**UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549**

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**FORM 10-Q**

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**Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934**

**For the quarterly period ended March 31, 2006**

**IPALCO ENTERPRISES, INC.**
(Exact name of Registrant as specified in its Charter)

**Commission file number 1-8644**



|**Indiana**                                                    | **35-1575582**                         
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

**One Monument CircleIndianapolis, IN    46204**(Address of Principal Executive Offices including Zip Code)

**(317) 261-8261**(Registrant's Telephone Number, Including Area Code)

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 reports), and (2) has been subject to such filing
requirements for the past 90 days.   YES [X]    NO [  ]

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

Large accelerated filer 	    
Accelerated filer	     
Non-accelerated filer X

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

At May 19, 2006, 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.
                                    FORM 10-Q
                                     INDEX**



|**PART I - Financial Information**                                                                                           | **Page No.**
|---------------------------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                                             |             
|Item 1:   Financial Statements:                                                                                              |             
|                                                                                                                             |             
|Unaudited Consolidated Statements of Income for the Three-month 
        
          Periods Ended March 31, 2006 and 2005    | 3           
|                                                                                                                             |             
|Unaudited Consolidated Balance Sheets as of March 31, 2006 
        
           and December 31, 2005                        | 4           
|                                                                                                                             |             
|Unaudited Consolidated Statements of Cash Flows for the
        
          Three-month Periods Ended March 31, 2006 and 2005 | 5           
|                                                                                                                             |             
|Notes to Unaudited Consolidated Financial Statements                                                                         | 6           
|                                                                                                                             |             
|Item 2:   Management's Discussion and Analysis of Financial Condition 
          
and Results of Operations                  | 10          
|                                                                                                                             |             
|Item 3:   Quantitative and Qualitative Disclosure About Market Risk                                                          | 15          
|                                                                                                                             |             
|Item 4:  Controls and Procedures                                                                                             | 15          
|                                                                                                                             |             
|**PART II - Other Information**                                                                                              |             
|                                                                                                                             |             
|Item 1:  Legal Proceedings                                                                                                   | 17          
|                                                                                                                             |             
|Item 1A:  Risk Factors                                                                                                       | 17          
|                                                                                                                             |             
|Item 6:  Exhibits                                                                                                            | 17          
|                                                                                                                             |             
|**Signature**                                                                                                                | 18          

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**PART I -- FINANCIAL INFORMATION**

Item 1.  Financial Statements

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**IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Unaudited Consolidated Statements of Income

(In Thousands)**

`Three Months Ended
                                                                   March 31,
                                                             ---------------------
                                                                2006       2005
                                                             ---------- ----------
UTILITY OPERATING REVENUES                                   $ 255,616  $ 226,889

UTILITY OPERATING EXPENSES:
 Operation:
   Fuel                                                         66,593     46,371
   Other operating expenses                                     39,869     33,484
 Power purchased                                                11,482      4,205
 Maintenance                                                    27,731     17,822
 Depreciation and amortization                                  33,691     34,114
 Taxes other than income taxes                                  10,111      9,344
 Income taxes-net                                               22,047     27,275
                                                             ---------- ----------
  Total utility operating expenses                             211,524    172,615
                                                             ---------- ----------
UTILITY OPERATING INCOME                                        44,092     54,274
                                                             ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
 Allowance for equity funds used during construction               738        606
 Other - net                                                    (1,480)       655
 Income tax benefit-net                                         10,568      6,339
                                                             ---------- ----------
  Total other income and (deductions)-net                        9,826      7,600
                                                             ---------- ----------
INTEREST AND OTHER CHARGES:
 Interest on long-term debt                                     27,721     28,238
 Other interest                                                    777        140
 Allowance for borrowed funds used during construction            (576)      (343)
 Amortization of redemption premiums and expense on debt-net       803        648
 Preferred dividends of subsidiary                                 803        803
                                                             ---------- ----------
  Total interest and other charges-net                          29,528     29,486
                                                             ---------- ----------
NET INCOME                                                   $  24,390  $  32,388
                                                             ---------- ----------
  Other comprehensive income (loss)                                677        (90)
                                                             ---------- ----------
TOTAL COMPREHENSIVE INCOME                                   $  25,067  $  32,298
                                                             ========== ==========`

See notes to consolidated financial statements.

