Fixed Asset Impairment (DP&L [Member])	9 Months Ended
Sep. 30, 2012
DP&L [Member]
Fixed-asset Impairment	13. Fixed-asset Impairment On October 5, 2012, DP&L filed for approval an ESP with the PUCO which reflects a shift in our outlook for the regulatory environment. Within the ESP filing, DP&L agreed to request a separation of its generation assets from its transmission and distribution assets in recognition that a restructuring of DP&L operations will be necessary, in compliance with Ohio law. Also, during 2012, North American natural gas prices fell significantly from the previous year, exerting downward pressure on wholesale electricity prices in the Ohio power market. Falling power prices have compressed wholesale margins at DP&L’s generating plants. Furthermore, these lower power prices have led to increased customer switching from DP&L to CRES providers, who are offering retail prices lower than DP&L’s standard service offer. Also, several municipalities in DP&L’s service territory have passed ordinances allowing them to become government aggregators with some having already contracted with CRES providers, further contributing to the switching trend. In September 2012, management revised its cash flow forecasts based on these developments as part of its annual budgeting process and forecasted lower operating cash flows than in prior reporting periods. Collectively, in the third quarter of 2012, these events were considered to be an impairment indicator for the long-lived asset group as management believes that these developments represent a significant adverse change in the business climate that could affect the value of the long-lived asset group. The long-lived asset group subject to the impairment evaluation was determined to be each individual plant of DP&L. This determination was based on the assessment of the plants’ ability to generate independent cash flows. When the recoverability test of the long-lived asset group was performed, management concluded that, on an undiscounted cash flow basis, the carrying amount of two plants, Conesville and Hutchings, were not recoverable. To measure the amount of impairment loss, management was required to determine the fair value of the two plants. Cash flow forecasts and the underlying assumptions for the valuation were developed by management. While there were numerous assumptions that impact the fair value, forward power prices, dark spreads and the transition to a merchant model were the most significant. In determining the fair value of the Conesville plant, the three valuation approaches prescribed by the fair value measurement accounting guidance were considered. The fair value under the income approach was considered the most appropriate and resulted in a $25.0 million fair value. The carrying value of the Conesville plant prior to the impairment was $97.5 million. Accordingly, the Conesville plant was considered impaired and $72.5 million of impairment expense was recognized in the third quarter of 2012. In determining the fair value of the Hutchings plant, the three valuation approaches prescribed by the fair value measurement accounting guidance were considered. The fair value under the income approach was considered the most appropriate and resulted in a zero fair value. The carrying value of the Hutchings plant prior to the impairment was $8.3 million. Accordingly, the Hutchings plant was considered impaired and $8.3 million of impairment expense was recognized in the third quarter of 2012.

13. Fixed-asset Impairment

On October 5, 2012, DP&L filed for approval an ESP with the PUCO which reflects a shift in our outlook for the regulatory environment. Within the ESP filing, DP&L agreed to request a separation of its generation assets from its transmission and distribution assets in recognition that a restructuring of DP&L operations will be necessary, in compliance with Ohio law. Also, during 2012, North American natural gas prices fell significantly from the previous year, exerting downward pressure on wholesale electricity prices in the Ohio power market. Falling power prices have compressed wholesale margins at DP&L’s generating plants. Furthermore, these lower power prices have led to increased customer switching from DP&L to CRES providers, who are offering retail prices lower than DP&L’s standard service offer. Also, several municipalities in DP&L’s service territory have passed ordinances allowing them to become government aggregators with some having already contracted with CRES providers, further contributing to the switching trend. In September 2012, management revised its cash flow forecasts based on these developments as part of its annual budgeting process and forecasted lower operating cash flows than in prior reporting periods. Collectively, in the third quarter of 2012, these events were considered to be an impairment indicator for the long-lived asset group as management believes that these developments represent a significant adverse change in the business climate that could affect the value of the long-lived asset group.

The long-lived asset group subject to the impairment evaluation was determined to be each individual plant of DP&L. This determination was based on the assessment of the plants’ ability to generate independent cash flows. When the recoverability test of the long-lived asset group was performed, management concluded that, on an undiscounted cash flow basis, the carrying amount of two plants, Conesville and Hutchings, were not recoverable. To measure the amount of impairment loss, management was required to determine the fair value of the two plants. Cash flow forecasts and the underlying assumptions for the valuation were developed by management. While there were numerous assumptions that impact the fair value, forward power prices, dark spreads and the transition to a merchant model were the most significant.

In determining the fair value of the Conesville plant, the three valuation approaches prescribed by the fair value measurement accounting guidance were considered. The fair value under the income approach was considered the most appropriate and resulted in a $25.0 million fair value. The carrying value of the Conesville plant prior to the impairment was $97.5 million. Accordingly, the Conesville plant was considered impaired and $72.5 million of impairment expense was recognized in the third quarter of 2012.

In determining the fair value of the Hutchings plant, the three valuation approaches prescribed by the fair value measurement accounting guidance were considered. The fair value under the income approach was considered the most appropriate and resulted in a zero fair value. The carrying value of the Hutchings plant prior to the impairment was $8.3 million. Accordingly, the Hutchings plant was considered impaired and $8.3 million of impairment expense was recognized in the third quarter of 2012.