UNITED STATES
		SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q

(Mark One)


þQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008


oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Commission file number 1-8644

IPALCO ENTERPRISES, INC.(Exact name of registrant as specified in its charter)

|                                                                      |                                     
|--------------------------------------------------------------------- | ------------------------------------
|Indiana                                                               | 35-1575582                          
|(State or other jurisdiction of incorporation or organization)        | (I.R.S. Employer Identification No.)
|                                                                      |                                     
|One Monument Circle,
							Indianapolis, Indiana                     | 46204                               
|(Address of principal executive offices)                              | (Zip Code)                          
|                                                                      |                                     
|Registrant’s telephone number, including area code:
  			317-261-8261

Indicate by check mark whether the registrant (1) has
		filed all reports required to be filed by Section 13 or 15(d) of the
		Securities Exchange Act of 1934 during the preceding 12 months (or for such
		shorter period that the registrant was required to file such reports), and (2) has
		been subject to such filing requirements for the past 90 days.
		Yesþ
		Noo

Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

|                                                                     |                            
|-------------------------------------------------------------------- | ---------------------------
|Large accelerated filer o                                            | Accelerated filer o        
|Non-accelerated filer þ(Do not check if a smaller reporting company) | Smaller reporting company o

Indicate by check mark whether the registrant is a
		shell company (as defined in Rule 12b-2 of the Exchange Act).
		Yeso
		No þ

At August 7, 2008, 89,685,177 shares of IPALCO
		Enterprises, Inc. common stock were outstanding. All of such shares were owned
		by The AES Corporation.

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS
H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT






**IPALCO ENTERPRISES, INC.
		Quarterly Report on Form 10-Q
		June 30, 2008**



|                               |              |                                                                                                              |   
|------------------------------ | ------------ | ------------------------------------------------------------------------------------------------------------ | --
|Table of Contents             
|                               |              |                                                                                                              |   
|Item No.                       | **Page No.**
|PART I - FINANCIAL INFORMATION
|                               | 1.           | Financial Statements:                                                                                        |   
|                               |              | Unaudited Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2008 and 2007 | 4 
|                               |              | Unaudited Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007                              | 5 
|                               |              | Unaudited Consolidated Statements of Cash Flows for the Six Month Ended June 30, 2008 and 2007               | 6 
|                               |              | Notes to Unaudited Consolidated Financial Statements                                                         | 7 
|                               | 1B.          | Defined Terms                                                                                                | 18
|                               | 2.           | Management's Discussion and Analysis of Financial Condition and Results of Operations                        | 20
|                               | 3.           | Quantitative and Qualitative Disclosure About Market Risk                                                    | 32
|                               | 4.           | Controls and Procedures                                                                                      | 32
|                               |              |                                                                                                              |   
|PART II - OTHER INFORMATION   
|                               | 1.           | Legal Proceedings                                                                                            | 33
|                               | 1A.          | Risk Factors                                                                                                 | 33
|                               | 2.           | Unregistered Sales of Equity Securities and Use of Proceeds                                                  | 33
|                               | 3.           | Defaults Upon Senior Securities                                                                              | 33
|                               | 4.           | Submission of Matters to a Vote of Security Holders                                                          | 33
|                               | 5.           | Other Information                                                                                            | 33
|                               | 6.           | Exhibits                                                                                                     | 34
|                               |              |                                                                                                              |   
|                               |              | Signatures                                                                                                   | 35

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Report on Form 10-Q includes *“forward-looking statements”* within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. including, in particular, the statements about
our plans, strategies and prospects under the heading *“Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations”*
in Part I - Financial Information of this Form 10-Q.
Forward-looking statements express an expectation or belief and contain a
projection, plan or assumption with regard to, among other things, our future
revenues, income or capital structure. Such statements of future events or
performance are not guarantees of future performance and involve estimates,
assumptions and uncertainties. The words “could,” “may,” “predict,”
“anticipate,” “would,” “believe,” “estimate,”
“expect,” “forecast,” “project,”
“objective,” “intend,” “continue,” “should,”
“plan,” and similar expressions are
intended to identify forward-looking statements.

Some important factors that could cause our actual results or outcomes to
differ materially from those discussed in the forward-looking statements
include, but are not limited to:

- fluctuations in customer growth and demand;
- impacts of weather on retail sales and wholesale prices and weather-related damage to our electrical system;
- fuel and other input costs;
- generating unit availability and capacity;
- transmission and distribution system reliability and capacity;
- purchased power costs and availability;
- regulatory action, including, but not limited to, the review of our basic rates and charges by the Indiana
						Utility Regulatory Commission;
- federal and state legislation;
- our ownership by The AES Corporation;
- changes in our credit ratings or the credit ratings of AES;
- performance of pension plan assets;
- changes in financial or regulatory accounting policies;
- environmental matters, including costs of compliance with current and future environmental requirements;
- interest rates and other costs of capital;
- the availability of capital;
- labor strikes or other workforce factors;
- facility or equipment maintenance, repairs and capital expenditures;
- local economic conditions;
- acts of terrorism, acts of war, pandemic events or natural disasters such as floods, earthquakes, tornadoes
						or other catastrophic events;
- costs and effects of legal and administrative proceedings, settlements, investigations and claims and the
						ultimate disposition of litigation;
- issues related to our participation in the Midwest Independent Transmission System Operator, Inc., including
						recovery of costs incurred; and
- product development and technology changes.

Most of these factors affect us through our consolidated subsidiary
Indianapolis Power & Light Company. All such factors are difficult to predict,
contain uncertainties that may materially affect actual results and many are
beyond our control. Forward-looking statements speak only as of the date the
statements are made. Except as required under the federal securities laws and
rules and regulations of the Securities and Exchange Commission, we undertake no
obligation to publicly update or review any forward-looking information, whether
as a result of new information, future events or otherwise. We caution you not
to unduly rely on the forward-looking statements when evaluating the information
presented herein

PART I -FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



|                                                          |                    |         |                  |   |         |  |      |         |  |   |        
|--------------------------------------------------------- | ------------------ | ------- | ---------------- | - | ------- |  | ---- | ------- |  | - | -------
|IPALCO ENTERPRISES, INC. and SUBSIDIARIES                
|Unaudited Consolidated Statements of Income              
|(In Thousands)                                           
|                                                          |                   
|                                                          | Three Months Ended |         | Six Months Ended
|                                                          | June 30,           |         | June 30,        
|                                                          | 2008               |         | 2007             |   | 2008    |  | 2007
|                                                          |                    |         |                  |   |         |  |      |         |  |   |        
|UTILITY OPERATING REVENUES                                | $                  | 267,328 |                  | $ | 258,430 |  | $    | 516,361 |  | $ | 521,067
|                                                          |                    |         |                  |   |         |  |      |         |  |   |        
|UTILITY OPERATING EXPENSES:                               |                    |         |                  |   |         |  |      |         |  |   |        
|Operation:                                                |                    |         |                  |   |         |  |      |         |  |   |        
|Fuel                                                      |                    | 65,420  |                  |   | 61,917  |  |      | 130,552 |  |   | 121,959
|Other operating expenses                                  |                    | 48,221  |                  |   | 40,885  |  |      | 93,574  |  |   | 81,065 
|Power purchased                                           |                    | 12,240  |                  |   | 8,882   |  |      | 27,117  |  |   | 24,302 
|Maintenance                                               |                    | 26,610  |                  |   | 21,978  |  |      | 50,249  |  |   | 42,223 
|Depreciation and amortization                             |                    | 43,618  |                  |   | 35,431  |  |      | 80,525  |  |   | 70,320 
|Taxes other than income taxes                             |                    | 9,965   |                  |   | 10,846  |  |      | 20,885  |  |   | 20,986 
|Income taxes-net                                          |                    | 18,328  |                  |   | 27,133  |  |      | 34,042  |  |   | 55,710 
|Total utility operating expenses                          |                    | 224,402 |                  |   | 207,072 |  |      | 436,944 |  |   | 416,565
|UTILITY OPERATING INCOME                                  |                    | 42,926  |                  |   | 51,358  |  |      | 79,417  |  |   | 104,502
|                                                          |                    |         |                  |   |         |  |      |         |  |   |        
|OTHER INCOME AND (DEDUCTIONS):                            |                    |         |                  |   |         |  |      |         |  |   |        
|Allowance for equity funds used during construction       |                    | 198     |                  |   | 1,418   |  |      | 432     |  |   | 2,244  
|Other - net                                               |                    | (1,882) |                  |   | (67)    |  |      | (2,899) |  |   | (283)  
|Income tax benefit - net                                  |                    | 13,296  |                  |   | 6,443   |  |      | 20,516  |  |   | 12,957 
|Total other income and (deductions) - net                 |                    | 11,612  |                  |   | 7,794   |  |      | 18,049  |  |   | 14,918 
|                                                          |                    |         |                  |   |         |  |      |         |  |   |        
|INTEREST AND OTHER CHARGES:                               |                    |         |                  |   |         |  |      |         |  |   |        
|Interest on long-term debt                                |                    | 43,039  |                  |   | 28,185  |  |      | 73,023  |  |   | 55,767 
|Other interest                                            |                    | 215     |                  |   | 497     |  |      | 429     |  |   | 1,422  
|Allowance for borrowed funds used during construction     |                    | (227)   |                  |   | (1,178) |  |      | (690)   |  |   | (1,918)
|Amortization of redemption premiums and expense on debt   |                    | 1,347   |                  |   | 800     |  |      | 2,102   |  |   | 1,583  
|Preferred dividends of subsidiary                         |                    | 804     |                  |   | 804     |  |      | 1,607   |  |   | 1,607  
|Total interest and other charges-net                      |                    | 45,178  |                  |   | 29,108  |  |      | 76,471  |  |   | 58,461 
|NET INCOME AND TOTAL COMPREHENSIVE INCOME                 | $                  | 9,360   |                  | $ | 30,044  |  | $    | 20,995  |  | $ | 60,959 
|                                                         
|See notes to unaudited consolidated financial statements.





|                                                                                                                      |              |           |                  |   |          
|--------------------------------------------------------------------------------------------------------------------- | ------------ | --------- | ---------------- | - | ---------
|IPALCO ENTERPRISES, INC. and SUBSIDIARIES                                                                            
|Unaudited Consolidated Balance Sheets                                                                                
|(In Thousands)                                                                                                       
|                                                                                                                      |              |           |                  |   |          
|                                                                                                                      | **June 30,** |           | **December 31,**
|                                                                                                                      | **2008**     |           | **2007**        
|ASSETS                                                                                                               
|UTILITY PLANT:                                                                                                        |              |           |                  |   |          
|Utility plant in service                                                                                              | $            | 3,892,322 |                  | $ | 3,849,648
|Less accumulated depreciation                                                                                         |              | 1,628,396 |                  |   | 1,572,684
|Utility plant in service - net                                                                                        |              | 2,263,926 |                  |   | 2,276,964
|Construction work in progress                                                                                         |              | 68,396    |                  |   | 68,678   
|Spare parts inventory                                                                                                 |              | 1,361     |                  |   | 1,173    
|Property held for future use                                                                                          |              | 591       |                  |   | 591      
|Utility plant - net                                                                                                   |              | 2,334,274 |                  |   | 2,347,406
|                                                                                                                      |              |           |                  |   |          
|OTHER ASSETS:                                                                                                         |              |           |                  |   |          
|Nonutility property - at cost, less accumulated depreciation                                                          |              | 701       |                  |   | 702      
|Other investments                                                                                                     |              | 10,288    |                  |   | 10,422   
|Other assets - net                                                                                                    |              | 10,989    |                  |   | 11,124   
|                                                                                                                      |              |           |                  |   |          
|CURRENT ASSETS:                                                                                                       |              |           |                  |   |          
|Cash and cash equivalents                                                                                             |              | 44,394    |                  |   | 7,743    
|Short-term investments                                                                                                |              | 10,880    |                  |   | 2,100    
|Accounts receivable and unbilled revenue (less allowance for
			doubtful accounts of $1,752 and $1,882, respectively) |              | 68,325    |                  |   | 70,429   
|Fuel - at average cost                                                                                                |              | 26,742    |                  |   | 22,326   
|Materials and supplies - at average cost                                                                              |              | 54,259    |                  |   | 53,387   
|Financial Transmission Rights (Note 5)                                                                                |              | 15,041    |                  |   | 1,553    
|Net income tax receivable                                                                                             |              | 3,791     |                  |   | 7,044    
|Deferred tax asset - current                                                                                          |              | 4,603     |                  |   | 3,765    
|Regulatory assets                                                                                                     |              | 7,485     |                  |   | 20,571   
|Prepayments and other current assets                                                                                  |              | 12,347    |                  |   | 8,235    
|Total current assets                                                                                                  |              | 247,867   |                  |   | 197,153  
|                                                                                                                      |              |           |                  |   |          
|DEFERRED DEBITS:                                                                                                      |              |           |                  |   |          
|Regulatory assets                                                                                                     |              | 261,658   |                  |   | 265,394  
|Miscellaneous                                                                                                         |              | 25,203    |                  |   | 20,864   
|Total deferred debits                                                                                                 |              | 286,861   |                  |   | 286,258  
|TOTAL                                                                                                                 | $            | 2,879,991 |                  | $ | 2,841,941
|                                                                                                                      |              |           |                  |   |          
|                                                                                                                      |              |           |                  |   |          
|CAPITALIZATION AND LIABILITIES                                                                                       
|CAPITALIZATION:                                                                                                       |              |           |                  |   |          
|Common shareholder’s deficit:                                                                                         |              |           |                  |   |          
|Pain in Capital                                                                                                       |              | 7,517     |                  |   | 6,778    
|Accumulated deficit                                                                                                   |              | (30,190)  |                  |   | (18,016) 
|Total common shareholder’s deficit                                                                                    |              | (22,673)  |                  |   | (11,238) 
|Cumulative preferred stock of subsidiary                                                                              |              | 59,784    |                  |   | 59,784   
|Long-term debt                                                                                                        |              | 1,665,792 |                  |   | 1,271,558
|Total capitalization                                                                                                  |              | 1,702,903 |                  |   | 1,320,104
|                                                                                                                      |              |           |                  |   |          
|CURRENT LIABILITIES:                                                                                                  |              |           |                  |   |          
|Line of credit and current portion of long-term debt                                                                  |              | -         |                  |   | 376,000  
|Accounts payable                                                                                                      |              | 63,267    |                  |   | 58,217   
|Accrued expenses                                                                                                      |              | 27,422    |                  |   | 24,215   
|Accrued real estate and personal property taxes                                                                       |              | 29,834    |                  |   | 20,278   
|Regulatory liabilities                                                                                                |              | 28,149    |                  |   | 2,774    
|Accrued interest                                                                                                      |              | 26,157    |                  |   | 23,889   
|Customer deposits                                                                                                     |              | 16,311    |                  |   | 16,042   
|Other current liabilities                                                                                             |              | 7,732     |                  |   | 7,557    
|Total current liabilities                                                                                             |              | 198,872   |                  |   | 528,972  
|                                                                                                                      |              |           |                  |   |          
|DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:                                                                     |              |           |                  |   |          
|Accumulated deferred income taxes - net                                                                               |              | 388,082   |                  |   | 394,570  
|Non-current income tax liability                                                                                      |              | 8,384     |                  |   | 23,759   
|Regulatory liabilities                                                                                                |              | 458,461   |                  |   | 445,072  
|Unamortized investment tax credit                                                                                     |              | 16,432    |                  |   | 17,652   
|Accrued pension and other postretirement benefits                                                                     |              | 86,088    |                  |   | 89,368   
|Miscellaneous                                                                                                         |              | 20,769    |                  |   | 22,444   
|Total deferred credits and other long-term liabilities                                                                |              | 978,216   |                  |   | 992,865  
|                                                                                                                      |              |           |                  |   |          
|COMMITMENTS AND CONTINGENCIES (Note 10)                                                                               |              |           |                  |   |          
|TOTAL                                                                                                                 | $            | 2,879,991 |                  | $ | 2,841,941
|                                                                                                                     
|See notes to unaudited consolidated financial
		statements.                                                          





