Independence Power and Light (IPL) is a complex capital intensive enterprise.
To make sure it has sufficient funds to meet its ongoing needs, a 2013 recent rate study suggested the City Council - the IPL governing board - formally adopt an "unrestricted cash fund balance."
The City Council has its own policy for fund balances, but nothing comparable currently exists for IPL.
Sawvel, which developed the 2013 rate study, provides a clear methodology for determining an appropriate "undesignated cash fund balance" for IPL (page 3). Sawvel is currently updating its rate study.
The 2013 study states:
"The methodology takes into account the reserve requirements for power supply related expenses, other operating expenses, recurring additions and capital improvements, and an amount for unanticipated emergencies. The financial community often considers whether an unrestricted cash fund policy is in place, and the level of such fund balances."
Indy Energy has developed a policy paper on this subject to explain the issue and the policy options.
This matter is a policy option for consideration by the City Council during its review and approval of 2015-16 budget.