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**IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In Thousands)**

`March 31,   December 31,
                                                              2006         2005
                                                         ------------- ------------
                         ASSETS
UTILITY PLANT:
 Utility plant in service                                $  3,502,399  $ 3,496,202
 Less accumulated depreciation                              1,446,171    1,425,489
                                                         ------------- ------------
     Utility plant in service - net                         2,056,228    2,070,713
 Construction work in progress                                134,574       94,087
 Property held for future use                                     591          591
                                                         ------------- ------------
     Utility plant - net                                    2,191,393    2,165,391
                                                         ------------- ------------
OTHER ASSETS:
 Nonutility property - at cost, less
  accumulated depreciation                                        713          714
 Other investments                                              9,357        9,460
                                                         ------------- ------------
     Other assets - net                                        10,070       10,174
                                                         ------------- ------------
CURRENT ASSETS:
 Cash and cash equivalents                                      3,649        6,008
 Short-term investments                                         1,469        1,581
 Accounts receivable and unbilled revenue (less allowance
 for doubtful accounts of $1,740 and $2,184, respectively)     64,776       64,025
 Fuel - at average cost                                        28,476       25,145
 Materials and supplies - at average cost                      51,674       52,331
 Net income tax refunds receivable                             18,741        6,309
 Regulatory assets                                             29,167       41,424
 Prepayments and other current assets                           9,984        8,131
                                                         ------------- ------------
     Total current assets                                     207,936      204,954
                                                         ------------- ------------
DEFERRED DEBITS:
 Regulatory assets                                            158,524      156,952
 Miscellaneous                                                 47,592       35,685
                                                         ------------- ------------
     Total deferred debits                                    206,116      192,637
                                                         ------------- ------------
             TOTAL                                       $  2,615,515  $ 2,573,156
                                                         ============= ============
             CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
 Common shareholder's deficit:
   Premium on 4% cumulative preferred stock              $        649  $       649
   Paid in capital                                              2,290        2,063
   Accumulated deficit                                        (30,362)     (54,752)
   Accumulated other comprehensive loss                       (73,684)     (74,361)
                                                         ------------- ------------
     Total common shareholder's deficit                      (101,107)    (126,401)
 Cumulative preferred stock of subsidiary                      59,135       59,135
 Long-term debt                                             1,443,337    1,443,316
                                                         ------------- ------------
     Total capitalization                                   1,401,365    1,376,050
                                                         -------------  -----------
CURRENT LIABILITIES:
  Notes payable and current portion of long-term debt          71,900      111,100
  Accounts payable and accrued expenses                        91,348       82,267
  Accrued real estate and personal property taxes              20,015       15,843
  Accrued interest                                             37,548       26,531
  Customer deposits                                            13,437       12,875
  Other current liabilities                                    14,134       13,052
                                                         ------------- ------------
     Total current liabilities                                248,382      261,668
                                                         ------------- ------------
 DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
 Accumulated deferred income taxes - net                      364,216      339,041
 Asset retirement obligations                                 418,667      412,597
 Unamortized investment tax credit                             22,174       22,827
 Accrued pension and other postretirement benefits            152,591      149,103
 Miscellaneous                                                  8,120       11,870
                                                         ------------- ------------
    Total deferred credits and other long-term liabilities    965,768      935,438
                                                         ------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 9)

             TOTAL                                       $  2,615,515  $ 2,573,156
                                                         ============= ============`

See notes to consolidated financial statements.

**IPALCO ENTERPRISES, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

(In Thousands)**

`Three Months Ended
                                                                 March 31,
                                                          ---------- ---------
                                                            2006       2005
                                                          ---------  ---------
Cash Flows from Operations:
 Net income                                              $  24,390  $  32,388
 Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                           33,332     33,659
    Amortization of regulatory assets                        1,169        825
    Deferred income taxes and investment tax credit
      adjustments - net                                     23,775     (5,220)
    Gain on sale of assets - net                            (3,500)         -
    (Gain) loss on investments                                  26       (398)
    Pension and other postretirement benefit expenses        3,239      1,914
    Preferred dividends of subsidiary                          803        803
    Allowance for funds used during construction              (738)      (606)
  Change in certain assets and liabilities:
    Accounts receivable                                       (751)     6,934
    Fuel, materials and supplies                            (3,852)       905
    Income taxes receivable or payable                     (12,432)    28,172
    Accounts payable and accrued expenses                    9,666    (11,820)
    Accrued real estate and personal property taxes          4,172      4,191
    Accrued interest                                        11,017     10,880
    Short-term and long-term regulatory assets
      and liabilities                                        9,107        787
    Other - net                                             (1,783)       604
                                                          ---------  ---------
Net cash provided by operating activities                   97,640    104,018
                                                          ---------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures - utility                           (47,267)   (23,762)
  Purchase of environmental emissions allowances           (10,547)         -
  Purchase of short-term investments                        (1,400)  (321,972)
  Proceeds from sales and maturities of
    short-term investments                                   1,525    292,322
  Other                                                     (2,066)      (619)
                                                          ---------  ---------
Net cash used in investing activities                      (59,755)   (54,031)
                                                          ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings - net                              (39,200)         -
  Dividends on common stock                                      -    (47,622)
  Preferred dividends of subsidiary                           (803)         -
  Other                                                       (241)       (23)
                                                          ---------  ---------
Net cash used in financing activities                      (40,244)   (47,645)
                                                          ---------  ---------
Net change in cash and cash equivalents                     (2,359)     2,342
Cash and cash equivalents at beginning of period             6,008      3,779
                                                          ---------  ---------
Cash and cash equivalents at end of period               $   3,649  $   6,121
                                                          =========  =========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest (net of amount capitalized)                 $  16,916  $  17,220
                                                          =========  =========
    Income taxes                                         $       0  $  (2,076)
                                                          =========  =========`

See notes to consolidated financial statements.

