Business Segments

6 Months Ended

Jun. 30, 2011

Business Segments

15. Business Segments

DPL operates through two segments consisting of the operations of two of its wholly-owned subsidiaries, DP&L (Utility segment) and DPLER (Competitive Retail segment). This is how we view our business and make decisions on how to allocate resources and evaluate performance.

The Utility segment is comprised of DP&L's electric generation, transmission and distribution businesses which generate and sell electricity to residential, commercial, industrial and governmental customers. Electricity for the segment's 24-county service area is primarily generated at eight coal-fired power plants and is distributed to more than 500,000 retail customers who are located in a 6,000 square mile area of West Central Ohio. DP&L also sells electricity to DPLER and any excess energy and capacity is sold into the wholesale market. DP&L's transmission and distribution businesses are subject to rate regulation by federal and state regulators while rates for its generation business are deemed competitive under Ohio law.

The Competitive Retail segment is comprised of DPLER's competitive retail electric service business which sells retail electric energy under contract to residential, commercial and industrial customers who have selected DPLER as their alternative electric supplier. The Competitive Retail segment sells electricity to approximately 15,000 customers located throughout Ohio and Illinois. Beginning February 28, 2011, the Competitive Retail segment includes the results of MC Squared, a Chicago-based retail electricity supplier. MC Squared was purchased by DPLER on February 28, 2011 and serves approximately 3,000 customers in northern Illinois. The Competitive Retail segment's electric energy used to meet its Ohio sales obligations was purchased from DP&L at market prices for wholesale power. The electric energy used to meet its Illinois sales obligations was purchased from PJM. The Competitive Retail segment has no transmission or generation assets. The operations of DPLER are not subject to rate regulation by federal or state regulators.

Included within the "Other" column are other businesses that do not meet the GAAP requirements for disclosure as reportable segments as well as certain corporate costs which include interest expense on DPL's debt.

Management evaluates segment performance based on gross margin. The accounting policies of the reportable segments are the same as those described in Note 1 – Overview and Summary of Significant Accounting Policies. Intersegment sales and profits are eliminated in consolidation.

The following table presents financial information for each of DPL's reportable business segments:

									Adjustments
				Competitive					and				DPL
$ in millions		Utility		Retail		Other			Eliminations				Consolidated
Three Months Ended June 30, 2011
Revenues from external customers	$	327.6	$	102.0	$	15.3			$	-		$	444.9
Intersegment revenues		81.0		-		1.0			(82.0		)		-
Total revenues	$	408.6	$	102.0	$	16.3		$	(82.0		)	$	444.9
Fuel		89.1		-		3.0				-			92.1
Purchased power		104.4		89.5		0.7			(81.0		)		113.6
Gross margin	$	215.1	$	12.5	$	12.6			$	(1.0	)	$	239.2
Depreciation and amortization	$	33.4	$	-	$	1.7			$	-		$	35.1
Interest expense		9.7		0.1		7.9				(0.1	)		17.6
Income tax expense (benefit)		15.5		3.3		(2.5	)			-			16.3
Net income (loss)		30.8		5.7		(3.7	)			(1.1	)		31.7
Cash capital expenditures		48.4		-		-				-			48.4
Three Months Ended June 30, 2010
Revenues from external customers	$	371.2	$	62.8	$	11.5			$	-		$	445.5
Intersegment revenues		52.7		-		1.1			(53.8		)		-
Total revenues	$	423.9	$	62.8	$	12.6		$	(53.8		)	$	445.5
Fuel		88.5		-		2.4				-			90.9
Purchased power		90.3		52.7		0.6			(52.7		)		90.9
Gross margin	$	245.1	$	10.1	$	9.6			$	(1.1	)	$	263.7
Depreciation and amortization	$	33.2	$	0.1	$	2.4			$	-		$	35.7
Interest expense		9.1		-		8.4				-			17.5
Income tax expense (benefit)		28.4		3.1		(1.4	)			-			30.1
Net income (loss)		59.4		5.0		(1.4	)			(1.6	)		61.4
Cash capital expenditures		34.1		-		1.2				-			35.3

