**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, 2007**

**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 14, 2007, 89,685,177 shares of IPALCO Enterprises, Inc. common stock were outstanding.
All of such shares were owned by The AES Corporation.







**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, 2007 and 2006     | 3           
|                                                                                                                             |             
|Unaudited Consolidated Balance Sheets as of March 31, 2007 
        
           and December 31, 2006                        | 4           
|                                                                                                                             |             
|Unaudited Consolidated Statements of Cash Flows for the
        
          Three-month Periods Ended March 31, 2007 and 2006 | 5           
|                                                                                                                             |             
|Notes to Unaudited Consolidated Financial Statements                                                                         | 6           
|                                                                                                                             |             
|Item 2:   Management's Discussion and Analysis of Financial Condition 
          
and Results of Operations                  | 12          
|                                                                                                                             |             
|Item 3:   Quantitative and Qualitative Disclosure About Market Risk                                                          | 16          
|                                                                                                                             |             
|Item 4:  Controls and Procedures                                                                                             | 16          
|                                                                                                                             |             
|**PART II - Other Information**                                                                                              |             
|                                                                                                                             |             
|Item 1:  Legal Proceedings                                                                                                   | 17          
|                                                                                                                             |             
|Item 1A:  Risk Factors                                                                                                       | 18          
|                                                                                                                             |             
|Item 2:  Unregistered Sales of Equity Securities and Use of Proceeds                                                         | 18          
|                                                                                                                             |             
|Item 3: Defaults Upon Senior Securities                                                                                      | 18          
|                                                                                                                             |             
|Item 4: Submission of Matters to a Vote of Security Holders                                                                  | 18          
|                                                                                                                             |             
|Item 5: Other Information                                                                                                    | 18          
|                                                                                                                             |             
|Item 6:  Exhibits                                                                                                            | 19          
|                                                                                                                             |             
|**Signature**                                                                                                                | 20          

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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,
                                                               ---------------------
                                                                  2007       2006
                                                               ---------- ----------
UTILITY OPERATING REVENUES                                     $ 262,637  $ 255,616

UTILITY OPERATING EXPENSES:
 Operation:
   Fuel                                                           60,042     66,593
   Other operating expenses                                       40,180     39,869
 Power purchased                                                  15,420     11,482
 Maintenance                                                      20,245     27,731
 Depreciation and amortization                                    34,889     33,691
 Taxes other than income taxes                                    10,140     10,111
 Income taxes-net                                                 28,577     22,047
                                                               ---------- ----------
  Total utility operating expenses                               209,493    211,524
                                                               ---------- ----------
UTILITY OPERATING INCOME                                          53,144     44,092
                                                               ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
 Allowance for equity funds used during construction                 826        738
 Other - net                                                        (216)    (1,480)
 Income tax benefit-net                                            6,514     10,568
                                                               ---------- ----------
  Total other income and (deductions)-net                          7,124      9,826
                                                               ---------- ----------
INTEREST AND OTHER CHARGES:
 Interest on long-term debt                                       27,582     27,721
 Other interest                                                      925        777
 Allowance for borrowed funds used during construction              (740)      (576)
 Amortization of redemption premiums and expense on debt             783        803
 Preferred dividends of subsidiary                                   803        803
                                                               ---------- ----------
  Total interest and other charges-net                            29,353     29,528
                                                               ---------- ----------
NET INCOME                                                        30,915     24,390
                                                               ---------- ----------
 Other comprehensive income                                            -        677
                                                               ---------- ----------
TOTAL COMPREHENSIVE INCOME                                     $  30,915  $  25,067
                                                               ========== ==========`

See notes to unaudited consolidated financial statements.

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**IPALCO ENTERPRISES, INC. and SUBSIDIARIES