|                                                                                  |                  |           |      |   |          
|--------------------------------------------------------------------------------- | ---------------- | --------- | ---- | - | ---------
|IPALCO ENTERPRISES, INC. and SUBSIDIARIES                                        
|Unaudited Consolidated Statements of Cash Flows                                  
|(In Thousands)                                                                   
|                                                                                  |                 
|                                                                                  | Six Months Ended
|                                                                                  | June 30,        
|                                                                                  | 2008             |           | 2007
|CASH FLOWS FROM OPERATIONS:                                                      
|Net income                                                                        | $                | 20,995    |      | $ | 60,959   
|Adjustments to reconcile net income to net cash provided by operating activities: |                  |           |      |   |          
|Depreciation and amortization                                                     |                  | 77,769    |      |   | 69,186   
|Amortization of regulatory assets                                                 |                  | 5,513     |      |   | 3,359    
|Deferred income taxes and investment tax credit adjustments - net                 |                  | (19,052)  |      |   | (5,978)  
|Tender premium expensed as interest                                               |                  | 13,852    |      |   | -        
|Preferred dividends of subsidiary                                                 |                  | 1,607     |      |   | 1,607    
|Allowance for equity funds used during construction                               |                  | (368)     |      |   | (2,200)  
|Change in certain assets and liabilities:                                        
|Accounts receivable                                                               |                  | 2,105     |      |   | (673)    
|Fuel, materials and supplies                                                      |                  | (5,289)   |      |   | 4,524    
|Income taxes receivable or payable                                                |                  | 3,253     |      |   | 4,748    
|Financial transmission rights                                                     |                  | (13,489)  |      |   | -        
|Accounts payable and accrued expenses                                             |                  | 14,329    |      |   | 1,280    
|Accrued real estate and personal property taxes                                   |                  | 9,556     |      |   | 3,282    
|Accrued interest                                                                  |                  | 2,268     |      |   | (110)    
|Pension and other postretirement benefit expenses                                 |                  | (3,692)   |      |   | 2,674    
|Short-term and long-term regulatory assets and liabilities                        |                  | 31,869    |      |   | 1,663    
|Other - net                                                                       |                  | (3,725)   |      |   | (8,573)  
|Net cash provided by operating activities                                         |                  | 137,501   |      |   | 135,748  
|                                                                                 
|CASH FLOWS FROM INVESTING ACTIVITIES:                                            
|Capital expenditures - utility                                                    |                  | (58,638)  |      |   | (101,730)
|Change in restricted cash                                                         |                  | 6         |      |   | (63,415) 
|Purchase of environmental emissions allowances                                    |                  | -         |      |   | (1,298)  
|Purchase of short-term investments                                                |                  | (55,032)  |      |   | (63,750) 
|Proceeds from sales and maturities of short-term investments                      |                  | 46,420    |      |   | 56,591   
|Other                                                                             |                  | (1,562)   |      |   | (5,035)  
|Net cash used in investing activities                                             |                  | (63,806)  |      |   | (178,637)
|                                                                                 
|CASH FLOWS FROM FINANCING ACTIVITIES:                                            
|Short-term borrowings - net                                                       |                  | (1,000)   |      |   | (75,000) 
|Long-term borrowings                                                              |                  | 394,105   |      |   | 164,985  
|Retirement of long-term debt (including redemption premium)                       |                  | (388,852) |      |   | -        
|Dividends on common stock                                                         |                  | (32,757)  |      |   | (30,200) 
|Preferred dividends of subsidiary                                                 |                  | (1,607)   |      |   | (1,607)  
|Other                                                                             |                  | (6,933)   |      |   | (2,242)  
|Net cash cash provided by (used in) financing activities                          |                  | (37,044)  |      |   | 55,936   
|Net change in cash and cash equivalents                                           |                  | 36,651    |      |   | 13,047   
|Cash and cash equivalents at beginning of period                                  |                  | 7,743     |      |   | 8,645    
|Cash and cash equivalents at end of period                                        | $                | 44,394    |      | $ | 21,692   
|                                                                                 
|Supplemental disclosures of cash flow information:                               
|Cash paid during the period for:                                                 
|Interest (net of amount capitalized)                                              | $                | 70,968    |      | $ | 56,962   
|Income taxes                                                                      | $                | 29,045    |      | $ | 43,984   
|                                                                                 
|See notes to unaudited consolidated financial statements.                        

IPALCO ENTERPRISES, INC. and SUBSIDIARIES
	Notes to Unaudited Consolidated Financial Statements

For a list of certain abbreviations or acronyms used in the Notes to
Unaudited Consolidated Financial Statements, see *“Item 1B. Defined Terms”*
included in Part I - Financial Information of this Form 10-Q.

1. ORGANIZATION

IPALCO Enterprises, Inc. is a wholly-owned subsidiary of The AES Corporation.
IPALCO owns all of the outstanding common stock of its subsidiaries. These
include its regulated electric utility subsidiary, Indianapolis Power & Light
Company, and its unregulated subsidiary, Mid-America Capital Resources, Inc.
Substantially all of IPALCO’s business consists of the generation, transmission,
distribution and sale of electric energy conducted through IPL. IPL has
approximately 470,000 retail customers in the city of Indianapolis and
neighboring cities, towns and communities, and adjacent rural areas all within
the state of Indiana, the most distant point being approximately forty miles
from Indianapolis. IPL has an exclusive right to provide electric service to
those customers. IPL owns and operates two primarily coal-fired generating
plants, one combination coal and gas-fired plant and a separately-sited
gas-fired combustion turbine facility that are all used for generating
electricity. IPL’s net electric generation capability for winter is 3,492 MW and
net summer capability is 3,353 MW. Mid-America conducts IPALCO’s unregulated
activities.

2. basis of presentation

The accompanying unaudited Consolidated Financial Statements include the
accounts of IPALCO, IPL and Mid-America. All significant intercompany amounts
have been eliminated. The accompanying financial statements are unaudited;
however, they have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information and in conjunction with the rules and regulations of the Securities
and Exchange Commission. Accordingly, they do not include all of the disclosures
required by GAAP for annual fiscal reporting periods. In the opinion of
management, all adjustments of a normal recurring nature necessary for fair
presentation have been included. The electric utility business is affected by
seasonal weather patterns throughout the year and, therefore, the operating
revenues and associated operating expenses are not generated evenly by month
during the year. These unaudited financial statements have been prepared in
accordance with the accounting policies described in IPALCO's financial
statements for the year ended December 31, 2007, included in its annual report
on Form 10-K and should be read in conjunction therewith.

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.

**3. NEW ACCOUNTING PRONOUNCEMENTS**

**SFAS 157 “Fair Value Measurements”**

In September 2006, the FASB released SFAS 157 to define fair value,
		establish a framework for measuring fair value in accordance with GAAP,
		and expand disclosures about fair value measurements. SFAS 157 is
		effective for fiscal years beginning after November 15, 2007. In
		February 2008, the Financial Accounting Standard Board issued FASB Staff
		Position No. FAS 157-2 “Effective Date of FASB Statement No. 157,” which
		delays the effective date of SFAS 157 for nonfinancial assets and
		nonfinancial liabilities, except for items that are recognized or
		disclosed at fair value in the financial statements on a recurring basis
		(at least annually). Effective January 1, 2008, IPALCO partially adopted
		SFAS 157.  As permitted by the FASB Staff Position No. FAS 157-2
		“Effective Date of FASB Statement No. 157,” IPALCO elected to defer the
		adoption of the nonrecurring fair value measurement disclosures of
		nonfinancial assets and liabilities, such as goodwill and asset
		retirement obligations until January 1, 2009.  The partial adoption of
		SFAS 157 did not have a material impact on IPALCO’s results of
		operations, cash flows or financial position.  Please see Note 5
		*“Fair
		Value Measurements”*for the additional disclosures required by SFAS 157.
		We are currently assessing the potential impact that the adoption of the
		remaining provisions of SFAS 157 may have on IPALCO’s financial
		statements.

**SFAS 160 “Non-controlling Interests in Consolidated Financial
		Statements - an amendment of ARB No. 51”**

In December 2007, the FASB issued SFAS 160, which requires all
		entities to report minority interests in subsidiaries as equity in the
		consolidated financial statements, and requires that transactions
		between entities and non-controlling interests be treated as equity.
		SFAS 160 is effective for IPALCO beginning January 1, 2009. The adoption
		of SFAS 160 is currently not expected to have a material effect on
		IPALCO’s consolidated financial position and results of operations.

**SFAS 161 “Disclosures about Derivative Instruments and
		Hedging Activities - an amendment of FASB Statement No. 133”**

In March 2008, the FASB issued SFAS 161, which requires additional
		disclosures about the objectives of the derivative instruments and
		hedging activities, the method of accounting for such instruments under
		Statement of Financial Accounting Standards No. 133 “Accounting for
		Derivative Instruments and Hedging Activities” and its related
		interpretations, and a tabular disclosure of the effects of such
		instruments and related hedged items on IPALCO’s financial position,
		operations, and cash flows. SFAS 161 is effective for IPALCO beginning
		January 1, 2009. We are currently assessing the potential impact that
		the adoption of SFAS 161 may have on IPALCO’s financial statements.

4. Regulatory Matters

**Basic Rates and Charges**

IPL’s basic rates and charges are determined after giving consideration, on a
pro-forma basis, to all allowable costs for ratemaking purposes including a fair
return on the fair value of the utility property used and useful in providing
service to customers. Pursuant to statute, the Indiana Utility Regulatory
Commission is to conduct a periodic review of the basic rates and charges of all
utilities at least once every four years, but the IURC has the authority to
review the rates of any utility at any time it chooses. Once set, the basic
rates and charges authorized do not assure the realization of a fair return on
the fair value of property. IPL’s basic rates and charges were last adjusted in
1996.

Fuel Adjustment Charge and Authorized Jurisdictional Net Operating Income

IPL may apply to the IURC for a change in its fuel charge every three months
to recover its estimated fuel costs, including the fuel portion of purchased
power costs, which may be above or below the levels included in its basic rates
and charges. Independent of the IURC’s ability to review basic rates and
charges, Indiana law requires electric utilities under the jurisdiction of the
IURC to meet operating expense and income test requirements as a condition for
approval of requested changes in the FAC. Additionally, customer refunds may
result if a utility’s rolling twelve month operating income, determined at
quarterly measurement dates, exceeds a utility’s authorized annual
jurisdictional net operating income and there are not sufficient applicable
cumulative net operating income deficiencies against which the excess rolling
twelve month jurisdictional net operating income can be offset.

In IPL’s four most recently approved FAC filings, the IURC found that IPL’s
rolling annual jurisdictional retail electric net operating income was greater
than the authorized annual jurisdictional net operating income. In addition, in
IPL’s June 2008 FAC filing (FAC 80), which has not yet been approved by the
IURC, IPL’s rolling annual jurisdictional retail electric net operating income
was calculated to be greater than the authorized annual jurisdictional net
operating income by $4.7 million for the twelve months ended April 30, 2008.
Because IPL has a cumulative net operating income deficiency, it has not been
required to make customer refunds in its FAC proceedings. However, even though
it has a cumulative net operating income deficiency, the IURC may still review
IPL’s basic rates and charges on a prospective basis at any time it chooses.

In December 2007, IPL received a letter from the staff of the IURC requesting
information relevant to the IURC’s periodic review of IPL’s basic rates and
charges and IPL subsequently provided information to the staff. Since IPL’s
cumulative net operating income deficiency (described above) requires no
customer refunds in the FAC process, the IURC staff was concerned that the
higher than usual 2007 earnings may continue in the future. In an effort to
allay staff’s concerns, IPL proposed in its March and June 2008 FAC filings (FAC
79 and 80) prospective credits to its retail customers totaling $30 million and
$2 million, respectively. Consistent with these proposals, IPL recorded a $30
million deferred fuel regulatory liability in March 2008 and a $2 million
deferred fuel regulatory liability in June 2008, with corresponding and
respective reductions against revenues. In May 2008, the IURC approved IPL’s FAC
79, including the $30 million credit. The credit provides an offset against fuel
charges customers would otherwise pay in the billing months of June, July and
August of 2008, with approximately $8.4 million being applied in June 2008. If
IPL’s request for a credit in FAC 80 is approved, it will provide an offset
against fuel charges customers would otherwise pay in the billing months of
September, October and November of 2008. The proposed $2.0 million credit is
subject to the IURC approval.

