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Overview and Summary of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2021

Dec. 31, 2019

Property, Plant and Equipment, Policy [Policy Text Block]

Property, plant and equipment is stated at original cost as defined for regulatory purposes. The cost of additions to property, plant and equipment and replacements of retirement units of property are charged to plant accounts. Units of property replaced or abandoned in the ordinary course of business are retired from the plant accounts at cost; such amounts, less salvage, are charged to accumulated depreciation. Depreciation is computed by the straight-line method based on functional rates approved by the IURC and averaged 3.7% during 2021, 2020 and 2019, respectively. Depreciation expense was $239.1 million, $232.8 million, and $228.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. "Depreciation and amortization" expense on the accompanying Consolidated Statements of Operations is presented net of regulatory deferrals of depreciation expense and also includes amortization of intangible assets and amortization of previously deferred regulatory costs.

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

The following table summarizes our accounts receivable balances at December 31:


	As of December 31,
	2021		2020
	(In Thousands)
Accounts receivable, net
Customer receivables	$	100,952	$	91,335
Unbilled revenue	64,758		72,334
Amounts due from related parties	169		490
Other	13,904		4,189
Allowance for credit losses	(647)		(3,155)
Total accounts receivable, net	$	179,136	$	165,193

Inventory, Policy [Policy Text Block]

Inventories

We maintain coal, fuel oil, materials and supplies inventories for use in the production of electricity. These inventories are accounted for at the lower of cost or net realizable value, using the average cost. The following table summarizes our inventories balances at December 31:


	As of December 31,
	2021		2020
	(In Thousands)
Inventories
Fuel	$	41,626	$	36,953
Materials and supplies, net	60,273		58,553
Total inventories	$	101,899	$	95,506

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets

Finite-lived intangible assets include capitalized software and project development intangible assets amortized over their useful lives. Capitalized software of $162.0 million and $144.5 million and its corresponding accumulated amortization of $95.8 million and $85.3 million is recorded as of December 31, 2021 and 2020, respectively. Amortization expense for capitalized software was $11.2 million, $10.6 million and $7.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. These capitalized software intangible assets have a 7 year-weighted average amortization period and the estimated amortization expense is approximately $52.5 million over the next 5 years ($10.5 million in 2022, $10.5 million in 2023, $10.5 million in 2024, $10.5 million in 2025 and $10.5 million in 2026). IPALCO recorded project development intangible assets of $39.5 million during the year ended December 31, 2021. These project development intangible assets have a 30 year-weighted average amortization period and the estimated amortization expense is approximately $4.9 million over the next 5 years ($0.0 million in 2022, $1.0 million in 2023, $1.3 million in 2024, $1.3 million in 2025 and $1.3 million in 2026).

Principles of Consolidation

IPALCO’s consolidated financial statements are prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The consolidated financial statements include the accounts of IPALCO, its regulated utility subsidiary, AES Indiana, and its unregulated subsidiary, Mid-America. All intercompany items have been eliminated in consolidation. Certain costs for shared resources amongst AES Indiana and IPALCO, such as labor and benefits, are allocated to each entity based on allocation methodologies that management believes to be reasonable. We have evaluated subsequent events through the date this report is issued.

Use of Management Estimates

The preparation of financial statements in conformity with GAAP requires that management make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The reported amounts of revenues and expenses during the reporting period may also be affected by the estimates and assumptions management is required to make. Actual results may differ from those estimates.

Regulation

Regulatory Accounting

The retail utility operations of AES Indiana are subject to the jurisdiction of the IURC. AES Indiana’s wholesale power transactions are subject to the jurisdiction of the FERC. These agencies regulate AES Indiana’s utility business operations, tariffs, accounting, depreciation allowances, services, issuances of securities and the sale and acquisition of utility properties. The financial statements of AES Indiana are based on GAAP, including the provisions of FASB ASC 980 “Regulated Operations,” which gives recognition to the ratemaking and accounting

practices of these agencies. See also Note 2, “Regulatory Matters - Regulatory Assets and Liabilities” for a discussion of specific regulatory assets and liabilities.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents are stated at cost, which approximates fair value. All highly liquid short-term investments with original maturities of three months or less are considered cash equivalents. Restricted cash includes cash which is restricted as to withdrawal or usage. The nature of the restrictions includes restrictions imposed by agreements related to deposits held as collateral. The following table provides a summary of cash, cash equivalents and restricted cash amounts as shown on the Consolidated Statements of Cash Flows:


