v3.26.3
Derivative Instruments and Hedging Activities (Notes)
 9 Months Ended
Sep. 30, 2026
Derivative Instruments and Hedging Activities [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block] DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
For further information on the Company’s derivative and hedge accounting policies, see Note 1, “Overview and Summary of Significant Accounting Policies - Financial Derivatives” and Note 6, “Derivative Instruments and Hedging Activities” to IPALCO’s 2025 Form 10-K.

Volume of Activity — The following tables present the Company’s maximum notional over the remaining contractual period by type of derivative as of September 30, 2026, and the dates through which the maturities for each type of derivative range:

Commodity
Accounting Treatment
UnitMaximum Notional
(in thousands)		Latest Maturity
FTRsNot DesignatedMWh6,7232027
Natural gasNot DesignatedMMBtu12,0312028

Accounting and Reporting — The following table summarizes the fair value, balance sheet classification and hedging designation of IPALCO’s derivative instruments (in thousands):

CommodityHedging DesignationBalance sheet classification
September 30, 2026
December 31, 2025
FTRs
Not designatedPrepayments and other current assets$4,947 $1,584 
Commodity derivativesNot designatedOther non-current assets$45 $— 
Commodity derivativesNot designatedAccrued and other current liabilities, Other non-current liabilities$2,743 $— 

AES Indiana’s commodity contracts do not qualify for hedge accounting or the normal purchases and sales exceptions under ASC 815. Accordingly, FTRs are recorded at fair value using the income approach when acquired and subsequently amortized over the annual period as they are used. Other commodity derivatives are recorded at fair value using the market approach with changes in the fair value recorded to regulatory assets and liabilities. Gains and losses on commodity derivatives are included in future FAC filings, and therefore any realized and unrealized gains and losses are deferred to be returned to or recovered from customers in future periods. For the three and nine months ended September 30, 2026, net losses on the Company's commodity derivatives deferred were $2.8 million and $3.1 million, respectively.

When applicable, IPALCO has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of September 30, 2026 and December 31, 2025, IPALCO did not have any offsetting positions.

Cash Flow Hedges

As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. IPALCO
previously used derivative financial instruments primarily to manage the interest rate risk associated with our long-term debt. These interest rate derivative contracts were settled in previous periods, and we continue to amortize amounts out of AOCI into interest expense.

The amounts reclassified out of AOCI by component during the three and nine months ended September 30, 2026 and 2025 are as follows (in Thousands):

Details about AOCI components
Affected line item in the Condensed Consolidated Statements of OperationsThree Months Ended September 30,Nine Months Ended September 30,
2026202520262025
Net gains on cash flow hedges Interest expense$(578)$(578)$(1,734)$(1,734)
Income tax effect144 144 432 432 
Total reclassifications for the period, net of income taxes$(434)$(434)$(1,302)$(1,302)
During the next twelve months, the Company expects to reclassify $1.7 million of net gains from accumulated other comprehensive income into earnings