In IPL’s March 2006 FAC proceeding (FAC 71), a consumer advocacy group
representing some of IPL’s industrial customers requested that a sub-docket be
established. IPL and the customer group entered into an agreement regarding the
scope of the sub-docket which agreement was approved by the IURC in its May 2006
order in IPL’s FAC 71 proceeding. The agreement defines the scope of the
sub-docket as “any issue related to FAC 71” and includes illustrative examples
including: review of the Midwest Independent Transmission System Operator, Inc.
components of the cost of fuel, review of projection of the Midwest ISO
components of the cost of fuel, review of IPL’s generation and demand bidding
practices, review of allocation of fuel and other costs, review of compliance
with Indiana Code 8-1-2-42(d) and review of IPL’s Elect Plan, all as they relate
to FAC 71 only. Because of the uncertain outcome of the FAC 71 sub-docket, the
IURC Orders in IPL’s FAC 71 proceeding and subsequent FAC proceedings (through
FAC 79) approved IPL’s FAC factors on an interim basis, subject to refund. An
attorney’s conference was held in June 2008, when a procedural schedule was set
for the parties to file their cases-in-chief and for the evidentiary hearing.
The IURC’s Orders in IPL’s FAC 77, 78 and 79 proceedings also set IPL’s FAC
factor on an interim basis, subject to refund, pending the outcome of the FERC
proceeding regarding Revenue Sufficiency Guarantee Second Pass charges and any
subsequent appeals or future order of the IURC. We cannot predict what refunds,
if any, may be required, or for what period of time.

Purchased power costs below an established benchmark are presumed to be
recoverable fuel costs. In April 2008, the IURC issued a final order, which
approved IPL’s joint petition filed along with another Indiana utility and the
Indiana Office of Utility Consumer Counselor. This petition requested a new
settlement mechanism for the recovery of fuel costs in the cost of purchased
electricity. Under the former agreement, hourly purchased power costs were
compared to a monthly standard. Under the new settlement agreement, hourly
purchased power costs are compared to a daily benchmark to better reflect
changes in natural gas prices that occur throughout the month. IPL believes that
changes in natural gas prices typically influence the price at which it can
purchase power. Therefore, IPL believes that the new benchmark will more closely
track fluctuations in purchased power prices. The new benchmark expires in April
2010. Purchased power costs over the benchmark not recovered from IPL’s
customers have not had a material impact on our results of operations or
financial condition to date.

Wind Power Purchase Agreement

In April 2008, IPL entered into a power purchase agreement for 20 years of
approximately 100 MW of wind generated electricity with Hoosier Wind Project,
LLC, a subsidiary of enXco, Inc. The contract is contingent, among other things,
on the IURC approval of cost recovery via a cost recovery mechanism similar to
the FAC and the extension of the federal production tax credit for qualified
renewable energy producers. In April 2008, IPL filed the request with the IURC
for such recovery. No assurance can be given at this time as to whether or not
the IURC will approve the request. This agreement, if approved, would help IPL
to diversify the resources available to serve its customers in light of
potential greenhouse gas and renewable portfolio standards legislation.
Renewable portfolio standards, which would require a certain percentage of an
electric utility’s electricity to come from renewable sources by a given date,
have been considered at both the state and federal levels. However, it is
currently unclear what future legislation IPL might face related to renewable
portfolio standards.

5. FAIR VALUE MEASUREMENTS

SFAS 157 defines and establishes a framework for measuring fair value and
expands disclosures about fair value measurements. In accordance with SFAS 157,
we have categorized our financial assets and liabilities, based on the priority
of the inputs to the valuation technique, into a three-level fair value
hierarchy as set forth below. If the inputs used to measure the financial
instruments fall within different levels of the hierarchy, the categorization is
based on the lowest level input that is significant to the fair value
measurement of the instrument.

Financial assets and liabilities recorded on the unaudited Consolidated
Balance Sheets are categorized based on the inputs to the valuation techniques
as follows:

*Level 1* - Financial assets and liabilities whose values are based on
unadjusted quoted prices for identical assets or liabilities in an active market
that the company has the ability to access at the measurement date (examples
include active exchange-traded equity securities, listed derivatives, and most
U.S. Government and agency securities).

*Level 2* - Financial assets and liabilities whose values are based on
quoted prices in markets where trading occurs infrequently or whose values are
based on quoted prices of instruments with similar attributes in active markets.
Level 2 inputs include the following:

- Quoted prices for identical or similar assets or liabilities
	in non-active markets (examples include corporate and municipal bonds which
	trade infrequently);
- Inputs other than quoted prices that are observable for
	substantially the full term of the asset or liability (examples include
	interest rate and currency swaps); and
- Inputs that are derived principally from or corroborated by
	observable market data for substantially the full term of the asset or
	liability (examples include certain securities and derivatives).

*Level 3*- Financial assets and liabilities whose values are based on
prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement. These inputs reflect
management’s own assumptions about the assumptions a market participant would
use in pricing the asset or liability.

The following table presents the financial assets and liabilities we
		measure at fair value on a recurring basis, based on the fair value
		hierarchy as of June 30, 2008:

|                                                   |                                                 |       |         |   |         |  |   |       
|-------------------------------------------------- | ----------------------------------------------- | ----- | ------- | - | ------- |  | - | ------
|                                                   | Fair Value Measurements at June 30, 2008, Using
|                                                   | Level 1                                         |       | Level 2 |   | Level 3
|                                                   | (In Thousands)                                 
|Financial assets:                                  |                                                 |       |         |   |         |  |   |       
|Short-term investments                             | $                                               | 7,830 |         | $ | 3,050   |  | $ | -     
|Financial transmission rights                      |                                                 | -     |         |   | -       |  |   | 15,041
|Other derivative assets                            |                                                 | -     |         |   | -       |  |   | 205   
|Total financial assets measured at fair value      | $                                               | 7,830 |         | $ | 3,050   |  | $ | 15,246
|                                                   |                                                
|Financial liabilities:                             |                                                 |       |         |   |         |  |   |       
|Interest rate swap                                 | $                                               | -     |         | $ | -       |  | $ | 4,908 
|Other financial instruments                        |                                                 | -     |         |   | -       |  |   | 185   
|Total financial liabilities measured at fair value | $                                               | -     |         | $ | -       |  | $ | 5,093 
|                                                  

The following table sets forth a reconciliation of financial instruments
classified as Level 3 in the fair value hierarchy:

|                                                     |                                                         |        
|---------------------------------------------------- | ------------------------------------------------------- | -------
|                                                     | Derivative Financial Instruments, net asset (liability)
|                                                     | (In Thousands)                                         
|                                                     |                                                         |        
|**Balance at January 1, 2008**                       | $                                                       | (4,671)
|Unrealized gains (losses) recognized in earnings     |                                                         | (221)  
|Unrealized gain recognized as a regulatory liability |                                                         | 1,557  
|Issuances and settlements, net                       |                                                         | 13,488 
|**Balance at June 30, 2008**                         | $                                                       | 10,153 
|                                                    

Valuation Techniques

As of June 30, 2008, our available-for-sale securities consisted of $7.8
million of variable-rate demand notes and $3.1 million of auction rate
securities, which are included in short-term investments on our unaudited
Consolidated Balance Sheets. Our variable-rate demand notes are measured using
quoted market prices. Due to recent events in the U.S. credit markets, we held
$9.1 million of auction rate securities that experienced failed auctions during
the first quarter of 2008. In the second quarter, $6.0 million of the auction
rate securities were redeemed. We continue to hold $3.1 million of auction rate
securities that experienced failed auctions during the first half of 2008. As
described in our Form 10-Q for the quarterly period ended March 31, 2008, such
securities were valued using quoted market prices, but due to the illiquid
nature of such investments in the current market, we have classified them as
Level 2.

Derivative assets included $15.0 million of Financial Transmission Rights. In
connection with IPL’s participation in the Midwest ISO, in the second quarter of
each year IPL is granted financial instruments that can be converted into cash
or FTR’s based on IPL’s forecasted peak load for the period. FTR’s are used in
the Midwest ISO market to hedge IPL’s exposure to congestion charges, which
result from constraints on the transmission system. IPL converted all of these
financial instruments into FTR’s during the second quarter of 2008. IPL’s FTR’s
are valued at the cleared auction prices for FTR’s in the Midwest ISO’s annual
auction. The fair value assigned to the FTR’s is considered a Level 3 input
under the fair value hierarchy required by SFAS 157. An offsetting regulatory
liability has been recorded as management believes that these costs will be
refunded in rates, through the FAC. As such, there is no impact on our unaudited
Consolidated Statements of Income.

6. REGULATORY ASSETS and Liabilities

Deferred Fuel

Deferred fuel costs are a component of current regulatory assets or
liabilities and are expected to be recovered from or credited to retail
customers through future FAC proceedings. IPL records deferred fuel in
accordance with standards prescribed by the Federal Energy Regulatory
Commission. The deferred fuel adjustment is the result of variances between
estimated fuel and purchased power costs in IPL’s FAC and actual fuel and
purchased power costs. IPL is generally permitted to recover underestimated fuel
and purchased power costs in future rates through the FAC proceedings and
therefore the costs are deferred and amortized into fuel expense in the same
period that IPL’s rates are adjusted. Additionally, as discussed in Note 4,
“Regulatory Matters,” in IPL’s FAC 79 and 80, IPL proposed prospective credits
to its retail customers totaling $32 million. Consistent with these proposals,
IPL has recorded $32 million as reductions against revenues with corresponding
deferred fuel regulatory liabilities, which are being reduced as the credits are
applied. Including these credits, IPL had deferred fuel liabilities of $12.6
million at June 30, 2008, which are included in regulatory liabilities (current)
on the accompanying unaudited Consolidated Balance Sheets. IPL had deferred fuel
assets of $13.2 million at December 31, 2007, which is included in regulatory
assets (current) on the accompanying unaudited Consolidated Balance Sheets.

**Financial Transmission Rights**

As discussed in Note 5, *“Fair Value Measurements,”* IPL has recorded
a current regulatory liability on the accompanying unaudited Consolidated
Balance Sheets related to FTRs that it has been granted by the Midwest ISO. The
regulatory liability (current) balance related to FTRs was $15.0 million and
$1.6 million at June 30, 2008 and December 31, 2007, respectively. The $13.4
million increase is primarily because IPL was granted $17.1 million of FTRs by
the Midwest ISO in the second quarter of 2008.

**7. INDEBTEDNESS**

**IPALCO’s Senior Secured Notes**

In April 2008, IPALCO completed the sale of $400 million aggregate principal
amount of 7.25% Senior Secured Notes due April 1, 2016 pursuant to Rule 144A and
Regulation S under the Securities Act of 1933, as amended. The 2016 IPALCO Notes
were issued pursuant to an Indenture dated April 15, 2008, by and between IPALCO
and The Bank of New York Trust Company, N.A., as trustee. In connection with
this issuance, IPALCO conducted a Tender Offer to repurchase for cash any and
all of IPALCO’s outstanding 8.375% Senior Secured Notes due November 14, 2008
(original coupon 7.375%), of which $375 million were outstanding.

The 2016 IPALCO Notes were sold at 98.526% of par resulting in net proceeds
of $394.1 million. The $5.9 million discount is being amortized through 2016
using the effective interest method. We used these net proceeds to repurchase
all of the outstanding 2008 IPALCO Notes through the Tender Offer and subsequent
redemption of all remaining notes not tendered. The proceeds were also used to
pay the early tender premium of $13.9 million (included in Interest on long-term
debt in the accompanying unaudited Consolidated Statements of Income) and other
fees and expenses related to the Tender Offer and the redemption of the 2008
IPALCO Notes and the issuance of the 2016 IPALCO Notes.

In addition, IPALCO solicited and received consents to amend the applicable
indenture with respect to the 2008 IPALCO Notes and entered into the Indenture
Supplement dated April 15, 2008, with The Bank of New York Trust Company, N.A.,
as trustee, to the Indenture between the parties dated November 14, 2001. The
Indenture Supplement amends the Original Indenture with respect to the 2008
IPALCO Notes to eliminate substantially all of the restrictive covenants,
several affirmative covenants and certain events of default, modify the covenant
regarding mergers, consolidations and sales of IPALCO’s assets and eliminate or
modify certain other provisions.

The 2016 IPALCO Notes are secured by IPALCO’s pledge of all of the
outstanding common stock of IPL. The lien on the pledged shares will be shared
equally and ratably with IPALCO’s existing senior secured notes. IPALCO has
entered into a Pledge Agreement Supplement with The Bank of New York Trust
Company, N.A., as Collateral Agent, dated April 15, 2008 to the Pledge Agreement
between IPALCO and The Bank of New York Trust Company, N.A. as successor
Collateral Agent dated November 14, 2001.

8. INCOME TAXES

In May 2008, we received notification that the Joint Committee on Taxation
completed their review of our method of capitalizing indirect service costs for
tax years ended December 31, 2001 through December 31, 2004 and took no
exception to the settlement as proposed by the U.S. Internal Revenue Service.
The resolution of this tax position resulted in a decrease in our unrecognized
tax benefits by approximately $14 million. The impact was recorded in the second
quarter of 2008 by decreasing our non-current income tax liability by
approximately $16 million, increasing our income taxes currently payable by
approximately $6 million, increasing our accumulated deferred income taxes by
approximately $9 million and decreasing income tax expense by approximately $1
million.

