REGULATORY MATTERS

In March 2016, the IURC issued an order authorizing IPL to increase its basic rates and charges by $30.8 million annually. The order also authorized IPL to collect, over a ten year period, $117.7 million of previously deferred regulatory assets related to IPL’s participation in the regional transmission organization known as MISO. Such deferred costs will be amortized to expense over ten years. Accordingly, $11.8 million of IPL’s long-term MISO regulatory asset as of December 31, 2015 has been reclassified to current regulatory assets on the accompanying Unaudited Condensed Consolidated Balance Sheets. The rate order also authorized an increase in IPL’s depreciation rates of $24.3 million annually compared to the twelve months ended June 30, 2014, which is the period upon which the rate increase was calculated. IPL also received approval to implement three new rate riders for current recovery from customers of ongoing MISO costs, capacity costs and sharing at 50% of wholesale sales margins with customers. The order approved recovery of IPL’s pension expenses and a return on IPL’s discretionary pension fundings. While the IURC noted in the order that they found IPL’s Service Company cost allocations to be reasonable, IPL was directed to request the FERC to review its Service Company allocations. Such review is currently underway. The IURC also closed their investigation into IPL’s underground network.

Some of the intervening parties in the IURC rate case filed petitions for reconsideration of the IURC’s March 2016 order with respect to certain issues. These petitions were subsequently denied by the IURC. In addition, certain intervening parties have filed notices of appeal of the order.

As described in IPALCO’s 2015 Form 10-K, in May 2014, IPL received an order from the IURC granting approval to build a 644 to 685 MW CCGT at Eagle Valley. The costs to build and operate the CCGT, other than fuel costs, will not be recoverable by IPL through rates until the conclusion of a base rate case proceeding with the IURC after the assets have been placed in service. The CCGT is expected to be placed into service in the first half of 2017. IPL intends to file its next base rate case proceeding in the near future.

The amounts of regulatory assets and regulatory liabilities are as follows:



	September 30, 2016		December 31, 2015		Recovery Period
	(In Thousands)
Regulatory Assets
Current:
Undercollections of rate riders	$	14,101	$	8,002	Approximately 1 year⁽¹⁾
Costs being recovered through base rates	13,953		—		Approximately 1 year⁽¹⁾
Total current regulatory assets	$	28,054	$	8,002
Long-term:
Unrecognized pension and other
postretirement benefit plan costs	$	213,102	$	226,889	Various⁽²⁾
Income taxes recoverable through rates	44,906		35,765		Various
Deferred MISO costs	117,301		128,610		Through 2026⁽³⁾
Unamortized Petersburg Unit 4 carrying
charges and certain other costs	10,457		11,248		Through 2026^{(1) (4)}
Unamortized reacquisition premium on debt	22,290		23,268		Over remaining life of debt
Environmental projects	32,522		16,876		Through 2050⁽¹⁾⁽⁴⁾
Other miscellaneous	3,921		5,544		To be determined⁽¹⁾⁽⁵⁾
Total long-term regulatory assets	$	444,499	$	448,200
Total regulatory assets	$	472,553	$	456,202
Regulatory Liabilities
Current:
Overcollections of rate riders	$	7,881	$	24,019	Approximately 1 year⁽¹⁾
FTRs	7,428		4,150		Approximately 1 year⁽¹⁾
Total current regulatory liabilities	$	15,309	$	28,169
Long-term:
ARO and accrued asset removal costs	$	656,711	$	637,065	Not Applicable
Unamortized investment tax credit	1,872		2,451		Through 2021
Total long-term regulatory liabilities	$	658,583	$	639,516
Total regulatory liabilities	$	673,892	$	667,685


(1)	Recovered (credited) per specific rate orders


(2)	IPL receives a return on its discretionary funding


(3)	The majority of these costs are being recovered per specific rate order; for the remaining costs recovery is probable but timing not yet determined


(4)	Recovered with a current return


(5)	A portion of this amount will be recovered over the next two years