Unaudited Consolidated Balance Sheets

(In Thousands)**

`March 31,   December 31,
                                                                2007         2006
                                                           ------------- ------------
                          ASSETS
UTILITY PLANT:
 Utility plant in service                                  $  3,591,359  $ 3,578,525
 Less accumulated depreciation                                1,501,928    1,485,459
                                                           ------------- ------------
     Utility plant in service - net                           2,089,431    2,093,066
 Construction work in progress                                  178,562      152,801
 Spare parts inventory                                            1,391        1,587
 Property held for future use                                       591          591
                                                           ------------- ------------
     Utility plant - net                                      2,269,975    2,248,045
                                                           ------------- ------------
OTHER ASSETS:
 Nonutility property - at cost, less
  accumulated depreciation                                          694          709
 Other investments                                               10,067       10,141
                                                           ------------- ------------
     Other assets - net                                          10,761       10,850
                                                           ------------- ------------
CURRENT ASSETS:
 Cash and cash equivalents                                       11,436        8,645
 Restricted cash                                                 27,624       31,720
 Accounts receivable and unbilled revenue (less allowance
  for doubtful accounts of $2,519 and $1,802, respectively)      63,510       67,875
 Fuel - at average cost                                          24,892       30,589
 Materials and supplies - at average cost                        53,246       53,045
 Net income tax refunds receivable                                  737        5,800
 Deferred tax asset - current                                     3,291            -
 Regulatory assets                                                4,201        4,508
 Prepayments and other current assets                            11,126        8,065
                                                           ------------- ------------
     Total current assets                                       200,063      210,247
                                                           ------------- ------------
DEFERRED DEBITS:
 Regulatory assets                                              315,884      320,413
 Miscellaneous                                                   18,659       18,410
                                                           ------------- ------------
     Total deferred debits                                      334,543      338,823
                                                           ------------- ------------
             TOTAL                                         $  2,815,342  $ 2,807,965
                                                           ============= ============
              CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
 Common shareholder's deficit:
   Premium on 4% cumulative preferred stock                $        649  $       649
   Paid in capital                                                3,857        3,479
   Accumulated deficit                                          (23,455)     (54,808)
   Accumulated other comprehensive loss                              (2)          (2)
                                                           ------------- ------------
     Total common shareholder's deficit                         (18,951)     (50,682)
 Cumulative preferred stock of subsidiary                        59,135       59,135
 Long-term debt                                               1,481,536    1,481,516
                                                           ------------- ------------
     Total capitalization                                     1,521,720    1,489,969
                                                           -------------  -----------
CURRENT LIABILITIES:
  Line of credit and current portion of long-term debt           80,000      155,000
  Accounts payable and accrued expenses                          85,915       74,472
  Accrued real estate and personal property taxes                20,101       15,908
  Accrued income taxes                                           19,254            -
  Accrued interest                                               38,829       26,096
  Customer deposits                                              15,111       14,446
  Other current liabilities                                      10,266       10,049
                                                           ------------- ------------
     Total current liabilities                                  269,476      295,971
                                                           ------------- ------------
 DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
 Accumulated deferred income taxes - net                        396,316      425,638
 Non-current income tax liability                                25,193            -
 Asset retirement obligations                                   437,122      431,993
 Unamortized investment tax credit                               19,563       20,216
 Accrued pension and other postretirement benefits              133,805      132,453
 Miscellaneous                                                   12,147       11,725
                                                           ------------- ------------
     Total deferred credits and other long-term liabilities   1,024,146    1,022,025
                                                           ------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 10)

             TOTAL                                         $  2,815,342  $ 2,807,965
                                                           ============= ============`

See notes to unaudited consolidated financial statements.

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**IPALCO ENTERPRISES, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

(In Thousands)**

`Three Months Ended
                                                                 March 31,
                                                          ---------- ---------
                                                            2007       2006
                                                          ---------  ---------
Cash Flows from Operations:
 Net income                                              $  30,915  $  24,390
 Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization                           34,259     33,332
    Amortization of regulatory assets                        1,677      1,169
    Deferred income taxes and investment tax credit
      adjustments - net                                     (2,992)    23,775
    Gain on sales of assets - net                               (5)    (3,500)
    Preferred dividends of subsidiary                          803        803
    Allowance for equity funds used during construction       (805)      (738)
  Change in certain assets and liabilities:
    Accounts receivable                                      4,365       (751)
    Fuel, materials and supplies                             5,495     (3,852)
    Income taxes receivable or payable                      25,054    (12,432)
    Accounts payable and accrued expenses                      546      9,666
    Accrued real estate and personal property taxes          4,192      4,172
    Accrued interest                                        12,733     11,017
    Pension and other postretirement benefit expenses        1,353      3,239
    Short-term and long-term regulatory assets
      and liabilities                                       (1,290)     9,107
    Other - net                                             (3,979)    (1,757)
                                                          ---------  ---------
Net cash provided by operating activities                  112,321     97,640
                                                          ---------  ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures - utility                           (35,304)   (47,267)
  Decrease in restricted cash                                4,360          -
  Purchase of environmental emissions allowances                 -    (10,547)
  Purchase of short-term investments                             -     (1,400)
  Proceeds from sales and maturities of
    short-term investments                                     124      1,525
  Other                                                     (2,544)    (2,066)
                                                          ---------  ---------
Net cash used in investing activities                      (33,364)   (59,755)
                                                          ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings - net                              (75,000)   (39,200)
  Preferred dividends of subsidiary                           (803)      (803)
  Other                                                       (363)      (241)
                                                          ---------  ---------
Net cash used in financing activities                      (76,166)   (40,244)
                                                          ---------  ---------
Net change in cash and cash equivalents                      2,791     (2,359)
Cash and cash equivalents at beginning of period             8,645      6,008
                                                          ---------  ---------
Cash and cash equivalents at end of period               $  11,436  $   3,649
                                                          =========  =========
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
    Interest (net of amount capitalized)                 $  15,675  $  16,916
                                                          =========  =========
    Income taxes                                         $       -  $       -
                                                          =========  =========`