9. PENSION AND OTHER POSTRETIREMENT BENEFITS

The following tables present information relating to the Employees’
Retirement Plan of Indianapolis Power & Light Company and the Supplemental
Retirement Plan of Indianapolis Power & Light Company, which are combined and
shown as Pension Benefits. The following tables also present information
relating to Other Postretirement Benefits:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                  |          |                               |   |         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------- | -------- | ----------------------------- | - | --------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | Pension Benefits |          | Other Postretirement Benefits
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | (In Thousands)  
|Net funded status of plans:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                  |          |                               |   |         
|Net funded status at December 31, 2007, before tax adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | $                | (78,634) |                               | $ | (10,137)
|Net benefit cost components reflected in net funded status during quarter:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                  |          |                               |   |         
|Service cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                  | (1,749)  |                               |   | (279)   
|Interest cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                  | (10,107) |                               |   | (161)   
|Expected return on assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                  | 10,497   |                               |   | -       
|Employer contributions during quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                  | 335      |                               |   | 60      
|Net funded status at March 31, 2008, before tax adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $                | (79,658) |                               | $ | (10,517)
|Net benefit cost components reflected in net funded status during quarter:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                  |          |                               |   |         
|Service cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                  | (1,312)  |                               |   | (279)   
|Interest cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                  | (7,566)  |                               |   | (161)   
|Expected return on assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                  | 7,858    |                               |   | -       
|SFAS 88 settlement accounting re-actuarial valuation - supplemental plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                  | (388)    |                               |   | -       
|Employer contributions during quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                  | 5,000    |                               |   | 67      
|Net funded status at
		June 30, 2008, before tax adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $                | (76,066) |                               | $ | (10,890)
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                 
|Regulatory assets (liabilities) related to pensions (1):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                  |          |                               |   |         
|Regulatory assets (liabilities) at December 31, 2007, before tax adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | $                | 89,589   |                               | $ | (1,465) 
|Amount reclassified through net benefit cost:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                  |          |                               |   |         
|Amortization of net actuarial gain/(loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                  | (456)    |                               |   | 4       
|Amortization of prior service credit/(cost)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                  | (956)    |                               |   | 14      
|Regulatory assets (liabilities) at March 31, 2008, before tax adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $                | 88,177   |                               | $ | (1,447) 
|SFAS 88 settlement accounting re-actuarial valuation - supplemental plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                  | 388      |                               |   | -       
|Amount reclassified through net benefit cost:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                  |          |                               |   |         
|Amortization of net actuarial (loss) - SFAS 88 recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                  | (429)    |                               |   | -       
|Amortization of net actuarial gain/(loss) - monthly amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                  | (342)    |                               |   | 5       
|Amortization of prior service credit/(cost) - monthly amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                  | (717)    |                               |   | 14      
|Regulatory assets (liabilities) at June 30, 2008, before tax adjustments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $                | 87,077   |                               | $ | (1,428) 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(1)Amounts that would otherwise be charged/credited to
		Accumulated Other Comprehensive Income or Loss upon application of
		Statement of Financial Accounting Standards No. 158 “Employers’
		Accounting for Defined Benefits Pension and Other Postretirement Plans -
		an amendment of FASB Statements No. 87, 88, 106, and 132R” are recorded
		as a regulatory asset or liability because IPL has historically
		recovered and currently recovers pension and other postretirement
		benefit expenses in rates. These are unrecognized amounts yet to be
		recognized as components of net periodic benefit costs.

Effective for fiscal years ending after December 15, 2008, Statement of
Financial Accounting Standards No. 158 “Employers’ Accounting for Defined
Benefits Pension and Other Postretirement Plans - an amendment of FASB
Statements No. 87, 88, 106, and 132R” requires plan assets and liabilities to be
measured as of fiscal year-end. The Pension Plans had a measurement date of
November 30 for the fiscal year ended December 31, 2007. Therefore, in
accordance with SFAS 158, IPL has elected to change the Pension Plans’
measurement date from November 30 to December 31, effective December 31, 2008.
SFAS 158 gives employers two methods for changing their measurement dates: (1)
The “remeasurement method,” which would require assets and liabilities to be
remeasured at the end of the preceding fiscal year (December 31, 2007) or (2) A
simplified “13-month method,” that avoids a remeasurement at the start of the
transition year.

Under either option, the plan must book an adjustment to retained earnings to
reflect net periodic cost for the “gap period” (December 1, 2007 to December 31,
2007). IPL elected the simplified “13-month method” for remeasurement. The “gap
period” adjustment is booked as an adjustment to retained earnings to reflect
net periodic cost for the “gap period” of $0.4 million, net of income taxes, and
Accumulated Other Comprehensive Income or Loss, to the extent it includes
amortization components and does not flow through earnings or income. Under the
13-month method, no adjustment is required to Accumulated Other Comprehensive
Income or Loss for gains and losses arising during the gap period. Amounts that
would otherwise be charged/credited to Accumulated Other Comprehensive Income or
Loss upon application of SFAS 158 are recorded as a regulatory asset or
liability because IPL has historically recovered and currently recovers pension
and other postretirement benefit expenses in rates. These are unrecognized
amounts yet to be recognized as components of net periodic benefit costs.

Pension Expense

The following table presents the “gap period” adjustment that was booked to
IPL’s January 1, 2008 beginning retained earnings. The information relates to
the Pension Plans (combined):

|                                             |                |        
|-------------------------------------------- | -------------- | -------
|                                             | (In Thousands)
|**Components of net periodic benefit cost:** |                |        
|Service cost                                 | $              | 437    
|Interest cost                                |                | 2,527  
|Expected return on plan assets               |                | (2,624)
|Amortization of actuarial loss               |                | 114    
|Amortization of prior service cost           |                | 239    
|**Net periodic benefit cost**                | $              | 693    
|                                            

The following table presents Net Periodic Benefit Cost information relating
to the Pension Plans combined:

|                                                                                                                                                                                                                                                                                                                                                                   |                                      |         |                                    |   |         |  |      |          |  |   |         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------ | ------- | ---------------------------------- | - | ------- |  | ---- | -------- |  | - | --------
|                                                                                                                                                                                                                                                                                                                                                                   | For the Three Months Ended, June 30, |         | For the Six Months Ended, June 30,
|                                                                                                                                                                                                                                                                                                                                                                   | 2008                                 |         | 2007                               |   | 2008    |  | 2007
|                                                                                                                                                                                                                                                                                                                                                                   | (In Thousands)                      
|Components of net periodic benefit cost:                                                                                                                                                                                                                                                                                                                           |                                      |         |                                    |   |         |  |      |          |  |   |         
|Service cost                                                                                                                                                                                                                                                                                                                                                       | $                                    | 1,312   |                                    | $ | 1,472   |  | $    | 2,624    |  | $ | 2,943   
|Interest cost                                                                                                                                                                                                                                                                                                                                                      |                                      | 7,566   |                                    |   | 7,152   |  |      | 15,146   |  |   | 14,304  
|Expected return on plan assets                                                                                                                                                                                                                                                                                                                                     |                                      | (7,858) |                                    |   | (7,703) |  |      | (15,731) |  |   | (15,406)
|Amortization of actuarial loss(1)                                                                                                                                                                                                                                                                                                                                  |                                      | 771     |                                    |   | 1,409   |  |      | 1,113    |  |   | 2,818   
|Amortization of prior service cost                                                                                                                                                                                                                                                                                                                                 |                                      | 717     |                                    |   | 687     |  |      | 1,434    |  |   | 1,374   
|Net periodic benefit cost                                                                                                                                                                                                                                                                                                                                          | $                                    | 2,508   |                                    | $ | 3,017   |  | $    | 4,586    |  | $ | 6,033   
|                                                                                                                                                                                                                                                                                                                                                                  
|(1)Includes $429,000 Statement of Financial Accounting
		Standards No. 88 “Employers’ Accounting for Settlements and Curtailments
		of Defined Benefit Pension Plans and for Termination Benefits”
		settlement loss as a result of a lump sum distribution paid out of the
		Supplemental Pension Plan for the three months and six months ended June
		30, 2008.

Other Postretirement Employee Benefits and Expense

The SFAS 158 measurement date requirement has no effect on the other
postretirement benefit plan since the measurement date for that plan was
December 31 for the fiscal year ended December 31, 2007. Therefore, no “gap
period” adjustment is required for the other postretirement benefit plan.

The following table presents Net Periodic Benefit Cost information relating
to other postretirement benefits:

|                                         |                                      |      |                                    |   |      |  |      |      |  |   |    
|---------------------------------------- | ------------------------------------ | ---- | ---------------------------------- | - | ---- |  | ---- | ---- |  | - | ---
|                                         | For the Three Months Ended, June 30, |      | For the Six Months Ended, June 30,
|                                         | 2008                                 |      | 2007                               |   | 2008 |  | 2007
|                                         | (In Thousands)                      
|Components of net periodic benefit cost: |                                      |      |                                    |   |      |  |      |      |  |   |    
|Service cost                             | $                                    | 279  |                                    | $ | 330  |  | $    | 558  |  | $ | 661
|Interest cost                            |                                      | 161  |                                    |   | 145  |  |      | 322  |  |   | 290
|Amortization of actuarial loss           |                                      | (5)  |                                    |   | -    |  |      | (9)  |  |   | -  
|Amortization of prior service cost       |                                      | (14) |                                    |   | 2    |  |      | (28) |  |   | 3  
|Net periodic benefit cost                | $                                    | 421  |                                    | $ | 477  |  | $    | 843  |  | $ | 954
|                                        

10. COMMITMENTS AND CONTINGENCIES

Please see Note 4, *“Regulatory Matters - Fuel Adjustment Charge and
Authorized Jurisdictional Net Operating Income”* for a discussion of the
deferred fuel regulatory liabilities recorded for credits to IPL’s retail
customers.

Legal

As of June 30, 2008 and December 31, 2007, IPL was a defendant in
approximately 114 pending lawsuits, alleging personal injury or wrongful death
stemming from exposure to asbestos and asbestos containing products formerly
located in IPL power plants. IPL has been named as a “premises defendant” in
that IPL did not mine, manufacture, distribute or install asbestos or asbestos
containing products. These suits have been brought on behalf of persons who
worked for contractors or subcontractors hired by IPL. IPL has insurance which
may cover some portions of these claims; currently, these cases are being
defended by counsel retained by various insurers who wrote policies applicable
to the period of time during which much of the exposure has been alleged.

It is possible that material additional loss with regard to the asbestos
lawsuits could be incurred. At this time, an estimate of additional loss cannot
be made. IPL has settled a number of asbestos related lawsuits for amounts
which, individually and in the aggregate, were not material to IPL or IPALCO’s
financial position, results of operations, or cash flows. Historically,
settlements paid on IPL’s behalf have been comprised of proceeds from one or
more insurers along with comparatively smaller contributions by IPL. We are
unable to estimate the number of, the effect of, or losses or range of loss
which are reasonably possible from the pending lawsuits or any additional
asbestos suits. Furthermore, we are unable to estimate the portion of a
settlement amount, if any, that may be paid from any insurance coverage for any
known or unknown claims. Accordingly, there is no assurance that the pending or
any additional suits will not have a material adverse effect on IPALCO’s
Consolidated Financial Statements.

In November 2007, the International Brotherhood of Electrical Workers, Local
Union No. 1395, and sixteen individual retirees, (the “Complainants”), filed a
complaint at the IURC seeking enforcement of their interpretation of the 1995
final order and associated settlement agreement resolving IPL’s basic rate case.
The Complainants are requesting that the IURC conduct an investigation of IPL’s
failure to fund the Voluntary Employee Beneficiary Association Trust, at a level
of approximately $19 million per year. The VEBA Trust was spun off to an
independent trustee in 2001. The complaint seeks an IURC order requiring IPL to
make contributions to place the VEBA Trust in the financial position in which
allegedly it would have been had IPL not ceased making annual contributions to
the VEBA Trust after its spin off. The Complaint also seeks an IURC order
requiring IPL to resume making annual contributions to the VEBA Trust. IPL filed
a motion to dismiss and both parties are seeking summary judgment in the IURC
proceeding. To date, no procedural schedule for this proceeding has been
established. IPL believes it has meritorious defenses to the Complainants'
claims and it will assert them vigorously in response to the complaint; however,
there can be no assurances that it will be successful in its efforts.

In addition, IPALCO and IPL are involved in litigation arising in the normal
course of business. While the results of such litigation cannot be predicted
with certainty, management believes that the final outcome will not have a
material adverse effect on IPALCO’s Consolidated Financial Statements.

Environmental

We are subject to various federal, state and local environmental protection
and health and safety laws and regulations governing, among other things, the
generation, storage, handling, use, disposal and transportation of hazardous
materials; the emission and discharge of hazardous and other materials into the
environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and
renewing permits and other governmental authorizations from federal, state and
local agencies. Violation of these laws, regulations or permits can result in
substantial fines, other sanctions, permit revocation and/or facility shutdowns.
We cannot assure you that we have been or will be at all times in full
compliance with such laws, regulations and permits; however, we do not believe
any currently open investigations will result in fines material to our results
of operations or financial position.

*Clean Air Interstate Rule*

As discussed in our 2007 Form 10-K, in March 2005 the U.S. Environmental
Protection Agency finalized the CAIR, which imposes restrictions against
polluting the air of downwind states. The CAIR established a two-phase regional
“cap and trade” program for SO2 and NOx emissions that would require the largest
reduction in air pollution in more than a decade. CAIR covers 28 eastern states,
including Indiana, and the District of Columbia. In July 2008, the U.S. Court of
Appeals for the D.C. Circuit vacated and remanded the federal CAIR to the EPA.
The ruling could be appealed either to the full bench (en banc) of the U.S.
Court of Appeals for the D.C. Circuit or to the U.S. Supreme Court.  Thus, it is
not clear what impact this ruling will have on our business, results of
operations or financial position.