	As of December 31,
	2021		2020
	(In Thousands)
Cash, cash equivalents and restricted cash
Cash and cash equivalents	$	6,912	$	20,502
Restricted cash	5		6,120
Total cash, cash equivalents and restricted cash	$	6,917	$	26,622

Revenues and Accounts Receivable

Revenues related to the sale of energy are generally recognized when service is rendered or energy is delivered to customers. However, the determination of the energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to certain customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is accrued. In making its estimates of unbilled revenue, AES Indiana uses complex models that consider various factors including daily generation volumes; known amounts of energy usage by nearly all residential, commercial and industrial customers; estimated line losses; and estimated customer rates based on prior period billings. Given the use of these models, and that customers are billed on a monthly cycle, we believe it is unlikely that materially different results will occur in future periods when revenue is billed. The effect on 2021 revenues and ending unbilled revenues of a one percentage point change in estimated line losses for the month of December 2021 is immaterial. An allowance for potential credit losses is maintained and amounts are written off when normal collection efforts have been exhausted. Our provision for expected credit losses included in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations was $3.0 million, $4.8 million and $4.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

AES Indiana’s basic rates include a provision for fuel costs as established in AES Indiana’s most recent rate proceeding, which last adjusted AES Indiana’s rates in December 2018. AES Indiana is permitted to recover actual costs of purchased power and fuel consumed, subject to certain restrictions. This is accomplished through quarterly FAC proceedings, in which AES Indiana estimates the amount of fuel and purchased power costs in future periods. Through these proceedings, AES Indiana is also permitted to recover, in future rates, underestimated fuel and purchased power costs from prior periods, subject to certain restrictions, and therefore the over or underestimated costs are deferred or accrued and amortized into fuel expense in the same period that AES Indiana’s rates are adjusted. See also Note 2, “Regulatory Matters” for a discussion of other costs that AES Indiana is permitted to recover through periodic rate adjustment proceedings and the status of current rate adjustment proceedings.

In addition, we are one of many transmission system owner members of MISO, a RTO which maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. See Note 13, "Revenue" for additional information of MISO sales and other revenue streams.

The following table summarizes our accounts receivable balances at December 31:


	As of December 31,
	2021		2020
	(In Thousands)
Accounts receivable, net
Customer receivables	$	100,952	$	91,335
Unbilled revenue	64,758		72,334
Amounts due from related parties	169		490
Other	13,904		4,189
Allowance for credit losses	(647)		(3,155)
Total accounts receivable, net	$	179,136	$	165,193

Contingencies

IPALCO accrues for loss contingencies when the amount of the loss is probable and estimable. We are subject to various environmental regulations and are involved in certain legal proceedings. If AES Indiana’s actual environmental and/or legal obligations are different from our estimates, the recognition of the actual amounts may

have a material impact on our results of operations, financial condition and cash flows; although that has not been the case during the periods covered by this report. As of December 31, 2021 and 2020, total loss contingencies accrued were $0.2 million and $15.4 million, respectively, which were included in “Accrued and Other Current Liabilities” and "Other Non-Current Liabilities", respectively, on the accompanying Consolidated Balance Sheets.

Concentration of Risk

Concentrations of Risk

Substantially all of AES Indiana’s customers are located within the Indianapolis area. Approximately 69% of AES Indiana’s employees are covered by collective bargaining agreements in two bargaining units: a physical unit and a clerical-technical unit. AES Indiana’s contract with the physical unit expires on December 4, 2024, and the contract with the clerical-technical unit expires February 13, 2023. Additionally, AES Indiana has long-term coal contracts with three suppliers, and substantially all of AES Indiana's coal is currently mined in the state of Indiana.