See notes to unaudited 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 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 combustion turbine that are all used for generating electricity. IPL's
net electric generation capability for winter is 3,400 megawatts and net summer capability is 3,282
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, 2006, 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

Financial Accounting Standards Board
("FASB") Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"

In July 2006, the FASB issued FASB Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN No. 48"), which
clarifies the accounting for uncertainty in income taxes recognized in a company's financial
statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes."
The interpretation prescribes a recognition threshold and measurement criteria for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. It also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.

IPALCO adopted the provisions of FIN No. 48 on January 1, 2007.  Under FIN No. 48, IPALCO
must recognize the tax benefit from an uncertain tax position only if it is more likely than not
that the tax position will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the financial statements from such
a position are measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon ultimate resolution. The impact of IPALCO's reassessment of its
tax positions in accordance with FIN No. 48 did not have a material effect on the results of
operations, financial condition or liquidity.  See Note 6 "Income Taxes".

Statement of Financial Accounting Standards ("SFAS") No. 157 "Fair Value
Measurements"

In September 2006, the FASB released SFAS No. 157, "Fair Value Measurements," to
define fair value, establish a framework for measuring fair value in accordance with accounting
principles generally accepted in the United States of America, and expand disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
Management has determined that SFAS No. 157 will not change the way we currently estimate fair value
on any of our assets or liabilities.

SFAS No. 159 "The Fair Value Option for Financial Assets and Financial
Liabilities"

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities." SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for
IPALCO beginning in 2008, but early adoption is permitted. IPALCO has chosen not to early adopt and
management does not believe SFAS No. 159 will have a material impact on our results of operations or
financial position.

4.  EQUIPMENT PURCHASE

On March 5, 2007, IPL filed a petition with the IURC for approval of, or a declination of
jurisdiction over, IPL's plans to acquire a combustion turbine owned by DTE Georgetown, LP, which is
a wholly owned subsidiary of DTE Georgetown Holdings, Inc. ("Holdings") and DTE Energy
Services Inc. ("Services"), pursuant to a purchase and sale agreement entered into with
Holdings and Services on February 22, 2007.  The turbine has a nominal nameplate capacity of 80
megawatts and is located at IPL's Georgetown substation.  The acquisition is contingent upon
receiving regulatory approvals.

5.  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.
IPALCO's reportable business segments are electric and "all other." The "all
other" category primarily includes the IPALCO$750 million Senior Secured Notes as of
March 31, 2007 and December 31, 2006, approximately $0.9 million and $0.9 million of nonutility cash
and cash equivalents, as of March 31, 2007 and December 31, 2006, respectively; long-term nonutility
investments of $9.0 million and $9.0 million at March 31, 2007 and December 31, 2006, 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, 2007 and December 31, 2006 and there were no
nonutility capital expenditures during the three month periods ended March 31, 2007 and March 31,
2006.

6.  INCOME TAXES

IPALCO's effective combined state and federal income tax rates for the three month periods
ended March 31, 2007 and 2006 were 41.6% and 32.0%, respectively. The rate increase was primarily
the result of interest income related to income taxes recorded during the first quarter of 2006 as a
result of the completion of an IRS examination of our filings for the period 1996 through March of
2001.

AES files federal and state income tax returns which consolidate IPALCO and its
subsidiaries.  Under a tax sharing agreement with AES, IPALCO is responsible for the income
taxes associated with its own taxable income.  As a subsidiary of AES, IPALCO files income tax
returns in the U.S. federal jurisdiction and the state of Indiana.  IPALCO is no longer subject
to U.S. or state income tax examinations for tax years prior to December 31, 2001.