*Clean Air Mercury Rule*

As discussed in our 2007 Form 10-K, in March 2005, the EPA finalized the
federal CAMR that required utilities to reduce mercury emissions from new and
existing coal fired power plants. The rule created “standards of performance”
limiting mercury emissions from utilities and established a staged approach for
reductions via a “cap and trade” program. In February 2008, the U.S. Court of
Appeals for the D.C. Circuit vacated the federal CAMR, requiring the EPA to
promulgate a new mercury emissions rule which presumably will not include a
“cap-and trade” program. Subsequently, in July 2008, the Indiana Office of the
Attorney General issued an Advisory Letter No. 08-17 regarding implementation
and enforcement of the Indiana CAMR, which resulted in the Indiana Department of
Environmental Management providing a formal opinion that the Indiana CAMR should
not be enforced. As a result, IPL will not be required to meet either the
mercury emission reduction requirements or install mercury monitors until such
time as there is either judicial or regulatory finality.

Clean Coal Technology Filings

In April 2008, in response to an updated Plan filed by IPL, the IURC issued
an Order approving recovery of capital expenditures of approximately $92.7
million over the next three years. The $92.7 million approved by the IURC
includes $90.0 million to install and/or upgrade CCT to further reduce SO2 and
mercury emissions at IPL’s Petersburg generating station and $2.7 million for
mercury emissions monitoring equipment at IPL’s coal-fired power plants. IPL
currently estimates the installation and/or upgrade of CCT to further reduce SO2
and mercury emissions at its Petersburg generating station will cost
approximately $98.5 million. IPL intends to seek recovery of any prudent costs
incurred on this project above the currently authorized $90.0 million; however,
there can be no assurance that such recovery will be granted. The IURC also
approved the ratemaking treatment applicable to qualified pollution control
property to be recovered through an Environmental Compliance Cost Recovery
Adjustment, similar to that which IPL has received in previous environmental
filings. Such treatment includes a return on the construction costs and recovery
of depreciation expenses and operation and maintenance expenses associated with
these projects. The IURC also granted IPL the authority to add the approved
return on its environmental projects to IPL’s authorized annual jurisdictional
net operating income in subsequent FAC proceedings.

The installation and upgrade of CCT to further reduce SO2 and mercury
emissions at IPL’s Petersburg generating station is expected to begin in 2009
and to be in service during the second quarter of 2010. However, because the
federal CAIR has been vacated, as discussed above, IPL is reevaluating its
options and it is not yet clear whether or not there will be material change to
its CCT plans for SO2 and NOx. The installation of the mercury emissions
monitoring equipment at IPL’s coal-fired power plants is also under review given
that the mercury monitoring requirements under the Indiana Clean Air Mercury
Rules are uncertain as a result of the federal CAMR being vacated and the
opinion letter from the Indiana Office of Attorney General, as discussed above.
Until there is greater regulatory clarity around its obligations, IPL has
tentatively suspended its plan to install mercury monitors.

11. RELATED PARTY TRANSACTIONS

In the first quarter of 2008, IPL exchanged 20,661 SO2 environmental air
emissions allowances for 20,718 SO2 environmental air emissions allowances with
wholly-owned subsidiaries of AES. Because the transactions lacked commercial
substance and were between entities under common control, the exchanges have
been accounted for by IPL at their historical cost. This transaction did not
have a material impact on our results of operations or financial condition.

12. SEGMENT INFORMATION

Operating segments are components of an enterprise for which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in assessing performance and deciding how to allocate
resources. Substantially all of our business consists of the generation,
transmission, distribution and sale of electric energy conducted through IPL
which is a vertically integrated electric utility. IPALCO’s reportable business
segments are utility and nonutility. Utility net income for the three months
ended June 30, 2008 and 2007 was $28.6 million and $40.6 million, respectively
and for the six months ended June 30, 2008 and 2007 was $50.8 million and $82.3
million, respectively. The nonutility category primarily includes the 2008
IPALCO Notes, the $375 million of 8.625% (original coupon 7.625%) Senior Secured
Notes due November 14, 2011 and 2016 IPALCO Notes; approximately $7.9 million
and $1.7 million of nonutility cash and cash equivalents, as of June 30, 2008
and December 31, 2007, respectively; short-term and long-term nonutility
investments (including EnerTech Capital Partners II L.P.) of $9.4 million and
$11.5 million at June 30, 2008 and December 31, 2007, respectively; and income
taxes and interest related to those items. There was no nonutility operating
income during the periods covered by this report. However, the nonutility
operating segment had a net loss of $18.4 million and $9.7 million for the three
months ended June 30, 2008 and 2007, respectively and $28.2 million and $19.8
million for the six months ended June 30, 2008 and 2007, respectively.
Nonutility assets represented less than 1% of IPALCO’s total assets as of June
30, 2008 and December 31, 2007. There were no nonutility capital expenditures
during the three months and six months ended June 30, 2008 and 2007. The
accounting policies of the identified segments are consistent with those
policies and procedures described in the summary of significant accounting
policies. Intersegment sales, if any, are generally based on prices that reflect
the current market conditions.

ITEM 1B. DEFINED TERMS

|                                                                                                                     |                                                                                                                                                                                                                                                                                                   
|-------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|DEFINED TERMS                                                                                                       
|The following is a list of frequently used abbreviations or
				acronyms that are found in this report on Form 10-Q:
|                                                                                                                     |                                                                                                                                                                                                                                                                                                   
|2008 IPALCO Notes                                                                                                    | $375 million of 8.375% (original coupon 7.375%)
							Senior Secured Notes due November 14, 2008                                                                                                                                                                                                 
|2016 IPALCO Notes                                                                                                    | $400 million of 7.25% Senior Secured Notes due April
							1, 2016                                                                                                                                                                                                                               
|AES                                                                                                                  | The AES Corporation                                                                                                                                                                                                                                                                               
|BART                                                                                                                 | Best Available Retrofit Technology                                                                                                                                                                                                                                                                
|CAIR                                                                                                                 | Clean Air Interstate Rule                                                                                                                                                                                                                                                                         
|CAMR                                                                                                                 | Clean Air Mercury Rule                                                                                                                                                                                                                                                                            
|CCT                                                                                                                  | Clean Coal Technology                                                                                                                                                                                                                                                                             
|CO2                                                                                                                  | Carbon Dioxide                                                                                                                                                                                                                                                                                    
|DSM                                                                                                                  | Demand-Side Management                                                                                                                                                                                                                                                                            
|EPA                                                                                                                  | U.S. Environmental Protection Agency                                                                                                                                                                                                                                                              
|FAC                                                                                                                  | Fuel Adjustment Charges                                                                                                                                                                                                                                                                           
|FASB                                                                                                                 | Financial Accounting Standards Board                                                                                                                                                                                                                                                              
|FERC                                                                                                                 | Federal Energy Regulatory Commission                                                                                                                                                                                                                                                              
|FTR                                                                                                                  | Financial Transmission Right                                                                                                                                                                                                                                                                      
|GAAP                                                                                                                 | Accounting Principles Generally Accepted in the United States of America                                                                                                                                                                                                                          
|Indenture Supplement                                                                                                 | Indenture Supplement between IPALCO Enterprises,
							Inc. and The Bank of New York Trust Company, N.A.,
							as Trustee, dated April 15, 2008, to the Indenture
							of Trust between IPALCO Enterprises, Inc. and The
							Bank of New York Trust Company dated November 14,
							2001
|IPALCO                                                                                                               | IPALCO Enterprises, Inc.                                                                                                                                                                                                                                                                          
|IPL                                                                                                                  | Indianapolis Power & Light Company                                                                                                                                                                                                                                                                
|IURC                                                                                                                 | Indiana Utility Regulatory Commission                                                                                                                                                                                                                                                             
|kWh                                                                                                                  | Kilowatt hour                                                                                                                                                                                                                                                                                     
|Mid-America                                                                                                          | Mid-America Capital Resources, Inc.                                                                                                                                                                                                                                                               
|Midwest ISO                                                                                                          | Midwest Independent Transmission System Operator, Inc.                                                                                                                                                                                                                                            
|MW                                                                                                                   | Megawatt                                                                                                                                                                                                                                                                                          
|NOx                                                                                                                  | Nitrogen Oxides                                                                                                                                                                                                                                                                                   
|Original Indenture                                                                                                   | Indenture of Trust between IPALCO Enterprises, Inc.
							and The Bank of New York Trust Company dated
							November 14, 2001                                                                                                                                                                  
|Pension Plans                                                                                                        | Employees’ Retirement Plan of Indianapolis Power &
							Light Company and Supplemental Retirement Plan of
							Indianapolis Power & Light Company                                                                                                                                             
|SFAS 88                                                                                                              | Statement of Financial Accounting Standards No. 88 “Employers’ Accounting for Settlements and Curtailments of
							Defined Benefit Pension Plans and for Termination Benefits”                                                                                                                  
|SFAS 157                                                                                                             | Statement of Financial Accounting Standards No. 157 “Fair Value Measurements”                                                                                                                                                                                                                     
|SFAS 158                                                                                                             | Statement of Financial Accounting Standards No. 158 “Employers’ Accounting for Defined Benefits
							Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132R”                                                                                        
|SFAS 160                                                                                                             | Statement of Financial Accounting Standards No. 88 “Noncontrolling Interests in
							Consolidated Financial Statements - an amendment of ARB No. 51”                                                                                                                                            
|SFAS 161                                                                                                             | Statement of Financial Accounting Standards No. 161 “Disclosures about Derivative Instruments
							and Hedging Activities - an amendment of FASB Statement No. 133”                                                                                                                             
|SO2                                                                                                                  | Sulfur Dioxide                                                                                                                                                                                                                                                                                    
|Tender Offer                                                                                                         | A tender offer to repurchase for cash any and all of
							IPALCO’s outstanding 8.375% Senior Secured Notes due
							November 14, 2008 (original coupon 7.375%)                                                                                                                                
|VEBA Trust                                                                                                           | Voluntary Employee Beneficiary Association Trust                                                                                                                                                                                                                                                  
|                                                                                                                     |                                                                                                                                                                                                                                                                                                   

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

The following discussion and analysis should be read in conjunction with our
unaudited Consolidated Financial Statements and the notes thereto included in
*“Item 1. Financial Statements”* included in Part I - Financial
Information of this Form 10-Q. The following discussion contains forward-looking
statements. Our actual results may differ materially from the results suggested
by these forward-looking statements. Please see *“Cautionary Note Regarding
Forward - Looking Statements”* at the beginning of this Form 10-Q. For a
list of certain abbreviations or acronyms used in this discussion, see *“Item
1B. Defined Terms”* included in Part I - Financial Information of this Form
10-Q.

Description of the Company

IPALCO Enterprises, Inc. is a holding company incorporated under the laws of
the state of Indiana. Our principal subsidiary is Indianapolis Power & Light
Company, a regulated utility operating in the state of Indiana. Substantially
all of our business consists of the generation, transmission, distribution and
sale of electric energy conducted through IPL. Our other direct subsidiary,
Mid-America Capital Resources, Inc., is the holding company for our unregulated
activities. Mid-America’s only significant investment is a small minority
ownership interest in EnerTech Capital Partners II L.P., a venture capital fund,
with a recorded value of $6.8 million as of June 30, 2008 and December 31, 2007.
Our business segments are utility and nonutility.

We are primarily engaged in generating, transmitting, distributing and
selling electric energy to approximately 470,000 retail customers in the city of
Indianapolis and neighboring areas within the state of Indiana. We have an
exclusive right to provide electric service to those customers. We own and
operate four generating stations, all within the state of Indiana. More than 99%
of our total electricity produced was generated from coal. Natural gas and fuel
oil combined to provide the remaining kWh generation (primarily for peaking
capacity). Our net electric generation capability for winter and summer is 3,492
MW and 3,353 MW, respectively. Our corporate mission is to serve our customers’
needs for electric power in ways that provide exceptional value to our
customers, shareholders, people and communities.

Material changes in our consolidated financial condition and results of
operations, except where noted, are attributed to the operations of IPL.
Consequently, the following discussion is centered on IPL.

Results of Operations

The electric utility business is affected by seasonal weather patterns
throughout the year and, therefore, the operating revenues and associated
expenses are not generated evenly by month during the year.

**Comparison of three months ended June 30, 2008 and three months ended June 30, 2007**

Net income during the three months ended June 30, 2008 of $9.4 million
decreased $20.6 million from net income of $30.0 million during the same period
in 2007. The following discussion highlights significant factors contributing to
this change.

Utility Operating Revenues

Utility operating revenues increased in 2008 during the three months ended
June 30, 2008 compared to the same period in 2007 by $8.9 million, which
resulted from the following changes (dollars in thousands):

|                                 |                                 |         |        |   |                |  |   |         |  |        
|-------------------------------- | ------------------------------- | ------- | ------ | - | -------------- |  | - | ------- |  | -------
|                                 | **Three months ended June 30,** |         | Change |   | Percent Change
|                                 | 2008                            |         | 2007  
|                                 |                                 |         |       
|Utility Operating
		Revenue     
|Retail Revenues                  | $                               | 244,132 |        | $ | 232,583        |  | $ | 11,549  |  | 5.0%   
|Wholesale Revenues               |                                 | 18,674  |        |   | 20,697         |  |   | (2,023) |  | (9.8)% 
|Miscellaneous Revenues           |                                 | 4,522   |        |   | 5,150          |  |   | (628)   |  | (12.2)%
|Total Utility Operating Revenues | $                               | 267,328 |        | $ | 258,430        |  | $ | 8,898   |  | 3.4%   
|                                 |                                 |         |        |   |                |  |   |         |  |        
|Heating Degree Days              |                                 | 521     |        |   | 476            |  |   | 45      |  | 9.5%   
|Cooling Degree Days              |                                 | 290     |        |   | 446            |  |   | (156)   |  | (35.0)%
|                                

The 3.4% increase in utility operating revenues was primarily due to a 5.0%
increase in retail revenues. This increase is net of a $2.0 million regulatory
liability recorded in June 2008 for a proposed credit to IPL’s retail customers.
See *“Liquidity and Capital Resources - Regulatory Matters - Fuel Adjustment
Charge and Authorized Jurisdictional Net Operating Income”* for further
information regarding the credit.