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IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

1.  ORGANIZATION

IPALCO Enterprises, Inc. ("IPALCO") is a wholly-owned subsidiary of The AES
Corporation ("AES"). IPALCO owns all of the outstanding common stock of its subsidiaries.
These include its regulated electric utility subsidiary, Indianapolis Power & Light Company
("IPL"), and its unregulated subsidiary, Mid-America Capital Resources, Inc. ("Mid-
America"). Substantially all of IPALCO's business consists of the generation, transmission,
distribution and sale of electric energy conducted through IPL. IPL has more than 465,000 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 combustion turbine that are all used for generating electricity. IPL's
net electric generation capability for winter is 3,370 megawatts and net summer capability is 3,252
megawatts. Mid-America conducts IPALCO's unregulated activities.

2.  BASIS OF PRESENTATION

The accompanying 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 ("GAAP") 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
audited financial statements for the year ended December 31, 2005, 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. SIGNIFICANT ACCOUNTING POLICIES

Emissions Allowances. IPL uses environmental air emissions allowances to meet
standards set forth by the Environmental Protection Agency related to emission of sulfur dioxide
("SO2") and nitrous oxide gasses. IPL accounts for environmental air emissions
allowances as intangible assets and records expenses for allowances using a first in first out
("FIFO") method. The book value of emissions allowances as of March 31, 2006 and December
31, 2006 was $11.8 million and $1.2 million, respectively. The increase in book value is primarily
due to the purchase of $10.5 million of SO2 allowances during the period.

Income Taxes.
IPALCO includes any applicable interest and penalties related to income tax deficiencies
or overpayments in Income tax benefit - net under OTHER INCOME AND (DEDUCTIONS) in its
consolidated statements of income. The income tax provision for the three months ended March 31,
 2006 includes interest income of $4.5 million related to income tax refunds, while the income tax
provision for the three months ended March 31, 2005 includes interest expense related to
income taxes of $0.1 million.

4.  NONCASH TRANSACTIONS

During the three months ended March 31, 2006, IPL exchanged 2,510 SO2environmental emission allowances with a 2007 vintage year for 2,500
SO2 environmental emission allowances with a 2005 vintage year. IPL recorded a gain on the
transaction of $3.5 million.

5.  SEGMENT INFORMATION

IPALCO's operations are made up almost entirely of its ownership of IPL, its consolidated
electric utility, which is a reportable business segment. In addition, IPALCO has outstanding $750
million of Senior Secured Notes as of March 31, 2006 and December 31, 2005; approximately $0.5
million and $0.6 million of nonutility cash and cash equivalents, as of March 31, 2006 and December
31, 2005, respectively; short-term and long-term nonutility investments of $9.8 million and $9.9
million at March 31, 2006 and December 31, 2005, respectively; and income taxes and interest related
to those items. There was no utility operating income other than the activities of IPL during the
periods covered by this report. Nonutility assets represented less than 1% of IPALCO's total assets
as of March 31, 2006 and December 31, 2005 and there were no nonutility capital expenditures during
the three month periods ended March 31, 2006 and March 31, 2005.

6.  INCOME TAXES

IPALCO's effective combined state and federal income tax rates for the three month periods
ended March 31, 2006 and 2005 were 32.0% and 39.3%, respectively. The rate decrease was primarily
the result of $4.3 million of interest income related to income taxes recorded as a result of the
completion of an IRS examination of our filings for the period 1996 through March of 2001 during the
first quarter of 2006. The examination resulted in a refund due to us of approximately $23.5
million, which we expect to receive in the first half of 2006. This decrease was partially offset by
an increase in income taxes due to depreciation flow through and amortization of $2.1 million.

7.  REGULATORY ASSETS

Deferred Fuel. Deferred fuel costs are a component of current regulatory assets and
are expected to be recovered through future fuel adjustment charge proceedings. IPL records deferred
fuel in accordance with standards prescribed by the Federal Energy Regulatory Commission
("FERC"). The deferred fuel adjustment is the result of variances between estimated fuel
and purchased power costs in IPL's fuel adjustment charge and actual fuel and purchased power costs.
IPL is permitted to recover underestimated fuel and purchased power costs in future rates through
the fuel adjustment charge proceedings and therefore the costs are deferred and amortized into fuel
expense in the same period that IPL's rates are adjusted. Deferred fuel costs decreased $11.6
million during the three months ended March 31, 2006 primarily because the amount of fuel charged to
customers has increased in the first quarter to recover underbilled fuel costs from prior
periods.