As described in Note 3. "New Accounting Pronouncements", IPALCO adopted
the provisions of FIN No. 48, Accounting for Uncertainty in Income Taxes, on January
1, 2007.  The implementation of FIN No. 48 resulted in primarily a reclassification of
Accumulated deferred tax liabilities to Non-current income taxes payable and no significant
cumulative impact to Accumulated Deficit.  The gross unrecognized tax benefit balance as of the date
of adoption was $22.8 million.  The balance of unrecognized tax benefits represents tax positions
for which the ultimate deductibility is highly certain but for which there is uncertainty about the
timing of such deductibility.  Because of the impact of deferred tax accounting, other than interest
and penalties, the disallowance of the shorter deductibility period would not affect the annual
effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier
period.  It is expected that the amount of unrecognized tax benefits may change in the next twelve
months; however, management does not expect the change to have a significant impact on IPALCO's
financial statements.

Tax-related interest expense is reported as a part of the provision for federal and state income
taxes.  Penalties, if incurred, would also be recognized as a component of tax expense. 
As of January 1, 2007, IPALCO has recorded a liability of $3.3 million for the payments of interest
and a receivable of $0.7 million for a refund of interest.  Included in the recorded interest
is a $1.9 million liability and a $0.7 million receivable anticipated to
be paid/received within 12 months of the reporting date.  The liability/receivable for the
payment/receipt of interest did not materially change as of March 31, 2007.

7.  PENSION AND OTHER POSTRETIREMENT BENEFITS

Employees' Retirement Plan: Approximately 90% of IPL's active employees are covered by
the Employees' Retirement Plan of Indianapolis Power & Light Company ("Defined Benefit
Pension Plan"); as well as, the Employees' Thrift Plan of Indianapolis Power & Light
Company ("Thrift Plan").  The Defined Benefit Pension Plan is a qualified defined
benefit plan, while the Thrift Plan is a qualified defined contribution plan.  The remaining
10% of active employees are covered by the AES Retirement Savings Plan ("RSP Plan"). 
The RSP Plan is a qualified defined contribution plan containing a profit sharing component. 
All non-union new hires are covered under the RSP Plan, while International Brotherhood of
Electrical Workers ("IBEW") physical bargaining unit union new hires are covered under the
Defined Benefit Pension Plan and Thrift Plan. As a result of ratifying a new four-year labor
agreement between the IBEW clerical-technical unit and IPL in March 2007, new hires in this
bargaining unit are no longer covered under the Defined Benefit Pension Plan but will receive an
annual lump sum company contribution into the Thrift 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.
Management does not currently expect any of the pension assets to revert back to IPL during
2007.

In addition, IPL will change its measurement date from November 30 to December 31 coinciding with
the plan year ending December 31, 2008.

Supplemental Retirement Plan: Additionally, a small group of former officers and their
surviving spouses are covered under a funded non-qualified supplemental pension plan.

Pension Funding: IPL's funding policy for the Defined Benefit Pension Plan and the
Supplemental Retirement Plan 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, with
the plan to avoid the "at risk" status and to meet targeted funding levels necessary to qualify
under standards of the Pension Benefit Guaranty Corporation for exemption from certain
administrative requirements.

For funding purposes, the Defined Benefit Pension Plan will be exempt from any required funding
during 2007. At this time, IPL does not intend to make any contributions to the Defined Benefit
Pension Plan during 2007; however, management will continue to review possible funding scenarios
throughout 2007. The Supplemental Retirement Plan is not projected to have any contributions;
however, depending on the return on assets, contributions may be required in 2007.  If funding is
required, the amount is not expected to be material.

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

`For the Three Months
                                                     Ended March 31,
                                                  ---------- ----------
                                                     2007       2006
                                                  ---------- ----------
Pension Benefits                                      (In Thousands)

Components of net periodic benefit cost
Service cost                                         $1,472     $1,369
Interest cost                                         7,152      6,967
Expected return on plan assets                       (7,703)    (6,777)
Amortization of net actuarial loss                    1,409      1,300
Amortization of prior service cost                      687        565
                                                  ---------- ----------
Total net periodic benefit cost                      $3,017     $3,424
                                                  ========== ==========`

Expected amortization:  The estimated net loss and prior service cost for the pension
plans that will be amortized from the regulatory asset into net periodic benefit cost over the 2007
plan year are $5.7 million and $2.7 million, respectively (Defined Benefit Pension Plan of $5.5
million and $2.7 million, respectively; and the Supplemental Retirement Plan of $0.2 million and
$0.0 million, respectively).