Excluding the effect of the $2.0 million credit, retail revenues increased by
5.8% ($13.6 million) primarily due to a 12.5% increase in the weighted average
price per kWh sold ($30.5 million) partially offset by a 5.9% decrease in the
quantity of kWh sold ($16.9 million). The increase in the weighted average price
of kWhs sold was primarily due to a $12.5 million increase in revenues related
to our Clean Coal Technology projects, a $9.9 million increase in fuel revenues,
and an $6.2 million increase in the weighted average price per kWh rate charged
to our residential and commercial customers excluding fuel recovery and revenues
related to our CCT projects. The increase in fuel revenues is offset almost
entirely with increased fuel and purchased power expenses attributable to
serving our jurisdictional retail customers (see discussion in *“Utility
Operating Expenses”*). Our declining block rate structure generally provides
for residential and commercial customers to be charged a lower price per kWh
rate at higher consumption levels. Therefore, as volumes decrease, the weighted
average price per kWh increases. The decrease in the quantity of retail kWhs
sold was primarily due to the 35.0% decrease in cooling degree days during the
comparable periods.

The 9.8% decrease in wholesale revenues is primarily due to a 22.1% decrease
in the quantity of kWh sold ($5.3 million), partially offset by a 15.8% increase
in the weighted average price per kWh sold ($3.3 million).  The decrease in
quantity was primarily due to the timing and duration of generating unit
maintenance outages. The quantity and price of wholesale kWh sales are also
impacted by the ability of our generation to be dispatched by the Midwest
Independent Transmission System Operator, Inc. at wholesale prices that are
above our variable costs and the amount of electricity we have available to sell
in the wholesale market.  Our ability to be dispatched in the Midwest ISO market
is primarily impacted by the locational market price of electricity and variable
generation costs.  The amount of electricity available for wholesale sales is
impacted by our retail load requirements, our generation capacity and unit
availability.

Utility Operating Expenses

The following table illustrates our primary operating expense changes from
the three months ended June 30, 2007 to the three months ended June 30, 2008 (in
millions):

|                                                                |   |      
|--------------------------------------------------------------- | - | -----
|                                                               
|**Operating Expenses for the three months ended June 30, 2007** | $ | 207.1
|Increase in depreciation and amortization                       |   | 8.2  
|Increase in other operating expenses                            |   | 7.3  
|Increase in maintenance expenses                                |   | 4.6  
|Increase in fuel                                                |   | 3.5  
|Increase in power purchased                                     |   | 3.4  
|Decrease in income taxes - net                                  |   | (8.8)
|Decrease in taxes other than income taxes                       |   | (0.9)
|**Operating Expenses for the three months ended June 30, 2008** | $ | 224.4
|                                                               

The $8.2 million increase in depreciation and amortization was primarily due
to an increase in depreciation expense, net of amounts deferred for future
recovery, related to CCT placed into service in September 2007 at our Harding
Street generating station.

The increase in other operating expenses was primarily due to increased
operating expenses related to our CCT projects ($2.8 million), wages and
employee benefits ($2.2 million), and consulting fees and other contract labor
($1.0 million). The increase in maintenance expenses is primarily due to the
timing of scheduled generating unit maintenance outages and an increase in
maintenance on overhead lines primarily as a result of increased storm damage.

The increase in fuel was partially due to an increase in actual fuel costs of
$1.2 million due to a 9.9% increase in the cost of coal resulting primarily from
a price reopener on one of our large coal contracts, as well as increases in the
diesel component of coal prices and increases in coal transportation costs. 
This increase is partially offset by a 10.4% decrease in the quantity of coal
consumed due to a decrease in generation of 8.8%. There was also a $1.3 million
increase in deferred fuel costs. Deferred fuel costs are the result of variances
between estimated fuel and purchased power costs in our Fuel Adjustment Charges
and actual fuel and purchased power costs. We are generally permitted to recover
underestimated fuel and purchased power costs in future rates through the FAC
proceedings and therefore, the costs are deferred and amortized into expense in
the same period that our rates are adjusted. (See also *“Liquidity and
Capital Resources - Regulatory Matters - Fuel Adjustment Charge and Authorized
Jurisdictional Net Operating Income.”*) Deferred fuel costs are recorded in
Fuel on the accompanying unaudited Consolidated Statements of Income. There was
also an additional $0.8 million increase in fuel due to increased ash disposal
transportation costs.

The increase in power purchased was due to an 80.4% increase in the volume of
power purchased during the period ($7.2 million) partially offset by a decrease
in the market price of purchased power ($3.8 million). The volume of power
purchased increased primarily due to the timing and duration of outages in 2007
and 2008 and because at times in 2008 it was less expensive for us to buy power
in the market than to produce it ourselves. The decreased market price of
purchased power is influenced primarily by changes in the market price of
delivered fuel (primarily natural gas), the price of environmental emissions
allowances, the supply of and demand for electricity, and the time of day in
which power is purchased.

The $8.8 million decrease in income tax expense was primarily due to a
decrease in pretax net operating income.

Other Income and Deductions

Other income and deductions increased $3.8 million from income of $7.8
million in 2007 to income of $11.6 million in 2008. Included in this increase is
a $6.9 million increase in the income tax benefit, primarily due to the increase
in interest on long-term debt.  This increase is partially offset by a $1.8
million decrease in Other-net deductions due to various individually immaterial
items. There was also a $1.2 million decrease in the allowance for equity funds
used during construction primarily due to decreased capital expenditures in 2008
compared to 2007.

Interest and Other Charges

Interest and other charges increased $16.1 million for the three months ended
June 30, 2008 from the same period in 2007. This increase is primarily due to a
$13.9 million early tender premium related to the repurchase of the $375 million
of 8.375% (original coupon 7.375%) Senior Secured Notes due November 14, 2008.
There was an additional $1.3 million increase due to a weighted average increase
in the amount of long-term debt we had outstanding in the comparable periods,
partially offset by a $0.8 million decrease due to lower interest rates. In
addition, allowance for funds used during construction has decreased $1.0
million due to decreased construction activity in 2008 compared to 2007.

**Comparison of six months ended June 30, 2008 and six months ended June 30, 2007**

Net income during the six months ended June 30, 2008 of $21.0 million
decreased $40.0 million from net income of $61.0 million during the same period
in 2007. The following discussion highlights significant factors contributing to
change in net income.

Utility Operating Revenues

Utility operating revenues decreased in 2008 during the six months ended June
30, 2008 compared to the same period in 2007 by $4.7 million, which resulted
from the following changes (dollars in thousands):

|                                 |                               |         |        |   |                |  |   |         |  |        
|-------------------------------- | ----------------------------- | ------- | ------ | - | -------------- |  | - | ------- |  | -------
|                                 | **Six months ended June 30,** |         | Change |   | Percent Change
|                                 | 2008                          |         | 2007  
|                                 |                               |         |       
|Utility Operating
		Revenue     
|Retail Revenues                  | $                             | 472,921 |        | $ | 475,854        |  | $ | (2,933) |  | (0.6)% 
|Wholesale Revenues               |                               | 33,603  |        |   | 35,530         |  |   | (1,927) |  | (5.4)% 
|Miscellaneous Revenues           |                               | 9,837   |        |   | 9,683          |  |   | 154     |  | 1.6%   
|Total Utility Operating Revenues | $                             | 516,361 |        | $ | 521,067        |  | $ | (4,706) |  | (0.9)% 
|                                 |                               |         |        |   |                |  |   |         |  |        
|Heating Degree Days              |                               | 3,409   |        |   | 3,242          |  |   | 167     |  | 5.2%   
|Cooling Degree Days              |                               | 290     |        |   | 464            |  |   | (174)   |  | (37.5)%
|                                

The 0.9% decrease in utility operating revenues was primarily due to a 0.6%
decrease in retail revenues. The decrease includes $32.0 million in deferred
fuel regulatory liabilities recorded in 2008 for credits to IPL’s retail
customers. See *“Liquidity and Capital Resources - Regulatory Matters - Fuel
Adjustment Charge and Authorized Jurisdictional Net Operating Income”* for
further information regarding the credit.

Excluding the effect of the $32.0 million credits, retail revenues increased
by 6.1% ($29.1 million) primarily due to a 7.7% increase in the weighted average
price per kWh sold ($37.1 million) partially offset by a 1.5% decrease in the
quantity of kWh sold ($8.0 million). The increase in the weighted average price
of kWhs sold was primarily due to a $19.7 million increase in revenues related
to our CCT projects, and a $13.7 million increase in fuel revenues. The increase
in fuel revenues is offset almost entirely with increased fuel and purchased
power expenses attributable to serving our jurisdictional retail customers (see
discussion in *“Utility Operating Expenses”*). The decrease in the
quantity of retail kWhs sold was primarily due to the 37.5% decrease in cooling
degree days during the comparable periods.

The 5.4% decrease in wholesale revenues is primarily due to a 19.3%
		decrease in the quantity of kWh sold ($8.0 million), partially offset by
		a 17.2% increase in the weighted average price per kWh sold ($6.1
		million).  The decrease in quantity was primarily due to the timing and
		duration of generating unit maintenance outages and such other factors
		as described in *“Comparison of three months ended June 30, 2008 and
		three months ended June 30, 2007 - Utility Operating Revenues.”*

Utility Operating Expenses

The following table illustrates our primary operating expense changes from
the six months ended June 30, 2007 to the six months ended June 30, 2008 (in
millions):

|                                                              |   |       
|------------------------------------------------------------- | - | ------
|                                                             
|**Operating Expenses for the six months ended June 30, 2007** | $ | 416.6 
|Increase in other operating expenses                          |   | 12.5  
|Increase in depreciation and amortization                     |   | 10.2  
|Increase in fuel                                              |   | 8.6   
|Increase in maintenance expenses                              |   | 8.0   
|Increase in power purchased                                   |   | 2.8   
|Decrease in income taxes - net                                |   | (21.7)
|Decrease in taxes other than income taxes                     |   | (0.1) 
|**Operating Expenses for the six months ended June 30, 2008** | $ | 436.9 
|                                                             

The increase in other operating expenses was primarily due to increased
operating expenses related to our CCT projects ($4.8 million), wages and
employee benefits ($3.0 million), consulting fees and other contract labor ($2.6
million) and various other individually immaterial items.

The $10.2 million increase in depreciation and amortization is primarily due
to an increase in depreciation expense, net of amounts deferred for future
recovery, related to CCT placed into service in September 2007 at our Harding
Street generating station.

The increase in fuel was primarily due to an increase in actual fuel costs of
$7.6 million due to an 8.5% increase in the cost of coal resulting primarily
from a price reopener on one of our large coal contracts, as well as increases
in the diesel component of coal prices and increases in coal transportation
costs.  This increase is partially offset by a 3.1% decrease in the quantity of
coal consumed due to a decrease in generation of 3.3%. Deferred fuel costs
remained relatively flat for the period. There was a $0.8 million increase in
fuel due to increased ash disposal transportation costs.

The increase in maintenance expenses is primarily due to the timing of
scheduled generating unit maintenance outages and an increase in maintenance on
overhead lines primarily as a result of increased storm damage.

The increase in power purchased was due to a 17.3% increase in the
		volume of power purchased during the period ($4.1 million) partially
		offset by a decrease in the market price of purchased power ($1.4
		million). The volume of power purchased increased primarily due to the
		timing and duration of outages in 2007 and 2008 and because at times in
		2008 it was less expensive for us to buy power in the market than to
		produce it ourselves. The decreased market price of purchased power is
		influenced primarily by changes in the market price of delivered fuel
		(primarily natural gas), the price of environmental emissions
		allowances, the supply of and demand for electricity, and the time of
		day in which power is purchased.

The $21.7 million decrease in income tax expense was primarily due to
		a decrease in pretax net operating income.

Other Income and Deductions

Other income and deductions increased $3.1 million from income of $14.9
million in 2007 to income of $18.0 million in 2008. Included in this increase is
a $7.6 million increase in the income tax benefit, primarily due to the increase
in interest on long-term debt.  This increase is partially offset by a $2.6
million decrease in Other-net deductions due to various individually immaterial
items. There was also a $1.8 million decrease in the allowance for equity funds
used during construction primarily due to decreased capital expenditures in 2008
compared to 2007.

Interest and Other Charges

Interest and other charges increased $18.0 million for the six months ended
June 30, 2008 from the same period in 2007. This increase is primarily due to a
$13.9 million early tender premium related to the repurchase of the 2008 IPALCO
Notes. There was also a $2.0 million increase due to a weighted average increase
in the amount of long-term debt we had outstanding in the comparable periods,
partially offset by a $1.0 million decrease in interest expense because of a
decrease in the amount outstanding on our $150 million credit facility. In
addition, the allowance for funds used during construction has decreased $1.2
million due to decreased construction activity in 2008 compared to 2007.

Liquidity and Capital Resources

As of June 30, 2008, we had unrestricted cash and cash equivalents of $44.4
million and we also had available borrowing capacity of $108.7 million under our
$150.0 million committed credit facility after outstanding borrowings, existing
letters of credit and liquidity support for IPL’s $40 million unsecured variable
rate debt, which is remarketed weekly. All of IPL’s long-term borrowings must
first be approved by the Indiana Utility Regulatory Commission and the aggregate
amount of IPL’s short-term indebtedness must be approved by the Federal Energy
Regulatory Commission. We have approval from FERC to borrow up to $500 million
of short-term indebtedness outstanding at any time through July 27, 2010.
However, we also have restrictions on the amount of new debt that may be issued
due to contractual obligations of The AES Corporation and by financial covenant
restrictions under our existing debt obligations. We do not believe such
restrictions will be a limiting factor in our ability to issue debt in the
ordinary course of prudent business operations. We believe that existing cash
balances, short-term investments, cash generated from operating activities and
borrowing capacity on our committed credit facility will be adequate on a
short-term and long-term basis to meet anticipated operating expenses, interest
expense on outstanding indebtedness, recurring capital expenditures and pay
dividends to AES. Sources for principal payments on outstanding indebtedness and
nonrecurring capital expenditures are expected to be obtained from: (i) existing
cash balances; (ii) cash generated from operating activities; (iii) borrowing
capacity on our committed credit facility; and (iv) additional debt financing.

