—

 
28.6

 
5.0

WPL
September 30, 2012
 
December 31, 2011
 
Fair
 
Level
 
Level
 
Level
 
Fair
 
Level
 
Level
 
Level
 
Value
 
1
 
2
 
3
 
Value
 
1
 
2
 
3
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market fund investments

$12.5

 

$12.5

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

Derivatives - commodity contracts
18.4

 
—

 
3.8

 
14.6

 
5.1

 
—

 
2.1

 
3.0

Capitalization and liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
1,492.4

 
—

 
1,492.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Cumulative preferred stock
60.8

 
10.4

 
50.4

 
—

 
N/A

 
N/A

 
N/A

 
N/A

Derivatives - commodity contracts
34.5

 
—

 
22.0

 
12.5

 
44.4

 
—

 
36.2

 
8.2



Alliant Energy, IPL and WPL generally record gains and losses from IPL’s and WPL’s derivative instruments with offsets to regulatory assets or regulatory liabilities, based on their fuel and natural gas cost recovery mechanisms, as well as other specific regulatory authorizations. Based on these recovery mechanisms, the changes in the fair value of derivative liabilities resulted in comparable changes to regulatory assets, and the changes in the fair value of derivative assets resulted in comparable changes to regulatory liabilities on the Condensed Consolidated Balance Sheets.

The significant unobservable inputs (Level 3 inputs) used in the fair value measurement of IPL’s and WPL’s commodity contracts are forecasted electricity, natural gas and coal prices, and the expected volatility of such prices. Significant changes in any of those inputs would result in a significantly lower or higher fair value measurement. Information for fair value measurements using significant unobservable inputs (Level 3 inputs) for the three and nine months ended September 30 was as follows (in millions):
Alliant Energy
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$18.8

 

$18.1

 

$—

 

$2.1

 

$81.7

 

$66.4

Total net losses (realized/unrealized) included in changes in net assets (a)
(2.3
)
 
(0.1
)
 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(0.4
)
 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
9.3

 
—

 
—

 
—

 
—

 
—

Settlements (d)
(7.8
)
 
(6.1
)
 
—

 
(1.7
)
 
72.2

 
21.0

Ending balance, September 30

$17.6

 

$11.9

 

$—

 

$0.4

 

$153.9

 

$87.4

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($0.7
)
 

($0.1
)
 

$—

 

$—

 

$—

 

$—

Alliant Energy
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

($0.9
)
 

$2.8

 

$—

 

$4.7

 

$53.7

 

$152.9

Total net losses (realized/unrealized) included in changes in net assets (a)
(8.3
)
 
—

 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(1.7
)
 
0.2

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
8.3

 
—

 
—

 
—

 
—

 
—

Purchases
35.8

 
21.8

 
—

 
—

 
—

 
—

Settlements (d)
(15.6
)
 
(12.9
)
 
—

 
(4.3
)
 
100.2

 
(65.5
)
Ending balance, September 30

$17.6

 

$11.9

 

$—

 

$0.4

 

$153.9

 

$87.4

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($4.4
)
 

$—

 

$—

 

$—

 

$—

 

$—

IPL
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$14.1

 

$17.5

 

$—

 

$—

 

$81.7

 

$66.4

Total net losses (realized/unrealized) included in changes in net assets (a)
(0.2
)
 
(0.1
)
 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
7.4

 
—

 
—

 
—

 
—

 
—

Settlements (d)
(5.8
)
 
(5.0
)
 
—

 
—

 
72.2

 
21.0

Ending balance, September 30

$15.5

 

$12.4

 

$—

 

$—

 

$153.9

 

$87.4

The amount of total net gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) relating to assets and liabilities held at September 30 (a)

$1.4

 

($0.1
)
 

$—

 

$—

 

$—

 

$—

IPL
Derivative Assets and (Liabilities), net
 
 
 
Commodity Contracts
 
Foreign Contracts
 
Deferred Proceeds
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

$4.3

 

$4.3

 

$—

 

$4.8

 

$53.7

 

$152.9

Total net gains (losses) (realized/unrealized) included in changes in net assets (a)
(4.8
)
 
0.4

 
—

 
—

 
—

 
—

Transfers into Level 3 (b)
(1.1
)
 
—

 
—

 
—

 
—

 
—

Transfers out of Level 3 (c)
2.4

 
—

 
—

 
—

 
—

 
—

Purchases
26.8

 
18.1

 
—

 
—

 
—

 
—

Sales (e)
—

 
—

 
—

 
(2.1
)
 