Other Postretirement Benefits: IPL provides postretirement health care benefits to certain
retired or active employees and the spouses of certain retired or active employees. Other
postretirement benefit costs for the three month periods ended March 31, 2007 and 2006, were $0.5
million and $0.7 million, respectively.

The following table presents information relating to other postretirement benefits:

`For the Three Months
                                                         Ended March 31,
                                                    ------------ ------------
                                                        2007         2006
                                                    ------------ ------------
Other postretirement benefits                            (In Thousands)

Components of net periodic benefit cost
Service cost                                               $330         $362
Interest cost                                               145          159
Amortization of prior service cost                            2          171
                                                    ------------ ------------
Total net periodic benefit cost                            $477         $692
                                                    ============ ============`

Expected amortization:  The estimated net loss and prior service cost for the other
postretirement plan that will be amortized from the regulatory asset into net periodic benefit cost
over the 2007 plan year are not expected to be material.

8.  REGULATORY MATTERS

Empower: On August 23, 2006, we made a filing with the IURC in which we sought
approval for a new customer choice plan called Empower. The three elements of Empower were: (1)
renewable energy options, (2) energy efficiency options and (3) customer service and pricing
options. The renewable energy options include a Green Power initiative, renewable energy education
and a commitment to invest in a renewable energy project. Energy efficiency options are demand-side
management ("DSM") options with a focus on energy efficiency.  The customer pricing
options provide a voluntary alternative to our regulated rates and services and include choices for
a Sure Bill, Fixed Rate or Time of Use program. The Empower plan was proposed to replace Elect Plan
to allow revenues and expenses related to customers within the plan to be treated as non-
jurisdictional in our authorized jurisdictional net operating income calculation. In March 2007, we
withdrew this filing. As a result of the expiration of Elect Plan and the withdrawal of Empower, net
operating income from customers that previously participated in Elect Plan programs is now included
in our authorized jurisdictional net operating income calculation. The IURC has initiated state-wide
proceedings into the effectiveness of DSM programs offered across Indiana, as well as time-based
pricing and other demand response programs. These were also features of the proposed Empower filing. We
are participating in each of these proceedings.

Green Power and Demand Side Management: In March 2007, IPL filed a petition with the IURC
to offer Green Power as a tariff rate in order to continue to provide this customer option without
interruption. IPL has also filed a new DSM petition requesting an extension of the programs
currently in place.  Both filings are subject to IURC approval.

Fuel Adjustment Charge:

Purchased power costs below an established benchmark are presumed to be recoverable
energy costs. Under a settlement agreement amended and approved by the IURC in March 2007, which
expires April 30, 2008, the benchmark for IPL is established prospectively each month based on the
lesser of the futures settlement price on the last trading day of the current month for next month,
for natural gas or No. 2 fuel oil. The settlement also generally provides for recovery of 85% of
power purchased up to $700/MWh to replace capacity losses for certain full forced outages and
environmental derates (unit impairment for environmental conditions) for power purchases up to the
first 11% of IPL's total rated summer capacity in any hour and full recovery for power purchases
exceeding 11% of IPL's total rated summer capacity in any hour.

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 alleged 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. On March 28, 2007 the court issued its
judgment, finding for the defendants. The plaintiffs recently filed a notice of appeal.

As of March 31, 2007 and March 31, 2006, IPL was a defendant in approximately 115 and 114 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 final outcome will not have a material adverse effect 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 10 "Commitments and Contingencies - Environmental" of IPALCO's
audited financial statements for the year ended December 31, 2006, included in its annual report on
Form 10-K, for a more comprehensive discussion of environmental matters impacting IPALCO and
IPL.

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
- 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 IURC
- our ownership by The AES Corporation
- 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 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 Operators
("Midwest ISO"), including recovery of costs incurred
- product development and technology changes

Most of these factors affect us through our consolidated subsidiary IPL. 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 with a
recorded value of $6.4 million, as of March 31, 2007. Our business segments are electric and
"all other."

IPL is engaged primarily in generating, transmitting, distributing and selling electric energy to
more than 470,000 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 has been 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 3,400 and 3,282 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.

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, 2007 and March 31, 2006

Our first quarter 2007 net income of $30.9 million increased $6.5 million from net
income of $24.4 million in the first quarter of 2006. The following discussion highlights the
significant factors contributing to this change.