Capital Requirements

Capital Expenditures

Our construction program is composed of capital expenditures necessary for
prudent utility operations and compliance with environmental laws and
regulations, along with discretionary investments designed to improve overall
performance. Our capital expenditures totaled $53.6 million and $101.7 million
for the six months ended June 30, 2008 and 2007, respectively. Included in these
amounts are approximately $17.2 million and $57.5 million of expenditures for
2008 and 2007, respectively, on technology designed to reduce environmental
emissions related to our CCT projects. Construction expenditures during the
first six months of 2008 were financed with internally generated cash provided
by operations. Construction expenditures during the first six months of 2007
were financed with internally generated cash provided by operations, borrowings
on our credit facilities, a portion of proceeds from the June 2007 issuance of
$165 million IPL first mortgage bonds, and $4.4 million in draws from the
construction fund associated with the issuance in September 2006 of $60 million
of IPL first mortgage bonds.

Our capital expenditure program for the three-year period 2008-2010 is
currently estimated to cost approximately $471 million. It includes
approximately $184 million for additions, improvements and extensions to
transmission and distribution lines, substations, power factor and voltage
regulating equipment, distribution transformers and street lighting facilities.
The capital expenditure program also includes approximately $135 million for
power plant related projects; $114 million for construction projects designed to
reduce SO2 and mercury emissions; $14 million for investments associated with
additional generation and $24 million for other miscellaneous equipment and
furniture. The majority of the expenditures for construction projects designed
to reduce SO2 and mercury emissions are recoverable through jurisdictional
retail rate revenue as part of our CCT projects, subject to regulatory approval.
Capital expenditures are financed with a combination of internally generated
funds and short-term and long-term borrowings.

The $114 million for construction projects designed to
reduce SO2 and mercury emissions includes $98.5 million
		over the next three years to install and/or upgrade CCT to further
		reduce SO2 and mercury emissions at our Petersburg generating station,
		which is expected to begin in 2009 and to be in service during the
		second quarter of 2010. However, because the federal Clean Air
		Interstate Rule has been vacated, as discussed below in *“Environmental
		Matters - Clean Air Interstate Rule,”* we are reevaluating our options
		and it is not yet clear whether or not there will be material change to
		our CCT plans for SO2 and NOx.

*Contractual Cash Obligations*

Our 2007 Annual Report on Form 10-K contains a table, which details
		our contractual cash obligations as of December 31, 2007. Significant
		changes to our contractual cash obligations since December 31, 2007
		include the addition of $400 million of 7.25% Senior Secured Notes due
		April 1, 2016 and the removal of $375 million of the 2008 IPALCO Notes.
		See *“Capital Resources - Indebtedness”*below for further
		discussion of our debt refinancing activity.

*Dividends*

All of IPALCO’s outstanding common stock is held by AES. During the first six
months of 2008 and 2007, we paid dividends to AES totaling $32.8 million and
$30.2 million, respectively. Future distributions will be determined at the
discretion of our board of directors and will depend primarily on dividends
received from IPL. Dividends from IPL are affected by IPL’s actual results of
operations, cash flows, financial condition, capital requirements, regulatory
considerations, and such other factors as IPL’s board of directors deems
relevant.

*Pension Plans*

See Note 9, *“Pension and Other Postretirement Benefits”* to the
unaudited Consolidated Financial Statements of IPALCO in *“Item 1. Financial
Statements”* included in Part I - Financial Information of this Form 10-Q
for information regarding pension plans and other postretirement benefit plans.

**Capital Resources**

*Indebtedness*

In April 2008, IPALCO completed the sale of the 2016 IPALCO Notes pursuant to
Rule 144A and Regulation S under the Securities Act of 1933, as amended. The
2016 IPALCO Notes were issued pursuant to an Indenture dated April 15, 2008, by
and between IPALCO and The Bank of New York Trust Company, N.A., as trustee. In
connection with this issuance, IPALCO conducted a Tender Offer to purchase for
cash any and all of the 2008 IPALCO Notes outstanding, of which $375 million
were outstanding.

The 2016 IPALCO Notes were sold at 98.526% of par resulting in net proceeds
of $394.1 million. The $5.9 million discount is being amortized through 2016
using the effective interest method. We used these net proceeds to repurchase
all of the outstanding 2008 IPALCO Notes through the Tender Offer and subsequent
redemption of all remaining notes not tendered. The proceeds were also used to
pay the early tender premium of $13.9 million (included in Interest on long-term
debt in the accompanying unaudited Consolidated Statements of Income) and other
fees and expenses related to the Tender Offer and the redemption of the 2008
IPALCO Notes and the issuance of the 2016 IPALCO Notes.

In addition, we solicited and received consents to amend the applicable
indenture with respect to the 2008 IPALCO Notes and entered into the Indenture
Supplement dated April 15, 2008, with The Bank of New York Trust Company, N.A.,
as trustee, to the Indenture between the parties dated November 14, 2001. The
Indenture Supplement amends the Original Indenture with respect to the 2008
IPALCO Notes to eliminate substantially all of the restrictive covenants,
several affirmative covenants and certain events of default, modify the covenant
regarding mergers, consolidations and sales of the IPALCO’s assets and eliminate
or modify certain other provisions.

The 2016 IPALCO Notes are secured by IPALCO’s pledge of all of the
outstanding common stock of IPL. The lien on the pledged shares will be shared
equally and ratably with IPALCO’s existing senior secured notes. IPALCO has
entered into a Pledge Agreement Supplement with The Bank of New York Trust
Company, N.A., as Collateral Agent, dated April 15, 2008 to the Pledge Agreement
between IPALCO and The Bank of New York Trust Company, N.A. as successor
Collateral Agent dated November 14, 2001.

*Related Party Transactions*

In the first quarter of 2008, IPL exchanged 20,661 SO2 environmental air
emissions allowances for 20,718 SO2 environmental air emissions allowances with
wholly-owned subsidiaries of AES. Because the transactions lacked commercial
substance and were between entities under common control, the exchanges have
been accounted for by IPL at their historical cost. This transaction did not
have a material impact on our results of operations or financial condition.

*Sales of Accounts Receivable*

In May 2008, the receivables sales agreement included as part of our
		$50 million sale of accounts receivable was extended through May 26,
		2009.

**Regulatory Matters**

*Basic Rates and Charges*

Our basic rates and charges are determined after giving consideration, on a
pro-forma basis, to all allowable costs for ratemaking purposes including a fair
return on the fair value of the utility property used and useful in providing
service to customers. Pursuant to statute, the IURC is to conduct a periodic
review of the basic rates and charges of all utilities at least once every four
years, but the IURC has the authority to review the rates of any utility at any
time it chooses. Once set, the basic rates and charges authorized do not assure
the realization of a fair return on the fair value of property. IPL’s basic
rates and charges were last adjusted in 1996.

*Fuel Adjustment Charge and Authorized Jurisdictional Net Operating Income*

We may apply to the IURC for a change in our fuel charge every three months
to recover our estimated fuel costs, including the fuel portion of purchased
power costs, which may be above or below the levels included in our basic rates
and charges. Independent of the IURC’s ability to review basic rates and
charges, Indiana law requires electric utilities under the jurisdiction of the
IURC to meet operating expense and income test requirements as a condition for
approval of requested changes in FAC. Additionally, customer refunds may result
if a utility’s rolling twelve month operating income, determined at quarterly
measurement dates, exceeds a utility’s authorized annual jurisdictional net
operating income and there are not sufficient applicable cumulative net
operating income deficiencies against which the excess rolling twelve month
jurisdictional net operating income can be offset.

In our four most recently approved FAC filings, the IURC found that our
rolling annual jurisdictional retail electric net operating income was greater
than the authorized annual jurisdictional net operating income. In addition, in
our June 2008 FAC filing (FAC 80), which has not yet been approved by the IURC,
our rolling annual jurisdictional retail electric net operating income was calculated to be greater than the authorized annual jurisdictional net operating
income by $4.7 million for the twelve months ended April 30, 2008. Because we
have a cumulative net operating income deficiency, we have not been required to
make customer refunds in our FAC proceedings. However, even though we have a
cumulative net operating income deficiency, the IURC may still review our basic
rates and charges on a prospective basis at any time it chooses.

In December 2007, we received a letter from the staff of the IURC requesting
information relevant to the IURC’s periodic review of our basic rates and
charges and we subsequently provided information to the staff. Since our
cumulative net operating income deficiency (described above) requires no
customer refunds in the FAC process, the IURC staff was concerned that the
higher than usual 2007 earnings may continue in the future. In an effort to
allay staff’s concerns, we proposed in our March and June 2008 FAC filings (FAC
79 and 80) prospective credits to our retail customers totaling $30 million and
$2 million, respectively. Consistent with these proposals, we recorded a $30
million deferred fuel regulatory liability in March 2008 and a $2 million
deferred fuel regulatory liability in June 2008, with corresponding and
respective reductions against revenues. In May 2008, the IURC approved our FAC
79, including the $30 million credit. The credit provides an offset against fuel
charges customers would otherwise pay in the billing months of June, July and
August of 2008, with approximately $8.4 million being applied in June 2008. If
our request for a credit in FAC 80 is approved, it will provide an offset
against fuel charges customers would otherwise pay in the billing months of
September, October and November of 2008. The proposed $2.0 million credit is
subject to the IURC approval.

In our March 2006 FAC proceeding (FAC 71), a consumer advocacy group
		representing some of our industrial customers requested that a
		sub-docket be established. We and the customer group entered into an
		agreement regarding the scope of the sub-docket which agreement was
		approved by the IURC in its May 2006 order in our FAC 71 proceeding. The
		agreement defines the scope of the sub-docket as “any issue related to
		FAC 71” and includes illustrative examples including: review of the
		Midwest ISO components of the cost of fuel, review of projection of the
		Midwest ISO components of the cost of fuel, review of our generation and
		demand bidding practices, review of allocation of fuel and other costs,
		review of compliance with Indiana Code 8-1-2-42(d) and review of our
		Elect Plan, all as they relate to FAC 71 only. Because of the uncertain
		outcome of the FAC 71 sub-docket, the IURC Orders in our FAC 71
		proceeding and subsequent FAC proceedings (through FAC 79) approved our
		FAC factors on an interim basis, subject to refund. An attorney’s
		conference was held in June 2008, when a procedural schedule was set for
		the parties to file their cases-in-chief and for the evidentiary
		hearing. The IURC’s Orders in our FAC 77, 78 and 79 proceedings also set
		our FAC factor on an interim basis, subject to refund, pending the
		outcome of the FERC proceeding regarding Revenue Sufficiency Guarantee
		Second Pass charges and any subsequent appeals or future order of the
		IURC. We cannot predict what refunds, if any, may be required, or for
		what period of time.

Purchased power costs below an established benchmark are presumed to be
recoverable fuel costs. In April 2008, the IURC issued a final order, which
approved our joint petition filed along with another Indiana utility and the
Indiana Office of Utility Consumer Counselor. This petition requested a new
settlement mechanism for the recovery of fuel costs in the cost of purchased
electricity. Under the former agreement, hourly purchased power costs were
compared to a monthly standard. Under the new settlement agreement, hourly
purchased power costs are compared to a daily benchmark to better reflect
changes in natural gas prices that occur throughout the month. We believe that
changes in natural gas prices typically influence the price at which we can
purchase power. Therefore, we believe that the new benchmark will more closely
track fluctuations in purchased power prices. The new benchmark expires in April
2010. Purchased power costs over the benchmark not recovered from our customers
have not had a material impact on our results of operations or financial
condition to date.

*Wind Power Purchase Agreement*

In April 2008, we entered into a power purchase agreement for 20 years of
approximately 100 MW of wind generated electricity with Hoosier Wind
Project, LLC, a subsidiary of enXco, Inc. The contract is contingent, among
other things, on the IURC approval of cost recovery via a cost recovery
mechanism similar to the FAC and the extension of the federal production tax
credit for qualified renewable energy producers. In April 2008, we filed the
request with the IURC for such recovery. No assurance can be given at this time
as to whether or not the IURC will approve the request. This agreement, if
approved, would help us to diversify the resources available to serve our
customers in light of potential greenhouse gas and renewable portfolio standards
legislation. Renewable portfolio standards, which would require a certain
percentage of an electric utility’s electricity to come from renewable sources
by a given date, have been considered at both the state and federal levels.
However, it is currently unclear what future legislation we might face related
to renewable portfolio standards.

*Clean Coal Technology Filings*

In April 2008, in response to an updated Plan we filed, the IURC issued an
Order approving recovery of capital expenditures of approximately $92.7 million
over the next three years. The $92.7 million approved by the IURC includes $90.0
million to install and/or upgrade CCT to further reduce SO2 and mercury
emissions at our Petersburg generating station and $2.7 million for mercury
emissions monitoring equipment at our coal-fired power plants. We currently
estimate the installation and/or upgrade of CCT to further reduce SO2 and
mercury emissions at our Petersburg generating station will cost approximately
$98.5 million. We intend to seek recovery of any prudent costs incurred on this
project above the currently authorized $90.0 million; however, there can be no
assurance that such recovery will be granted. The IURC also approved the
ratemaking treatment applicable to qualified pollution control property to be
recovered through an Environmental Compliance Cost Recovery Adjustment, similar
to that which we have received in previous environmental filings. Such treatment
includes a return on the construction costs and recovery of depreciation
expenses and operation and maintenance expenses associated with these projects.
The IURC also granted us the authority to add the approved return on our
environmental projects to our authorized annual jurisdictional net operating
income in subsequent FAC proceedings.

The installation and upgrade of CCT to further reduce SO2 and mercury
emissions at our Petersburg generating station is expected to begin in 2009 and
to be in service during the second quarter of 2010. However, because the federal
CAIR has been vacated, as discussed below in *“Environmental Matters - Clean
Air Interstate Rule,”* we are reevaluating our options and it is not yet
clear whether or not there will be material change to our CCT plans for SO2 and
NOx. The installation of the mercury emissions monitoring equipment at our
coal-fired power plants is also under review given that the mercury monitoring
requirements under the Indiana Clean Air Mercury Rules are uncertain as a result
of the federal CAMR being vacated and the opinion letter from the Indiana Office
of Attorney General, as discussed below in *“Environmental Matters - Clean
Air Mercury Rule.”* Until there is greater regulatory clarity around our
obligations, we have tentatively suspended our plan to install mercury monitors.