8.  PENSION BENEFITS

Employees' Retirement Plan: Most of IPL's employees are covered by the Employees'
Retirement Plan of Indianapolis Power & Light Company (the "Defined Benefit Pension
Plan"). The Defined Benefit Pension Plan is noncontributory and is funded through a trust.
Benefits are based on each individual employee's pension band and years of service as opposed to
their compensation. Pension bands are based primarily on job duties and responsibilities.

Supplemental Retirement Plan: Additionally, a small group of former officers and their
surviving spouses are covered under a funded supplemental pension plan. The total number of
participants in the plan is less than 35 and the plan is closed to new participants.

Pension Funding: IPL's funding policy for the Defined Benefit Pension Plan and the
supplemental retirement plan ("the Pension Plans") is to contribute annually no less than
the minimum required by applicable law, nor more than the maximum amount that can be deducted for
federal income tax purposes. IPL has not made any contributions to the Pension Plans during the
first three months of 2006. Depending on the timing of contributions, pending legislation and other
factors related to the funding strategy, we estimate potential cash contributions to the Pension
Plans of $30 to $50 million in 2006. This estimate is based on actuarial assumptions using a
discount rate of 5.78%.

The following table presents information relating to the Pension Plans combined:

`For the Three Months
                                           Ended March 31,
                                         --------------------
                                            2006      2005
                                         --------------------
Pension Benefits                         (IN THOUSANDS)

Components of net periodic benefit cost
Service cost                                $1,369    $1,033
Interest cost                                6,967     6,473
Expected return on plan assets              (6,777)   (6,489)
Amortization of transition asset                --      (318)
Amortization of prior service costs            565       434
Amortization of actuarial loss               1,300       781
                                         --------------------
Net periodic benefit cost                   $3,424    $1,914
                                         ====================`

9.  COMMITMENTS AND CONTINGENCIES

Legal

IPALCO and certain former officers and directors of IPALCO are defendants in a class
action lawsuit under the Employment Retirement Income Security Act, filed in the U.S. District Court
for the Southern District of Indiana, regarding matters arising from the acquisition of IPALCO by
AES. The lawsuit was filed in March 2002 and alleges breach of fiduciary duties with respect to
shares held in IPL's 401(k) thrift plan. A bench trial was held in February 2006 to determine
whether there were any breaches of fiduciary duties. The court took the matter under advisement and
has not yet ruled. While we cannot predict the outcome, we do not believe that the suit will have a
material adverse effect on IPALCO's consolidated financial statements.

Many years ago, IPL obtained, through purchases from several owners, a substantial tract of land
as a potential site for a future power plant. IPL later determined it no longer intended to build a
power plant on that land and sold it in 2004. In September 2004, a former owner of a parcel included
within IPL's land sued IPL in Morgan County Superior Court in a purported class action to force IPL
to pay any profit on the sale to the various former owners, as well as profits received from ground
leases and timber sales. The plaintiff contended, in essence, that IPL obtained the various parcels
through eminent domain or the threat of eminent domain and alleged violations of Indiana's eminent
domain statute, conversion and unjust enrichment. IPL believes the suit is without merit. At this
time discovery has not yet begun and the court has not certified a class. While we cannot predict
the outcome, we do not expect the matter will have a material adverse effect on IPALCO's
consolidated financial statements.

As of March 31, 2006 and December 31, 2005, IPL was a defendant in approximately 114 and 109
pending lawsuits, respectively, 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, are 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 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, based upon
advice of counsel, believes that the outcomes will not have material adverse effects on IPALCO's
consolidated financial statements.

Environmental

IPALCO and IPL 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 believe that we operate in material compliance with
environmental laws, regulations and permits and health and safety laws. We cannot assure, however,
that we have been or will be at all times in full compliance with such laws, regulations and
permits. Please see Note 11 "Commitments and Contingencies - Environmental" of IPALCO's
audited financial statements for the year ended December 31, 2005, included in its annual report on
Form 10-K, for a more comprehensive discussion of environmental matters impacting IPALCO and
IPL.

10.  SUBSEQUENT EVENT

In May 2006, IPL entered into a new credit agreement in the aggregate principal amount of
$120.6 million which includes an $80 million committed line
of credit and a $40.6 million liquidity facility (related to $40 million of IPL variable rate bonds,
which are remarketed weekly).The committed line of credit may be increased to $109.4 million
upon IPL's request and subject to certain other conditions, and also provides for the issuance
 of letters of credit. The maturity date for the new agreement is May 16, 2011.
This agreement replaced two existing agreements 364-day agreements with an aggregate borrowing
capacity of $75.0 million and a $40.6 million liquidity facility.