									Adjustments
				Competitive					and				DPL
$ in millions		Utility		Retail		Other			Eliminations				Consolidated
Six Months Ended June 30, 2011
Revenues from external customers	$	716.3	$	196.0	$	27.3			$	-		$	939.6
Intersegment revenues		156.1		-		2.0			(158.1		)		-
Total revenues	$	872.4	$	196.0	$	29.3		$	(158.1		)	$	939.6
Fuel		187.7		-		4.2				-			191.9
Purchased power		222.2		167.2		1.1			(156.1		)		234.4
Gross margin	$	462.5	$	28.8	$	24.0			$	(2.0	)	$	513.3
Depreciation and amortization	$	66.5	$	0.1	$	3.6			$	-		$	70.2
Interest expense		19.4		0.1		15.1				(0.1	)		34.5
Income tax expense (benefit)		42.5		9.9		(11.3	)			-			41.1
Net income (loss)		83.5		11.8		(18.5	)			(1.6	)		75.2
Cash capital expenditures		90.8		-		0.6				-			91.4
Six Months Ended June 30, 2010
Revenues from external customers	$	771.9	$	104.6	$	20.2			$	-		$	896.7
Intersegment revenues		90.0		-		2.2			(92.2		)		-
Total revenues	$	861.9	$	104.6	$	22.4		$	(92.2		)	$	896.7
Fuel		189.1		-		3.7				-			192.8
Purchased power		162.9		90.0		0.8			(90.0		)		163.7
Gross margin	$	509.9	$	14.6	$	17.9			$	(2.2	)	$	540.2
Depreciation and amortization	$	68.0	$	0.1	$	5.0			$	-		$	73.1
Interest expense		18.5		-		16.9				-			35.4
Income tax expense (benefit)		65.2		4.3		(3.0	)			-			66.5
Net income (loss)		131.5		7.1		(3.4	)			(2.8	)		132.4
Cash capital expenditures		73.5		-		1.6				-			75.1
Total Assets
June 30, 2011	$	3,435.0	$	59.5	$	1,698.2		$	(1,481.1		)	$	3,711.6
December 31, 2010	$	3,475.4	$	35.7	$	1,828.8		$	(1,526.6		)	$	3,813.3

DP&L [Member]

Business Segments

15. Business Segments

DPL operates through two segments consisting of the operations of two of its wholly-owned subsidiaries, DP&L (Utility segment) and DPLER (Competitive Retail segment). This is how we view our business and make decisions on how to allocate resources and evaluate performance.

The Utility segment is comprised of DP&L's electric generation, transmission and distribution businesses which generate and sell electricity to residential, commercial, industrial and governmental customers. Electricity for the segment's 24-county service area is primarily generated at eight coal-fired power plants and is distributed to more than 500,000 retail customers who are located in a 6,000 square mile area of West Central Ohio. DP&L also sells electricity to DPLER and any excess energy and capacity is sold into the wholesale market. DP&L's transmission and distribution businesses are subject to rate regulation by federal and state regulators while rates for its generation business are deemed competitive under Ohio law.

The Competitive Retail segment is comprised of DPLER's competitive retail electric service business which sells retail electric energy under contract to residential, commercial and industrial customers who have selected DPLER as their alternative electric supplier. The Competitive Retail segment sells electricity to approximately 15,000 customers located throughout Ohio and Illinois. Beginning February 28, 2011, the Competitive Retail segment includes the results of MC Squared, a Chicago-based retail electricity supplier. MC Squared was purchased by DPLER on February 28, 2011 and serves approximately 3,000 customers in northern Illinois. The Competitive Retail segment's electric energy used to meet its Ohio sales obligations was purchased from DP&L at market prices for wholesale power. The electric energy used to meet its Illinois sales obligations was purchased from PJM. The Competitive Retail segment has no transmission or generation assets. The operations of DPLER are not subject to rate regulation by federal or state regulators.

Included within the "Other" column are other businesses that do not meet the GAAP requirements for disclosure as reportable segments as well as certain corporate costs which include interest expense on DPL's debt.

Management evaluates segment performance based on gross margin. The accounting policies of the reportable segments are the same as those described in Note 1 Overview and Summary of Significant Accounting Policies. Intersegment sales and profits are eliminated in consolidation.