*Demand-Side Management*

In 2004, the IURC initiated a generic investigation to consider and review
DSM issues and programs in Indiana, including the overall effectiveness of DSM
programs in the state and ways to improve DSM programs. DSM programs promote
customer energy efficiency and encourage energy conservation, and allow
customers to participate in time based pricing rate schedules and other demand
response programs. In April 2008, the IURC issued a Phase I Order which found
that Phase II of the proceeding shall be initiated to fully address the
following issues: (1) Indiana’s low spending levels on DSM Programs and high per
capita energy use; (2) possible development of a core group of “best practices”
DSM programs; (3) the feasibility and associated costs and benefits of a
statewide Third Party DSM Administrator; (4) development of a uniform energy
efficiency/DSM database; (5) issues identified in the Energy Policy Act of 2005
and the Energy Independence and Security Act of 2007, including consideration of
new technologies such as automated metering; and (6) the formation of an
Oversight Board, to oversee the development of a more uniform statewide strategy
with respect to DSM Programs. We cannot predict the outcome of the proceeding or
its impact on us at this time, but it will likely require us to increase our
level of DSM spending over the next few years. We plan to continue to seek
recovery of existing and future DSM program costs.

*Energy Policy Act of 2005*

In July 2007, the IURC initiated a generic investigation to consider:
		whether existing Indiana law and the IURC processes are sufficient to
		ensure utilities develop a plan to minimize dependence on a single fuel
		source, what are the appropriate utility methods to ensure energy is
		generated using a diverse range of fuels and technologies, and whether
		the energy market provides sufficient incentive for utilities to
		diversify their fuel sources and increase their fossil fuel generating
		efficiency. In July 2008, an IURC Order indicated that no additional
		standards need to be promulgated at this time.

**Environmental Matters**

We are subject to various federal, state and local environmental protection
and health and safety laws and regulations governing, among other things, the
generation, storage, handling, use, disposal and transportation of hazardous
materials; the emission and discharge of hazardous and other materials into the
environment; and the health and safety of our employees. These laws and
regulations often require a lengthy and complex process of obtaining and
renewing permits and other governmental authorizations from federal, state and
local agencies. Violation of these laws, regulations or permits can result in
substantial fines, other sanctions, permit revocation and/or facility shutdowns.
We cannot assure you that we have been or will be at all times in full
compliance with such laws, regulations and permits, however, we do not believe
any currently open investigations will result in fines material to our results
of operations or financial position.

Under certain environmental laws, we could be held responsible for costs
relating to contamination at our past or present facilities and at third party
waste disposal sites. We could also be held liable for human exposure to such
hazardous substances or for other environmental damage. Our costs of complying
with current and future environmental and health and safety laws, and our
liabilities arising from past or future releases of, or exposure to, hazardous
substances may adversely affect our business, results of operations or financial
condition.

*Clean Air Interstate Rule*

As discussed in our 2007 Form 10-K, in March 2005 the U.S.
		Environmental Protection Agency finalized the CAIR, which imposes
		restrictions against polluting the air of downwind states. The CAIR
		established a two-phase regional “cap and trade” program for SO2 and NOx
		emissions that would require the largest reduction in air pollution in
		more than a decade. CAIR covers 28 eastern states, including Indiana,
		and the District of Columbia. In July 2008, the U.S. Court of Appeals
		for the D.C. Circuit vacated and remanded the federal CAIR to the EPA.
		The ruling could be appealed either to the full bench (en banc) of the
		U.S. Court of Appeals for the D.C. Circuit or to the U.S. Supreme
		Court.  Thus, it is not clear what impact this ruling will have on our
		business, results of operations or financial position.

*Clean Air Mercury Rule*

As discussed in our 2007 Form 10-K, in March 2005, the EPA finalized
		the federal CAMR that required utilities to reduce mercury emissions
		from new and existing coal fired power plants. The rule created
		“standards of performance” limiting mercury emissions from utilities and
		established a staged approach for reductions via a “cap and trade”
		program. In February 2008, the U.S. Court of Appeals for the D.C.
		Circuit vacated the federal CAMR, requiring the EPA to promulgate a new
		mercury emissions rule which presumably will not include a “cap-and
		trade” program.   Subsequently, in July 2008, the Indiana Office of the
		Attorney General issued an Advisory Letter No. 08-17 regarding
		implementation and enforcement of the Indiana CAMR, which resulted in
		the Indiana Department of Environmental Management providing a formal
		opinion that the Indiana CAMR should not be enforced.  As a result, IPL
		will not be required to meet either the mercury emission reduction
		requirements or install mercury monitors until such time as there is
		either judicial or regulatory finality.

*Clean Coal Technology*

Please see *“Regulatory Matters - Clean Coal Technology Filings*” and
*“Liquidity and Capital Resources - Capital Requirements - Capital
Expenditures”* for a discussion of our environmental technologies and
related capital expenditures.

*Carbon Dioxide*

In 2007, our generating power plants emitted approximately 18.5 million tons
of CO2. We continue to monitor developments with respect to the regulation of
CO2 emissions under the Clean Air Act. Regulatory initiatives regarding CO2 may
be implemented in the future, although at this time we cannot predict if, how,
or to what extent such initiatives would affect us. Generally, we believe costs
to comply with any regulations implemented to reduce greenhouse gas emissions
would be deemed as part of the costs of providing electricity to our customers
and as such, we would seek recovery for such costs in our rates. However, no
assurance can be given as to whether or not the IURC will approve such requests.
In light of potential greenhouse gas and renewable portfolio standards
legislation, in April 2008, we entered into a 20 year 100 MW wind power purchase
agreement, which will help us to diversify our sources of electricity available
for sale. Please see “Regulatory Matters - Wind Purchase Power Agreement” above,
for further discussion.

In July 2008, the EPA issued an advanced notice of proposed
		rulemaking soliciting comments on whether and how greenhouse gas
		emissions should be regulated under the Clean Air Act.  The advanced
		notice of proposed rulemaking marks the EPA’s first rulemaking step to
		respond to the U.S. Supreme Court’s decision in *Massachusetts v. EPA*,
		which requires the EPA to decide under the Clean Air Act’s mobile source
		title whether greenhouse gases contribute to climate change, and if so,
		promulgate appropriate regulations, or explain why the EPA cannot make
		such an endangerment judgment at this time.  However, currently, it is
		not clear what impact this proposed rulemaking will have on our
		business, results of operation or financial position.

*Regional Haze*

The EPA published the final regional haze rule on July 1, 1999. This rule
established planning and emissions reduction timelines for states to use to
improve visibility in national parks throughout the United States. In 2001, the
EPA signed a proposed rule to guide states in implementing the 1999 rule and in
controlling power plant emissions that cause regional haze problems. The
proposed rule set guidelines for states in setting Best Available Retrofit
Technology at older power plants. In 2004, the EPA published a proposed rule
with new BART provisions and reproposed the BART guidelines. In June 2005, the
EPA finalized amendments to the 1999 regional haze rule. The EPA determined that
states, such as Indiana, which adopt the CAIR “cap and trade” program for SO2
and NOx, will be allowed to apply CAIR controls as a substitute for controls
required under BART. The Indiana Air Pollution Control Board has approved a
final rule implementing BART which provides that sources in compliance with CAIR
controls are exempt from BART requirements for SO2 and NOx. This rule became
effective on February 9, 2008. Because we comply with SO2 and NOx “cap and
trade” program under CAIR, we initially were exempt from BART requirements.
However, since the federal CAIR has been vacated, at this time, it is unclear
what impact it would have on our compliance with BART requirements.

**NEW ACCOUNTING STANDARDS**

See Note 3, *“New Accounting Pronouncements”* to the unaudited
		Consolidated Financial Statements of IPALCO in *“Item 1. Financial
		Statements”* included in Part I - Financial Information of this Form 10-Q
		for information regarding new accounting standards.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not applicable pursuant to General Instruction H of the Form 10-Q.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the reports that we file or submit
under the Securities Exchange Act of 1934, is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission’s rules and forms, and that such information is accumulated and
communicated to the principal executive officer and principal financial officer,
as appropriate, to allow timely decisions regarding required disclosures.

**Evaluation of Disclosure Controls and Procedures**

We carried out an evaluation, under the supervision and with the
participation of our management, including the principal executive officer and
principal financial officer, of the effectiveness of our “disclosure controls
and procedures” (as defined in the Exchange Rules 13a-15(e) and 15-d-15 (e) as
required by paragraph (b) of the Exchange Act Rules 13a-15 or 15d-15) as of June
30, 2008. Our management, including the principal executive officer and
principal financial officer, is engaged in a comprehensive effort to review,
evaluate and improve our controls; however, management does not expect that our
disclosure controls or our internal controls over financial reporting will
prevent all errors and all fraud. A control system, no matter how well designed
and operated, can provide only reasonable, not absolute, assurance that the
control system’s objectives will be met. Further, the design of a control system
must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. In addition, any evaluation
of the effectiveness of controls is subject to risks that those internal
controls may become inadequate in future periods because of changes in business
conditions, or that the degree of compliance with the policies or procedures
deteriorates. We have interests in certain unconsolidated entities. As we do not
control or manage these entities, our disclosure controls and procedures with
respect to such entities is generally more limited than those we maintain with
respect to our consolidated subsidiaries.

Based upon the controls evaluation performed, the principal executive officer
and principal financial officer have concluded that as of June 30, 2008, our
disclosure controls and procedures were effective to provide reasonable
assurance that material information relating to us and our consolidated
subsidiaries is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms
and that such information is accumulated and communicated to the principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosures.

**Changes in Internal Controls**

In the course of our evaluation of disclosure controls and procedures,
management considered certain internal control areas in which we have made and
are continuing to make changes to improve and enhance controls. Based upon that
evaluation, the principal executive officer and principal financial officer
concluded that there were no changes in our internal controls over financial
reporting identified in connection with the evaluation required by paragraph (d)
of the Exchange Act Rules 13a-15 or 15d-15 that occurred during the six months
ended June 30, 2008 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please see *“Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Environmental Matters,”* and Note 10,
*“Commitments and Contingencies”* to the unaudited Consolidated Financial
Statements of IPALCO in *“Item 1. Financial Statements”* included in Part
I - Financial Information of this Form 10-Q for a summary of significant legal
proceedings involving us. We are also subject to routine litigation, claims and
administrative proceedings arising in the ordinary course of business.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors as previously
disclosed in IPALCO’s 2007 annual report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On June 25, 2008, The AES Corporation, as sole shareholder of IPALCO
Enterprises, Inc. executed a Consent in Lieu of Meeting of Stockholders
in order to accept the resignation of David Gee as a member of
the IPALCO Board of Directors and further elect Edward C. Hall III as a member
of the IPALCO Board of Directors, effective June 25, 2008, to serve for a term
of one year. No other matter was included in the Consent.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

|                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT NO.                                                                                                                               | DOCUMENT                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.1*                                                                                                                                      | Indenture between IPALCO Enterprises, Inc. and The Bank of New York
		Trust Company, N.A., as Trustee, dated April 15, 2008 for the 7.25%
		Senior Secured Notes Due 2016.                                                                                                                                                                                                                                                            
|4.2*                                                                                                                                      | Indenture Supplement between IPALCO Enterprises, Inc. and The Bank of
		New York Trust Company, N.A., as Trustee, dated April 15, 2008, to the
		Indenture of Trust between IPALCO Enterprises, Inc. and The Bank of New
		York Trust Company dated November 14, 2001.                                                                                                                                                                
|4.3*                                                                                                                                      | Pledge Agreement Supplement between IPALCO Enterprises, Inc. and The
		Bank of New York Trust Company, N.A., as Collateral Agent, dated April
		15, 2008 to the Pledge Agreement between IPALCO Enterprises, Inc. and
		The Bank of New York Trust Company dated November 14, 2001.                                                                                                                                                   
|31.1                                                                                                                                      | Certification by Chief Executive Officer required by Rule 13a-14(a)
        																					or 15d-14(a).                                                                                                                                                                                                                                                                                                                        
|31.2                                                                                                                                      | Certification by Principal Financial Officer required by Rule 13a-14(a)
        																					or 15d-14(a).                                                                                                                                                                                                                                                                                                                    
|32                                                                                                                                        | Certification required by Rule 13a-14(b) or 15d-14(b).                                                                                                                                                                                                                                                                                                                                                                                
|99.1                                                                                                                                      | Sixth Amendment dated as of May 27, 2008 to Amended and Restated Receivables
																							Sale Agreement Dated as of July 20, 2004.                                                                                                                                                                                                                                                                                         
|99.2                                                                                                                                      | Amendment of Remarketing Agreement dated as of July 10, 2008, by and between Indianapolis Power
		& Light Company and J.P. Morgan Securities, Inc. to amend the Remarketing Agreement between IPL and J.P. Morgan Securities, Inc.
		dated September 30, 1997 for the remarketing of the $40,000,000 City of Petersburg, Indiana, Pollution Control Refunding Revenue Bonds, Adjustable Rate Tender Securities (ARTS)SM, Series 1995B.
|*Incorporated by reference to IPALCO’s Current Report on Form 8-K
			filed with the Securities and Exchange Commission on April 17, 2008.

SIGNATURES

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

|      |                |     |                                                                  | 
|----- | -------------- | --- | ---------------------------------------------------------------- | 
|      |                |     | IPALCO ENTERPRISES, INC.                                         | 
|      |                |     | (Registrant)                                                     | 
|      |                |     |                                                                  | 
|Date: | August 7, 2008 | By: | /s/ Kurt A. Tornquist                                            | 
|      |                |     | Kurt A. Tornquist                                                | 
|      |                |     | Vice President and Controller                                    | 
|      |                |     | *(Principal Financial Officer and Principal Accounting Officer)* |