Utility Operating Revenues

Utility operating revenues increased by $7.0 million during the three months ended March 31,
2007 compared to the same period in 2006 as a result of the following (dollars in thousands):

`March 31,      March 31,     Increase   Percentage
                                 2007           2006       (Decrease)    Change
                            ------------------------------------------------------
Retail Revenues                   $243,271       $235,194      $8,077         3.4%
Wholesale Revenues                  14,833         12,300       2,533        20.6%
Miscellaneous Revenues               4,533          8,122      (3,589)      -44.2%
                            ------------------------------------------
Total Utility Operating
  Revenues                        $262,637       $255,616      $7,021         2.7%
                            ==========================================

Heating Degree Days                  2,766          2,400         366        15.3%`

The 3.4% increase in retail revenues was primarily due to a 6.2% increase in the quantity of kWhs
sold ($14.2 million) offset by a 2.6% decrease in the weighted average price of kWhs sold ($6.1
million). The $14.2 million increase in the quantity of retail kWhs  sold was primarily due to a
15.3% increase in heating degree days during the comparable periods and because we increased our
retail customer base by approximately 3,200 customers or 0.6% from March 31, 2006 to March 31, 2007.
The $6.1 million decrease in the weighted average price of kWhs sold was primarily due to an $8.5
million decrease in fuel charges (see discussion in operating expenses) offset by a $3.2 million
increase in costs we recovered from our retail customers associated with the environmental
compliance construction program.

The 20.6% increase in wholesale revenues is primarily due to a 23.8% increase in the quantity of
kWhs sold ($2.9 million) partially offset by a 2.6% decrease in the weighted average price of retail
kWhs sold. The increase in the quantity of kWhs sold in the wholesale market in the first quarter of
2007 over the first quarter of 2006 was primarily due to a reduction in unit outages, which allowed
for more kWhs to be sold on the wholesale market.

The $3.6 million decrease in miscellaneous revenues was primarily due to a $3.5 million gain in
the first quarter of 2006 from exchanging 2,510 vintage 2007 sulfur dioxide
("SO2") air emissions allowances for 2,500 vintage 2005 SO2 air
emissions allowances. The gain resulted from exchanging allowances that were granted to us by the
Environmental Protection Agency at no charge and recorded at cost, which is zero, for allowances
that were recorded at their fair market value.

Utility Operating Expenses

The following table illustrates the primary operating expense changes from March
31, 2006 to March 31, 2007 for IPL (dollars in millions):

`Operating Expenses for the Quarter Ended March 31, 2006       $211.5
Increase in income taxes - net                                   6.5
Increase in purchased power expense                              3.9
Decrease in fuel                                                (6.6)
Decrease in maintenance expenses                                (7.5)
Other miscellaneous variances                                    1.7
                                                            ---------
Operating Expenses for the Quarter Ended March 31, 2007       $209.5
                                                            =========`

The $6.5 million increase in income tax expense was primarily due to a $15.6 million increase in
pretax net operating income.

Purchased power expense increased due to an increase in the volume of power purchased during the
period ($10.4 million) offset by a decrease in the market price of purchased power ($6.4 million).
The volume of power purchased increased primarily due to increased retail sales caused by a 15%
increase in heating degree days during the comparable periods.
The decreased market price of purchased power is influenced by changes in the
market price of delivered fuel (primarily natural gas), the price of environmental emission
allowances, the supply of and demand for electricity, and the time of day in which power is
purchased.

The decrease in fuel is primarily due to a $12.0 million decrease in the deferred fuel adjustment
offset by a $5.4 million increase in actual fuel costs. The deferred fuel adjustment is the result
of variances between estimated fuel and purchased power costs in IPL's fuel adjustment charge
("FAC") and actual fuel and purchased power costs. IPL is 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 IPL's rates are
adjusted. Actual fuel costs increased primarily due to the increase in the average price of coal
consumed.

Maintenance expenses were higher in the first quarter of 2006 primarily due to a scheduled
major generating unit outage that began in March 2006.