---



Item 2.	Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

Cautionary Note Regarding Forward-Looking Statements

This Report on Form 10-Q includes ``forward-looking statements''
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.''
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, expenses 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,'' 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:

- changes in our credit ratings or the credit ratings of AES
- performance of pension plan assets
- fluctuations in customer growth and demand
- weather and weather-related damage
- fuel 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 ("IURC")
- our ownership by AES
- federal and state legislation
- changes in financial or regulatory accounting policies
- environmental matters, including costs of compliance with current and future environmental
requirements
- interest rates and the availability and other cost of capital
- labor strikes or other workforce factors
- unanticipated facility or equipment maintenance, repairs and capital expenditures
- local economic conditions
- acts of terrorism, natural disasters or other catastrophic events
- unanticipated generation outages
- costs and effects of legal and administrative proceedings, settlements, investigations and
claims and the ultimate disposition of litigation
- industry restructuring, deregulation and competition
- issues related to our participation in the Midwest Independent Transmission System Operators,
Inc. ("Midwest ISO"), including recovery of costs incurred
- 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. We undertake no obligation to publicly update
or review any forward-looking information, future events or otherwise.

Overview

IPALCO is a holding company incorporated under the laws of the state of
Indiana. Our principal subsidiary is IPL, a regulated electric 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, 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 valued at
$5.8 million, as of March 31, 2006. Our business segments are electric and "all other."

IPL is engaged primarily in generating, transmitting, distributing and selling electric energy to
more than 465,000 retail customers in the city of Indianapolis and neighboring areas within the
State of Indiana. IPL has an exclusive right to provide electric service to those customers. IPL
owns and operates four generating stations, all within the State of Indiana. Historically,
approximately 99% of the total electricity produced by IPL was generated from coal. Natural gas and
fuel oil combined to provide the remaining kWh generation (primarily for peaking capacity). IPL's
net electric generation capability for winter and summer is 3,370 and 3,252 megawatts, respectively.
Our corporate mission is to serve our customer's needs for electric power in ways that provide
exceptional value to our customers, shareholders, people and communities.

We are subject to federal and State of Indiana income taxes. Our income tax provision requires
significant judgment and is based on calculations and assumptions that are subject to examination by
the Internal Revenue Service and other tax authorities. In January 2006, the Internal Revenue
Service completed an examination of our filings for the period 1996 through March of 2001. The
examination resulted in a refund due to us of approximately $23.5 million, which we expect to
receive in the first half of 2006.

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 operating expenses are not
generated evenly by month during the year.

Comparison of Quarters Ended March 31, 2006 and March 31, 2005

Our first quarter 2006 net income of $24.4 million decreased $8.0 million from net
income of $32.4 million in the first quarter of 2005. The following discussion highlights the
significant factors contributing to this change.

Utility Operating Revenues

Utility operating revenues increased by $28.7 million during the three months ended March 31,
2006 compared to the prior year as a result of the following (dollars in thousands):

`March 31,      March 31,     Increase   Percentage
                                 2006           2005       (Decrease)    Change
                            ------------------------------------------------------
Retail Revenues                   $235,194       $210,613     $24,581        11.7%
Wholesale Revenues                  12,300         12,805        (505)       -3.9%
Miscellaneous Revenues               8,122          3,471       4,651       134.0%
                            ------------------------------------------
Total Utility Operating
  Revenues                        $255,616       $226,889     $28,727        12.7%
                            ==========================================

Heating Degree Days                  2,400          2,676        (276)      -10.3%`

The 11.7% increase in retail revenues was primarily due to a 14.8% increase in the weighted
average price of kWhs sold ($31.1 million) offset by a 2.7% decrease in the quantity of kWhs sold
($6.6 million). The $31.1 million increase in the weighted average price of retail kWhs sold was
primarily due to a $30.5 million increase in fuel charges. The amount of fuel charged to customers
has increased in the first quarter primarily to recover underbilled fuel and/or purchased power
costs from prior periods. The decrease in the quantity of retail kWhs sold is primarily due to a
10.3% decrease in heating degree days during the comparative periods.

The $4.7 million increase in miscellaneous revenues during the first quarter of 2006 is primarily
due to a $3.5 million gain from exchanging 2,510 vintage 2007 sulfur dioxide
("SO2") air emissions allowances for 2,500 vintage 2005 SO2 air
emissions allowances and a $0.8 million increase in Midwest ISO transmission revenues. The gain
results from exchanging allowances that were granted to us by the Environmental Protection Agency
("EPA") at no charge and recorded at cost, which is zero, for allowances that are recorded
at their fair market value. The increase in Midwest ISO transmission revenues is offset by a $0.8
million increase in Midwest ISO transmission expenses (see below).