The following table presents financial information for each of DPL's reportable business segments:

									Adjustments
				Competitive					and				DPL
$ in millions		Utility		Retail		Other			Eliminations				Consolidated
Three Months Ended June 30, 2011
Revenues from external customers	$	327.6	$	102.0	$	15.3			$	-		$	444.9
Intersegment revenues		81.0		-		1.0			(82.0		)		-
Total revenues	$	408.6	$	102.0	$	16.3		$	(82.0		)	$	444.9
Fuel		89.1		-		3.0				-			92.1
Purchased power		104.4		89.5		0.7			(81.0		)		113.6
Gross margin	$	215.1	$	12.5	$	12.6			$	(1.0	)	$	239.2
Depreciation and amortization	$	33.4	$	-	$	1.7			$	-		$	35.1
Interest expense		9.7		0.1		7.9				(0.1	)		17.6
Income tax expense (benefit)		15.5		3.3		(2.5	)			-			16.3
Net income (loss)		30.8		5.7		(3.7	)			(1.1	)		31.7
Cash capital expenditures		48.4		-		-				-			48.4
Three Months Ended June 30, 2010
Revenues from external customers	$	371.2	$	62.8	$	11.5			$	-		$	445.5
Intersegment revenues		52.7		-		1.1			(53.8		)		-
Total revenues	$	423.9	$	62.8	$	12.6		$	(53.8		)	$	445.5
Fuel		88.5		-		2.4				-			90.9
Purchased power		90.3		52.7		0.6			(52.7		)		90.9
Gross margin	$	245.1	$	10.1	$	9.6			$	(1.1	)	$	263.7
Depreciation and amortization	$	33.2	$	0.1	$	2.4			$	-		$	35.7
Interest expense		9.1		-		8.4				-			17.5
Income tax expense (benefit)		28.4		3.1		(1.4	)			-			30.1
Net income (loss)		59.4		5.0		(1.4	)			(1.6	)		61.4
Cash capital expenditures		34.1		-		1.2				-			35.3

									Adjustments
				Competitive					and				DPL
$ in millions		Utility		Retail		Other			Eliminations				Consolidated
Six Months Ended June 30, 2011
Revenues from external customers	$	716.3	$	196.0	$	27.3			$	-		$	939.6
Intersegment revenues		156.1		-		2.0			(158.1		)		-
Total revenues	$	872.4	$	196.0	$	29.3		$	(158.1		)	$	939.6
Fuel		187.7		-		4.2				-			191.9
Purchased power		222.2		167.2		1.1			(156.1		)		234.4
Gross margin	$	462.5	$	28.8	$	24.0			$	(2.0	)	$	513.3
Depreciation and amortization	$	66.5	$	0.1	$	3.6			$	-		$	70.2
Interest expense		19.4		0.1		15.1				(0.1	)		34.5
Income tax expense (benefit)		42.5		9.9		(11.3	)			-			41.1
Net income (loss)		83.5		11.8		(18.5	)			(1.6	)		75.2
Cash capital expenditures		90.8		-		0.6				-			91.4
Six Months Ended June 30, 2010
Revenues from external customers	$	771.9	$	104.6	$	20.2			$	-		$	896.7
Intersegment revenues		90.0		-		2.2			(92.2		)		-
Total revenues	$	861.9	$	104.6	$	22.4		$	(92.2		)	$	896.7
Fuel		189.1		-		3.7				-			192.8
Purchased power		162.9		90.0		0.8			(90.0		)		163.7
Gross margin	$	509.9	$	14.6	$	17.9			$	(2.2	)	$	540.2
Depreciation and amortization	$	68.0	$	0.1	$	5.0			$	-		$	73.1
Interest expense		18.5		-		16.9				-			35.4
Income tax expense (benefit)		65.2		4.3		(3.0	)			-			66.5
Net income (loss)		131.5		7.1		(3.4	)			(2.8	)		132.4
Cash capital expenditures		73.5		-		1.6				-			75.1
Total Assets
June 30, 2011	$	3,435.0	$	59.5	$	1,698.2		$	(1,481.1		)	$	3,711.6
December 31, 2010	$	3,475.4	$	35.7	$	1,828.8		$	(1,526.6		)	$	3,813.3