Allowance For Funds Used During Construction

Allowance For Funds Used During ConstructionIn accordance with the Uniform System of Accounts prescribed by FERC, AES Indiana capitalizes an allowance for the net cost of funds (interest on borrowed funds and a reasonable rate of return on equity funds) used for construction purposes during the period of construction with a corresponding credit to income. AES Indiana capitalized amounts using pretax composite rates of 5.7%, 6.9% and 6.9% during 2021, 2020 and 2019, respectively.

Derivatives

Financial Derivatives

All derivatives are recognized as either assets or liabilities in the balance sheets and are measured at fair value. Changes in the fair value are recorded in earnings unless the derivative is designated as a cash flow hedge of a forecasted transaction or it qualifies for the normal purchases and sales exception.

AES Indiana has contracts involving the physical delivery of energy and fuel. Some of these contracts qualify for the normal purchases and normal sales scope exception in ASC 815, AES Indiana has elected to account for them as accrual contracts, which are not adjusted for changes in fair value. AES Indiana's FTRs and forward power contracts do not qualify for hedge accounting or the normal purchases and sales exceptions under ASC 815. Accordingly, FTRs are recorded at fair value when acquired and subsequently amortized over the annual period as they are used. FTRs are initially recorded at fair value using the income approach. The forward power contracts are recorded at fair value with changes in the fair value charged or credited to the Consolidated Statements of Operations in the period in which the change occurred. Forward power contracts are fair valued using the market approach.

Additionally, we use interest rate hedges to manage the interest rate risk of our variable rate debt. We use cash flow hedge accounting when the hedge or a portion of the hedge is deemed to be highly effective, which results in changes in the fair value being recorded within accumulated other comprehensive income, a component of shareholders' equity. We have elected not to offset net derivative positions in the Financial Statements. Accordingly, we do not offset such derivative positions against the fair value of amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting agreements. See Note 5, “Derivative Instruments and Hedging Activities” for additional information

Impairment of Long-Lived Assets

Impairment of Long-lived Assets

GAAP requires that we test long-lived assets for impairment when indicators of impairment exist. If an asset is deemed to be impaired, we are required to write down the asset to its fair value with a charge to current earnings. The net book value of our property, plant, and equipment was $4.0 billion and $4.1 billion as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, AES Indiana had $300.1 million and $74.5 million, respectively, of long-term regulatory assets associated with the Petersburg Unit 1 retirement and the probable Petersburg Unit 2 retirement (for further discussion, see Note 2, “Regulatory Matters - IRP Filing and Replacement Generation” and Note 3, "Property, Plant and Equipment"). We do not believe any of these assets are currently impaired. In making this assessment, we consider such factors as: the overall condition and generating and distribution capacity of the assets; the expected ability to recover additional expenditures in the assets; the anticipated demand and relative pricing of retail electricity in our service territory and wholesale electricity in the region; and the cost of fuel.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of the existing assets and liabilities, and their respective income tax bases. The Company establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company’s tax positions are evaluated under a more likely than not recognition threshold and measurement analysis before they are recognized for financial statement reporting.

Uncertain tax positions are classified as noncurrent income tax liabilities unless expected to be paid within one year. The Company’s policy for interest and penalties is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations.

Income tax assets or liabilities, which are included in allowable costs for ratemaking purposes in future years, are recorded as regulatory assets or liabilities with a corresponding deferred tax liability or asset. Investment tax credits that reduced federal income taxes in the years they arose have been deferred and are being amortized to income over the useful lives of the properties in accordance with regulatory treatment.

Pension and Postretirement Benefits

We recognize in our Consolidated Balance Sheets an asset or liability reflecting the funded status of pension and other postretirement plans with current-year changes in the funded status, that would otherwise be recognized in AOCI, recorded as a regulatory asset as this can be recovered through future rates. All plan assets are recorded at fair value. We follow the measurement date provisions of the accounting guidance, which require a year-end measurement date of plan assets and obligations for all defined benefit plans.