Utility Operating Expenses

`Operating Expenses for the Quarter Ended March 31, 2005       $172.6
Increase in fuel                                                20.2
Increase in maintenance expense                                  9.9
Increase in purchased power expense                              7.3
Increase in other operating expenses                             6.4
Decrease in income taxes - net                                  (5.2)
Other miscellaneous variances                                    0.3
                                                            ---------
Operating Expenses for the Quarter Ended March 31, 2006       $211.5
                                                            =========`

The increase in fuel is the result of a $14.6 million increase in the deferred fuel adjustment
and a $5.6 million increase in actual fuel costs. The deferred fuel adjustment is the result of
variances between estimated fuel and purchased power costs in our fuel adjustment charge and actual
fuel and purchased power costs. We are permitted to recover underestimated fuel and purchased power
costs in future rates through the fuel adjustment charge proceedings and therefore the costs are
deferred and amortized into expense in the same period that our rates are adjusted. The increase in
deferred fuel costs is primarily because the amount of fuel charged to customers has increased to
allow us to recover underestimated fuel costs in prior periods. Actual fuel costs increased
primarily due to the increase in the average price of coal consumed.

The increase in maintenance expenses is primarily due to the timing of major generating unit
overhauls. We expect maintenance expenses in the second quarter of 2006 to continue to be higher
than those in the second quarter of 2005 as a planned major generating unit overhaul is scheduled
for completion in May 2006.
Purchased power expense increased primarily due to an increase in the market price of purchased
power, which is influenced by changes in delivered fuel prices (primarily natural gas) and the price
of environmental emission allowances, as well as the supply of and demand for electricity.

The increase in other operating expenses is primarily due to increases in wages and employee
benefits ($3.2 million), consulting fees and other contract labor ($1.0 million), Midwest ISO
transmission expenses ($0.8 million) and payroll taxes ($0.5 million). The increase in wages and
employee benefits includes a $1.5 million increase in pension and other postretirement benefits, a
$0.9 million increase in payroll costs and a $0.7 million increase in employee group insurance
benefit expenses. The increase in pension and other postretirement benefits is primarily due to
increased interest and service costs ($0.8 million) and increased net loss amortization ($0.5
million). The increase in payroll costs reflects annual wage increases and additional employees. The
increase in employee group insurance benefit expenses results primarily from escalating health
insurance claims and additional employees. The increase in Midwest ISO transmission expenses is
offset by a $0.8 million increase in Midwest ISO transmission revenues (see above).

The $5.2 million decrease in income tax expense was primarily the result of a
$15.4 million decrease in pre-tax net operating income, which contributed $6.2
million to the decrease, and a $1.1 million decrease in operating income tax
contingencies.
 These decreases were partially offset by an increase in income taxes
due to depreciation flow through and amortization of $2.1 million. The $2.2 million recorded
for depreciation flow through in the first quarter of 2006 is based on the estimated annual amount
for 2006 of $8.8 million.

Our expense for 2006 emissions allowances was $0 through March 31, 2006. We are allocated
SO2 allowances each year by the EPA at no cost; however, we are projected to be in an
allowance shortfall position in 2006. During the four months ended April 30, 2006, we purchased
14,900 allowances at a total cost of $13.1 million. We account for emissions allowances as
intangible assets and record expenses for allowances using a first in first out, ("FIFO")
method. Therefore, our expense for 2006 emissions allowances will be $0 until we use all of the
allowances allocated to us from the EPA. We project our total expense in 2006 to be significantly
higher than in 2005 because we purchased a greater portion of our projected allowance needs in the
market. During 2006 and 2007, we expect to place additional clean coal technology in service, which
will help reduce our SO2emissions and therefore help to reduce future emissions
costs.

Other Income and Deductions

Other income and deductions increased from income of $7.6 million in the first quarter of
2005 to income of $9.8 million in the first quarter of 2006. Included in this increase is a $4.2
million increase in the income tax benefit, primarily due to the changes in previously recorded tax
contingencies. This increase is primarily related to the conclusion of the IRS examination of our
filings for the period from 1996 through March of 2001 that was completed in January 2006 ($3.3
million). This increase was offset by an increase in legal expenses ($0.9 million), a decrease in
our share of income from equity method investments ($0.4 million) and a decrease in interest income
from temporary cash investments ($0.4 million). Legal expense increased primarily due to increased
costs to defend litigation and interest income is down because less cash was available for
investment during the current period as a result of undercollected fuel costs and increased
construction expenditures.

Interest and Other Charges

While interest and other charges in total changed only slightly for the quarters ended March
31, 2006 and 2005, it includes an increase of $0.6 million of interest expense on short term debt
related to increased line of credit borrowings, partially offset by a $0.5 million decrease in
interest expense on long term debt. The decrease in interest on long term debt is primarily due to
less interest on $71.9 million of first mortgage bonds that were refinanced in 2005 at a lower
interest rate.

Liquidity and Capital Resources

As of March 31, 2006, IPALCO had cash and cash equivalents of $3.6
million and highly liquid short-term investments of $1.5 million. In addition, as of March 31, 2006,
IPL had available borrowing capacity of $61.2 million under its $75.0 million committed credit
facilities after outstanding borrowings of $13.1 million and existing letters of credit. All long-
term borrowings by IPL must first be approved by the IURC and the aggregate amount of IPL's short-
term indebtedness must be approved by FERC. IPL has approval from FERC to borrow up to $500 million
of short-term indebtedness outstanding at any time through July 29, 2006. IPL and IPALCO also have
restrictions on the amount of new debt that may be issued due to contractual obligations of AES and
by financial covenant restrictions under their existing debt obligations. Under such restrictions,
IPL is generally allowed to fully draw the amounts available on its committed credit facilities,
refinance existing debt, issue an additional $60 million of long-term debt approved by the IURC and
incur certain other indebtedness. We believe that existing cash balances, cash generated from
operating activities and borrowing capacity on IPL's committed credit facilities 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 IPL's committed credit facilities; and
(iv) additional debt financing.