Other Income and Deductions

Other income and deductions decreased from income of $9.8 million in the first quarter of
2006 to income of $7.1 million in the first quarter of 2007. Included in this decrease is a $4.1
million decrease in the income tax benefit partially offset by a $1.0 million reduction in legal
expenses. The decrease in the income tax benefit is primarily due to changes in previously recorded
 tax contingencies including a related interest benefit. Legal expenses decreased primarily due to
decreased costs to defend litigation

Liquidity and Capital Resources

As of March 31, 2007, IPALCO had unrestricted cash and cash equivalents of
$11.4 million and highly liquid short-term investments of $1.5 million. We also had $27.6 million of
restricted cash held by a trustee to be made available to IPL as funds are invested on certain
qualifying environmental facilities. As of March 31, 2007, IPL also had available borrowing capacity
of $108.6 million under its $109.4 million committed credit facility after existing letters of
credit. All long-term financing arrangements 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 the IURC to
refinance $80 million 7 3/8% first mortgage bonds due 2007 and to issue up to $85 million of new
long-term debt at various times throughout the period ending December 2008 to fund a portion of its
construction program and other corporate purposes. IPL has approval from FERC to borrow up to $500
million of short-term indebtedness outstanding at any time through July 27, 2008. However, we 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 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 restricted and unrestricted cash balances,
short-term investments, cash generated from operating activities and borrowing capacity on IPL's
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 restricted and unrestricted cash
balances; (ii) cash generated from operating activities; (iii) borrowing capacity on IPL's committed
credit facility; and (iv) additional debt financing.

Capital Requirements.  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. IPL's
capital expenditures totaled $35.3 million and $47.3 million for the three months ended March 31,
2007 and 2006, respectively. The decrease is primarily related to increased expenditures in 2006 on
technology designed to reduce environmental emissions related to IPL's clean coal technology
projects. Construction expenditures during the first quarter of 2007 were financed with internally
generated cash provided by operations, borrowings on our credit facility, and $4.4 million in draws
from the construction fund associated with the issuance in September 2006 of $60 million first
mortgage bonds. Our capital expenditure program for the three-year period 2007-2009 is currently
estimated to cost approximately $500 million. It includes approximately $149 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 $172million for construction projects
designed to reduce SO2 and mercury emissions; $94 million for power plant related
projects; $81 million for investments associated with additional generation and $4 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 IPL's Clean Coal Technology projects, subject to regulatory approval.
Capital expenditures are financed with a combination of internally generated funds and short-term
and long-term borrowings.

On March 5, 2007, IPL filed a petition with the IURC for approval of, or a declination of
jurisdiction over, IPL's plans to acquire a combustion turbine owned by DTE Georgetown, LP, which is
a wholly owned subsidiary of DTE Georgetown Holdings, Inc. ("Holdings") and DTE Energy
Services Inc. ("Services"), pursuant to a purchase and sale agreement entered into with
Holdings and Services on February 22, 2007.  The turbine has a nominal nameplate capacity of 80
megawatts and is located at IPL's Georgetown substation.  The acquisition is contingent upon
receiving regulatory approvals.

Capital Resources.  On January 31, 2007 IPL filed a financing petition with
the IURC requesting, among other things, authority to issue additional debt in an amount not to
exceed $85 million at various times throughout the period ending December 2008 to fund a portion of its
construction program and other corporate purposes. The IURC issued an Order approving this petition
on April 25, 2007.

Pension Funding.  The Pension Protection Act of 2006 ("The Act"), which
contains comprehensive pension funding reform legislation, was enacted into law during the third
quarter of 2006.  The Act primarily affects the Defined Benefit Pension Plan.  The pension funding
provisions are effective January 1, 2008. The Act requires plans that are less than 100% funded to
fully fund any funding shortfall in amortized level installments over seven years, beginning in the
year of the shortfall. Then, each year thereafter, if the plan's underfunding increases to more than
the present value of the remaining annual installments, the excess is separately amortized over a
new seven year period. In addition to the amortized level installments, IPL must also contribute an
amount equal to the service cost earned by active participants during the plan year.  The Act
contains special accelerated provisions for plans that are determined to be "at risk". IPL
plans to fund to levels to avoid the "at risk" status.  For funding purposes, the Defined
Benefit Pension Plan will be exempt from any required funding during 2007. At this time, IPL does
not intend to make any contributions to the Defined Benefit Pension Plan during 2007. However,
management will continue to review possible funding scenarios throughout 2007. The Supplemental
Retirement Plan is not projected to have any contributions; however, depending on the return on
assets, contributions may be required in December 2007.  If funding is required, the amount is not
expected to be material.

IPL's funding policy for the Defined Benefit Pension Plan and the
Supplemental Retirement Plan 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, with
the plan to avoid the "at risk" status and to meet targeted funding levels necessary to qualify
under standards of the Pension Benefit Guaranty Corporation for exemption from certain
administrative requirements.