We account for and disclose pension and postretirement benefits in accordance with the provisions of GAAP relating to the accounting for pension and other postretirement plans. These GAAP provisions require the use of assumptions, such as the discount rate for liabilities and long-term rate of return on assets, in determining the obligations, annual cost and funding requirements of the plans. Consistent with the requirements of ASC 715, we apply a disaggregated discount rate approach for determining service cost and interest cost for our defined benefit pension plans and postretirement plans.

See Note 9, "Benefit Plans" for more information.

Repair and Maintenance Costs

Repair and maintenance costs are expensed as incurred.

Per Share Data

IPALCO is owned by AES U.S. Investments and CDPQ. IPALCO does not report earnings on a per-share basis.

Indianapolis Power And Light Company

Entity Information [Line Items]

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

The following table summarizes our accounts receivable balances at December 31:


	As of December 31,
	2021		2020
	(In Thousands)
Accounts receivable, net
Customer receivables	$	100,952	$	91,335
Unbilled revenue	64,758		72,334
Amounts due from related parties	214		734
Other	13,904		4,187
Allowance for credit losses	(647)		(3,155)
Total accounts receivable, net	$	179,181	$	165,435

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets

Finite-lived intangible assets include capitalized software and project development intangible assets amortized over their useful lives. Capitalized software of $162.0 million and $144.5 million and its corresponding accumulated amortization of $95.8 million and $85.3 million is recorded as of December 31, 2021 and 2020, respectively. Amortization expense for capitalized software was $11.2 million, $10.6 million and $7.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. These capitalized software intangible assets have a 7 year-weighted average amortization period and the estimated amortization expense is approximately $52.5 million over the next 5 years ($10.5 million in 2022, $10.5 million in 2023, $10.5 million in 2024, $10.5 million in 2025 and $10.5 million in 2026). AES Indiana recorded project development intangible assets of $39.5 million during the year ended December 31, 2021. These project development intangible assets have a 30 year-weighted average amortization period and the estimated amortization expense is approximately $4.9 million over the next 5 years ($0.0 million in 2022, $1.0 million in 2023, $1.3 million in 2024, $1.3 million in 2025 and $1.3 million in 2026).

Principles of Consolidation

AES Indiana’s consolidated financial statements are prepared in accordance with GAAP and in conjunction with the rules and regulations of the SEC. The consolidated financial statements include the accounts of AES Indiana and its wholly owned subsidiaries AES Indiana Devco Holdings 1, LLC and AES Indiana Devco Holdings 2, LLC (these entities were formed on November 18, 2020 and May 27, 2021, respectively, related to the replacement generation project for retired Petersburg units). All intercompany items have been eliminated in consolidation. Certain costs for shared resources amongst AES Indiana and IPALCO, such as labor and benefits, are allocated to each entity based on allocation methodologies that management believes to be reasonable. We have evaluated subsequent events through the date this report is issued.

Use of Management Estimates

Regulation

Regulatory Accounting

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Cash, Cash Equivalents and Restricted Cash


	As of December 31,
	2021		2020
	(In Thousands)
Cash, cash equivalents and restricted cash
Cash and cash equivalents	$	2,756	$	17,946
Restricted cash	5		5
Total cash, cash equivalents and restricted cash	$	2,761	$	17,951

Revenues and Accounts Receivable

Revenues related to the sale of energy are generally recognized when service is rendered or energy is delivered to customers. However, the determination of the energy sales to individual customers is based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to certain customers since the date of the last meter reading are estimated and the corresponding unbilled revenue is accrued. In making its estimates of unbilled revenue, AES Indiana uses complex models that consider various factors including daily generation volumes; known amounts of energy usage by nearly all residential, commercial and industrial customers; estimated line losses; and estimated customer rates based on prior period billings. Given the use of these models, and that customers are billed on a monthly cycle, we believe it is unlikely that materially different results will occur in future periods when revenue is billed. The effect on 2021 revenues and ending unbilled revenues of a one percentage point change in estimated line losses for the month of December 2021 is immaterial. An allowance for potential credit losses is maintained and amounts are written off when normal collection efforts have been exhausted. AES Indiana’s provision for expected credit losses included in “Operating expenses - Operation and maintenance” on the accompanying Consolidated Statements of Operations was $3.0 million, $4.8 million and $4.3 million for the years ended December 31, 2021, 2020 and 2019, respectively.