In December 2005, IPL filed a financing petition with the IURC requesting, among other things,
authority to issue a total of $60 million of debt in 2006 (including $30 million approved in the
previous financing petition, but not yet issued) and to refinance $80 million of debt that matures
in 2007. An Order was issued approving our Financing Petition on March 22, 2006.

In May 2006, IPL entered into a new credit agreement in the aggregate principal amount of
$120.6 million which includes an $80 million committed line
of credit and a $40.6 million liquidity facility (related to $40 million of IPL variable rate bonds,
which are remarketed weekly).The committed line of credit may be increased to $109.4 million
upon IPL's request and subject to certain other conditions, and also provides for the issuance
 of letters of credit. The maturity date for the new agreement is May 16, 2011.
This agreement replaced two existing agreements 364-day agreements with an aggregate borrowing
capacity of $75.0 million and a $40.6 million liquidity facility.

We actively invest a portion of our available cash balances in various financial instruments,
such as tax-exempt debt securities that frequently have stated maturities of 20 years or more and
taxable and tax-exempt auction rate securities. These instruments provide for a high degree of
liquidity through features such as daily and seven day notice put options and 7, 28, and 35 day
auctions which allow for the redemption of the investments at their face amounts plus earned income.
As we intend to sell these instruments within one year or less, they are classified as current
assets.

Capital Requirements.  Our capital requirements are primarily related to IPL's
construction expenditures needed to meet customers' needs for electricity and for environmental
compliance. IPL's capital expenditures totaled $47.2 million during the three months ended March 31,
2006. This represented an increase of $23.5 million from the comparable period in 2005, primarily
related to increased expenditures on technology designed to reduce environmental emissions.
Construction expenditures during the first three months of 2006 were financed with internally
generated cash provided by operations. IPL's 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 expenditure program for the three-year period 2006-2008 is currently estimated to cost
approximately $473 million. The estimated cost of the overall program by year is $213 million
in 2006, $120 million in 2007 and $140 million in 2008. It includes approximately $152 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 $171 million for construction projects
designed to reduce SO2 and mercury emissions; $104 million for power plant related
projects; $40 million for investments associated with additional generation and $6 million for other
miscellaneous equipment and furniture. We currently estimate total capital expenditures related to
environmental matters to be approximately $115 million, $48 million and $8 million during 2006, 2007
and 2008, respectively.

Pension Funding.  IPL has not made any contributions to the Pension Plans during
the first three months of 2006. Depending on the timing of contributions, pending legislation, and
other factors related to the funding strategy, we estimate potential cash contributions to the
Pension Plans of $30 to $50 million in 2006. This estimate is based on actuarial assumptions using a
discount rate of 5.78%.

Dividends.  All of our outstanding common stock is owned by AES. During the first
three months of 2006, we did not pay dividends to AES. 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 results of operations, cash flows, financial condition,
capital requirements, regulatory considerations, and such other factors as IPL's board of directors
deems relevant.

Other Regulatory Matters

Fuel Adjustment Charge Proceedings.

Our three most recent fuel adjustment charge proceeding ("FAC") Orders approved rates
that are interim rates, subject to refund, because of issues regarding the appropriateness of
recovery in the FAC process of Day Ahead Revenue Sufficiency Guarantee Distribution Amounts and
Real-Time Revenue Sufficiency Guarantee First Pass Distribution Amounts ("RSG amounts")
assessed by Midwest ISO. IPL was a party to a Joint Petition, docketed as Cause No. 42962, which
sought IURC approval of recovery of these charges through the FAC process.  In a May 4, 2006
Order, the IURC found that RSG amounts beginning December 9, 2005, may be recovered in IPL's
FACs, subject to a benchmark. 
The Order also requires us to return RSG amounts from before December 9, 2005
charged to customers, or scheduled to be charged to customers, through the FAC,
of approximately $6 million. The Order requires IPL, in its next FAC filing,
which should be filed on or about June 9, 2006, to take the necessary steps to
effectuate the IURC's Order. IPL is currently reviewing the Order.
Additionally, in IPL's most recent FAC, a
consumer advocacy group representing some of IPL's industrial customers
requested that a sub-docket be established to review IPL's fuel costs.  The
hearing on IPL's most recent FAC was held on May 3, 2006, and we are currently
awaiting an Order on the outcome of the FAC proceeding as well as the industrial
customers' request for a sub-docket.