—

 
—

Settlements (d)
(12.1
)
 
(10.4
)
 
—

 
(2.7
)
 
100.2

 
(65.5
)
Ending balance, September 30

$15.5

 

$12.4

 

$—

 

$—

 

$153.9

 

$87.4

The amount of total net gains (losses) for the period included in changes in net assets attributable to the change in unrealized gains (losses) relating to assets and liabilities held at September 30 (a)

($0.7
)
 

$0.4

 

$—

 

$—

 

$—

 

$—

WPL
Derivative Assets and (Liabilities), net
 
Commodity Contracts
 
Foreign Contracts
Three Months Ended September 30
2012
 
2011
 
2012
 
2011
Beginning balance, July 1

$4.7

 

$0.6

 

$—

 

$—

Total net losses (realized/unrealized) included in changes in net assets (a)
(2.1
)
 
—

 
—

 
—

Transfers into Level 3 (b)
(0.4
)
 
—

 
—

 
—

Transfers out of Level 3 (c)
1.9

 
—

 
—

 
—

Settlements
(2.0
)
 
(1.1
)
 
—

 
—

Ending balance, September 30

$2.1

 

($0.5
)
 

$—

 

$—

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($2.1
)
 

$—

 

$—

 

$—

WPL
Derivative Assets and (Liabilities), net
 
Commodity Contracts
 
Foreign Contracts
Nine Months Ended September 30
2012
 
2011
 
2012
 
2011
Beginning balance, January 1

($5.2
)
 

($1.5
)
 

$—

 

($0.1
)
Total net losses (realized/unrealized) included in changes in net assets (a)
(3.5
)
 
(0.4
)
 
—

 
—

Transfers into Level 3 (b)
(0.6
)
 
0.2

 
—

 
—

Transfers out of Level 3 (c)
5.9

 
—

 
—

 
—

Purchases
9.0

 
3.7

 
—

 
—

Settlements
(3.5
)
 
(2.5
)
 
—

 
0.1

Ending balance, September 30

$2.1

 

($0.5
)
 

$—

 

$—

The amount of total net losses for the period included in changes in net assets attributable to the change in unrealized losses relating to assets and liabilities held at September 30 (a)

($3.7
)
 

($0.4
)
 

$—

 

$—


(a)
Gains and losses related to derivative assets and derivative liabilities are recorded in “Regulatory assets” and “Regulatory liabilities” on the Condensed Consolidated Balance Sheets.
(b)
Markets for similar assets and liabilities became inactive and observable market inputs became unavailable for transfers into Level 3. The transfers were valued as of the beginning of the period.
(c)
Observable market inputs became available for certain commodity contracts previously classified as Level 3 for transfers out of Level 3. The transfers were valued as of the beginning of the period.
(d)
Settlements related to deferred proceeds are due to the change in the carrying amount of receivables sold less the allowance for doubtful accounts associated with the receivables sold and cash proceeds received from the receivables sold.
(e)
The foreign exchange contract was transferred from IPL to Resources in connection with the sale of wind project assets in the second quarter of 2011.

Electric, Natural Gas and Coal Commodity Contracts - As of September 30, 2012, the fair value of Alliant Energy’s, IPL’s and WPL’s electric, natural gas and coal commodity contracts classified as Level 3, excluding FTRs, were recognized as net derivative liabilities of $5.6 million, $1.2 million and $4.4 million, respectively. These commodity contracts were valued using a market approach technique that utilizes significant observable inputs to estimate forward commodity prices. Forward electric and coal prices are estimated using market information obtained from counterparties and brokers, including bids, offers, historical transactions (including historical price differences between locations with both observable and unobservable prices) and executed trades. Forward natural gas prices are estimated using the most recent quoted observable inputs applied to future months (including historical price differences between locations with both observable and unobservable prices). Observable inputs are obtained from third-party pricing data sources and include bids, offers, historical transactions and executed trades. Forward electric price commodity curves that extend beyond currently available observable inputs utilize market prices for the most recent period for which observable inputs are available. Observable inputs include bids, offers, historical transactions and executed trades.

FTRs - As of September 30, 2012, Alliant Energy’s, IPL’s and WPL’s FTRs classified as Level 3 were recognized as net derivative assets of $23.2 million, $16.7 million and $6.5 million, respectively. These FTRs were measured at fair value using monthly or annual auction shadow prices for identical or similar instruments from relevant closed auctions.