In addition, AES Indiana is one of many transmission system owner members of MISO, a RTO which maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. See Note 13, "Revenue" for additional information of MISO sales and other revenue streams.

The following table summarizes our accounts receivable balances at December 31:


	As of December 31,
	2021		2020
	(In Thousands)
Accounts receivable, net
Customer receivables	$	100,952	$	91,335
Unbilled revenue	64,758		72,334
Amounts due from related parties	214		734
Other	13,904		4,187
Allowance for credit losses	(647)		(3,155)
Total accounts receivable, net	$	179,181	$	165,435

Contingencies

AES Indiana accrues for loss contingencies when the amount of the loss is probable and estimable. AES Indiana is subject to various environmental regulations and is involved in certain legal proceedings. If AES Indiana’s actual environmental and/or legal obligations are different from our estimates, the recognition of the actual amounts may

Concentration of Risk

Concentrations of Risk

Allowance For Funds Used During Construction

Derivatives

Impairment of Long-Lived Assets

Impairment of Long-lived Assets

GAAP requires that AES Indiana test long-lived assets for impairment when indicators of impairment exist. If an asset is deemed to be impaired, AES Indiana is required to write down the asset to its fair value with a charge to current earnings. The net book value of AES Indiana’s property, plant, and equipment was $4.0 billion and $4.1 billion as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, AES Indiana had $300.1 million and $74.5 million, respectively, of long-term regulatory assets associated with the Petersburg Unit 1 retirement and the probable Petersburg Unit 2 retirement (for further discussion, see Note 2, “Regulatory Matters - IRP Filing and Replacement Generation” and Note 3, "Property, Plant and Equipment"). AES Indiana does not believe any of these assets are currently impaired. In making this assessment, AES Indiana considers such factors as: the overall condition and generating and distribution capacity of the assets; the expected ability to recover additional expenditures in the assets; the anticipated demand and relative pricing of retail electricity in its service territory and wholesale electricity in the region; and the cost of fuel.

Income Taxes

deferred tax asset will not be realized. AES Indiana’s tax positions are evaluated under a more likely than not recognition threshold and measurement analysis before they are recognized for financial statement reporting.

Uncertain tax positions are classified as noncurrent income tax liabilities unless expected to be paid within one year. AES Indiana’s policy for interest and penalties is to recognize interest and penalties as a component of the provision for income taxes in the Consolidated Statements of Operations.

Income tax assets or liabilities which are included in allowable costs for ratemaking purposes in future years are recorded as regulatory assets or liabilities with a corresponding deferred tax liability or asset. Investment tax credits that reduced federal income taxes in the years they arose have been deferred and are being amortized to income over the useful lives of the properties in accordance with regulatory treatment.

Pension and Postretirement Benefits

AES Indiana recognizes in its Consolidated Balance Sheets an asset or liability reflecting the funded status of pension and other postretirement plans with current-year changes in the funded status, that would otherwise be recognized in AOCI, recorded as a regulatory asset as this can be recovered through future rates. All plan assets are recorded at fair value. AES Indiana follows the measurement date provisions of the accounting guidance, which require a year-end measurement date of plan assets and obligations for all defined benefit plans.

AES Indiana accounts for and discloses pension and postretirement benefits in accordance with the provisions of GAAP relating to the accounting for pension and other postretirement plans. These GAAP provisions require the use of assumptions, such as the discount rate for liabilities and long-term rate of return on assets, in determining the obligations, annual cost and funding requirements of the plans. Consistent with the requirements of ASC 715, AES Indiana applies a disaggregated discount rate approach for determining service cost and interest cost for its defined benefit pension plans and postretirement plans.

Repair and Maintenance Costs

Repair and maintenance costs are expensed as incurred.

Per Share Data

IPALCO owns all of the outstanding common stock of AES Indiana. AES Indiana does not report earnings on a per-share basis.