---

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

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

---

Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We carried out an
evaluation, under the supervision and with the participation of our management, including the chief
executive officer ("CEO") and chief financial officer ("CFO"), of the
effectiveness of our "disclosure controls and procedures" (as defined in the Securities
Exchange Act of 1934 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 March 31, 2006. IPL's management, including the CEO and CFO, 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.

Due to the material weakness described below, our CEO and CFO concluded that our disclosure
controls and procedures as of March 31, 2006 were not effective to ensure that information required
to be disclosed by us in reports we file or submit under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. To address this material weakness, we performed additional
analysis and other procedures to prepare our consolidated financial statements in accordance with
generally accepted accounting principles. Accordingly, we believe that the consolidated financial
statements included in this quarterly report fairly present, in all material respects, our financial
condition, results of operations and cash flows for the periods presented.

A material weakness is a significant deficiency (within the meaning of PCAOB Auditing Standard
No. 2), or combination of significant deficiencies, that results in there being more than a remote
likelihood that a material misstatement of the annual or interim financial statements will not be
prevented or detected.

As reported in Item 9A of our 2005 Form 10-K, the Company determined that a material weakness in
internal control over financial reporting existed as of December 31, 2005.  This material weakness
also existed as of March 31, 2006. Specifically, the Company lacked effective controls to monitor
and assess individual components of the deferred income tax and the related regulatory asset
balances.  These control deficiencies could result in a future misstatement of certain account
balances that could result in a material misstatement to the annual or interim financial
statements.

The Company's remediation efforts with respect to its deferred income tax and the related
regulatory asset balances include identification of all significant components and enhanced
controls over the analyses and reconciliation of the activity related to these components. Moreover,
these components are being incorporated into and tracked in our tax accounting system in order to
facilitate future reviews. When complete, the total deferred income taxes per the Company's
financial accounting system will be reconciled to the deferred taxes reported in the tax accounting
system on a quarterly basis.

Changes in Internal Controls. Please see above for a discussion of control enhancements
implemented relating to deferred income taxes and the related regulatory asset balances. 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 CEO and CFO concluded that there were no changes
in our internal controls over financial reporting identified in connection with the evaluation
required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter
ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.



Compliance with Section 404 of the Sarbanes Oxley Act of 2002.  Beginning with the year
ending December 31, 2007, Section 404 of the Sarbanes-Oxley Act of 2002 will require us to include
an internal control report of management with our annual report on Form 10-K. The internal control
report must contain (1) a statement of management's responsibility for establishing and maintaining
adequate internal controls over financial reporting for our Company, (2) a statement identifying the
framework used by management to conduct the required evaluation of the effectiveness of our internal
controls over financial reporting, (3) management's assessment of the effectiveness of our internal
controls over financial reporting as of the end of our most recent fiscal year, including a
statement as to whether or not our internal controls over financial reporting are effective, and (4)
a statement that our independent auditors have issued an attestation report on management's
assessment of our internal controls over financial reporting.

Management has developed a comprehensive plan in order to achieve compliance with Section 404
within the prescribed period and to review, evaluate and improve the design and effectiveness of our
controls and procedures on an on-going basis. The comprehensive compliance plan includes (1)
documentation and assessment of the adequacy of our internal controls over financial reporting, (2)
remediation of control weaknesses, (3) validation through testing that controls are functioning as
documented and (4) implementation of a continuous reporting and improvement process for internal
controls over financial reporting. As a result of this initiative, we have made and will continue to
make changes from time to time in our internal controls over financial reporting.

---



PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In November 2002, IPL was sued in a Fair Labor Standards Act ("FLSA")
collective action lawsuit filed in the U.S. District Court for the Southern District of Indiana. The
complaint alleges that certain of IPL's current and former employees were not paid overtime pay at
the rate required by the FLSA. IPL recently agreed with the plaintiffs to settle the case and, on
March 3, 2006, the court dismissed the suit. The settlement did not have a material adverse effect
on IPALCO's consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes to the risk factors as previously
disclosed in IPALCO's 2005 annual report on Form 10-K.

Item 6.  Exhibits





|**Exhibit No.** | **Document**
|--------------- | ------------

`10.1  Credit agreement by and among Indianapolis Power & Light Company, the
      various financial institutions party hereto, National City Bank of Indiana,
      as Syndication Agent, and LaSalle Bank National Association, as Administrative
      Agent, dated as of May 16, 2006.

31.1  Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a).

31.2  Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a).

  32  Certification required by Rule 13a-14(b) or 15d-14(b).`

---

**SIGNATURE**



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: May 19, 2006



| |     |                    
| | --- | -------------------
| | By: | /s/ Frank P. Marino

| |                                                                          
| | -------------------------------------------------------------------------
| |                                                                          
| | Frank P. Marino                                                          
| | Vice President and Chief Financial Officer                               
| | (Principal Financial and Accounting Officer 
and Duly Authorized Officer)