All non-union new hires are covered under the RSP Plan, while IBEW physical bargaining unit union
new hires are covered under the Defined Benefit Pension Plan and Thrift Plan. As a result of
ratifying a new four-year labor agreement between the IBEW clerical-technical unit union and IPL in
March 2007, new hires in this bargaining unit are no longer covered under the Defined Benefit
Pension Plan but will receive an annual lump sum company contribution into the Thrift Plan. The net
cash flow impact of this change is not expected to be material.

Dividends.  All of our outstanding common stock is owned by AES. We did not pay any
dividends to AES during the first three months of 2007. 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, financings, regulatory considerations, and such other factors as IPL's board
of directors deems relevant.

New Accounting Pronouncements

FIN
No. 48 "Accounting for Uncertainty in Income Taxes"

In July 2006, the FASB issued FIN
No. 48, "Accounting for Uncertainty in Income Taxes", which
clarifies the accounting for uncertainty in income taxes recognized in a company's financial
statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes."
The interpretation prescribes a recognition threshold and measurement criteria for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return. It also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.

IPALCO adopted the provisions of FIN
No. 48 on January 1, 2007.  Under FIN No. 48, IPALCO must recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such a position are measured based on the
largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate
resolution. The impact of IPALCO's reassessment of its tax positions in accordance with FIN No. 48
did not have a material effect on the results of operations, financial condition or liquidity.

SFAS No. 157, "Fair Value Measurements"

In September 2006, the FASB released SFAS No. 157, "Fair Value Measurements," to
define fair value, establish a framework for measuring fair value in accordance with accounting
principles generally accepted in the United States of America, and expand disclosures about fair
value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
Management has determined that SFAS No. 157 will not change the way we currently estimate fair value
on any of our assets or liabilities

SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities"

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial
Assets and Financial Liabilities." SFAS No. 159 permits entities to choose to measure many
financial instruments and certain other items at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that choose different
measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for
IPALCO beginning in 2008, but early adoption is permitted. IPALCO has chosen not to early adopt and
management does not believe SFAS No. 159 will have a material impact on our results of operations or
financial position.

---

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in IPL's exposure to market risks
during the three months ended March 31, 2007 compared with the exposure set forth in the Annual
Report filed with the SEC on Form 10-K for the year ended December 31, 2006.

---

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 and Exchange Act of 1934, as amended (the "Exchange Act"), is recorded,
processed, summarized and reported within the time periods specified in the SEC's rules and forms,
and that such information is accumulated and communicated to the chief executive officer
("CEO") and chief financial officer ("CFO"), 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 CEO and 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, 2007. 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.

Based upon the controls evaluation performed, the CEO and CFO have concluded that as of March 31,
2007, 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 SEC's rules and forms and that such
information is accumulated and communicated to the CEO and CFO, 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 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 first quarter ended March 31, 2007 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, and (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.

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

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 plaintiffs contended, in essence, that IPL
obtained the various parcels through the threat of eminent domain under circumstances where eminent
domain would have been inappropriate. In an amended complaint, the plaintiffs asserted claims for
fraudulent inducement to contract, unjust enrichment, breach of fiduciary duty and fraudulent
concealment, and sought compensatory and punitive damages. IPL settled the case for a nominal amount
on March 29, 2007.

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 alleged 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. On March 28, 2007 the court issued its judgment, finding for
the defendants. The plaintiffs recently filed a notice of appeal.

Item 1A. Risk Factors

There have been no material changes to the risk factors as previously
disclosed in IPALCO's 2006 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 March 15, 2007, AES, as sole shareholder
of IPALCO, executed a Consent in Lieu of Annual Meeting of
Stockholders in order to elect the following six individuals to serve as
directors of IPALCO:  Stephen R. Corwell, David Gee, Ann D. Murtlow, Richard
Santoroski, Ronald E. Talbot and Kenneth Uva.  No other matter was included in
the Consent, and these individuals are the only directors of IPALCO.

Item 5. Other Information

None.

Item 6.  Exhibits





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

`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) and by 18 U.S.C. Section 135`

---

**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 14, 2007 | By: | /s/ Frank P. Marino

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

|                   |     |                      
|------------------ | --- | ---------------------
|Date: May 14, 2007 | By: | /s/ Kurt A. Tornquist

| |                               
| | ------------------------------
| |                               
| | Kurt A. Tornquist             
| | Controller                    
| | (Principal Accounting Officer)