Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2015

Note 3 – Regulatory Assets and Liabilities

In accordance with FASC 980, we have recognized total regulatory assets of $194.3 million and $211.7 million at December 31, 2015 and 2014, respectively, and total regulatory liabilities of $151.4 million and $128.5 million at December 31, 2015 and 2014, respectively. Regulatory assets and liabilities are classified as current or non-current based on the term in which recovery is expected. See Note 1 – Overview and Summary of Significant Accounting Policies for accounting policies regarding Regulatory Assets and Liabilities.

The following table presents DPL’s Regulatory assets and liabilities:



			December 31,
$ in millions	Type of Recovery	Amortization Through	2015		2014
Regulatory assets, current:
Fuel and purchased power recovery costs	A	2016	$	13.9	$	16.3
Economic development costs	A	2016	0.5		2.1
Deferred storm costs	B	2015	—		22.3
Energy efficiency program	A	2016	—		1.8
Other miscellaneous	A	2016	—		1.7
Total regulatory assets, current			14.4		44.2
Regulatory assets, non-current:
Pension benefits	B	Ongoing	$	91.6	$	99.6
Deferred recoverable income taxes	B/C	Ongoing	36.4		43.1
Fuel costs	B	Undetermined	12.7		—
Unrecovered OVEC charges	D	Undetermined	10.5		—
Unamortized loss on reacquired debt	B	Various	9.0		9.9
Smart grid and advanced metering infrastructure costs	D	Undetermined	7.3		6.6
Generation separation costs	D	Undetermined	3.9		1.6
Retail settlement system costs	D	Undetermined	3.1		3.1
Consumer education campaign	D	Undetermined	3.0		3.0
Rate case costs	D	Undetermined	1.9		—
Other miscellaneous	D	Undetermined	0.5		0.6
Total regulatory assets, non-current			179.9		167.5

Total regulatory assets			$	194.3	$	211.7

Regulatory liabilities, current:
Energy efficiency program			$	9.2	$	—
Competitive bidding			9.1		—
Transmission costs			3.7		2.9
Reconciliation rider			2.1		—
Other miscellaneous			0.3		1.5
Total regulatory liabilities, current			24.4		4.4
Regulatory liabilities, non-current:
Estimated costs of removal - regulated property			$	121.8	$	119.3
Postretirement benefits			5.2		4.8
Total regulatory liabilities, non-current			127.0		124.1

Total regulatory liabilities			$	151.4	$	128.5

A – Recovery of incurred costs without a rate of return.

B – Recovery of incurred costs plus rate of return.

C – Balance has an offsetting liability resulting in no effect on rate base.

D – Recovery not yet determined, but is probable of occurring in future rate proceedings.

Regulatory assets

Fuel and purchased power recovery costs represent prudently incurred fuel, purchased power, derivative, emission and other related costs which will be recovered from or returned to customers in the future through the operation of the fuel and purchased power recovery rider. The fuel and purchased power recovery rider fluctuates based on actual costs and recoveries and is modified at the start of each seasonal quarter. As part of the PUCO approval process, an outside auditor reviews fuel costs and the fuel procurement process. The audit for 2014 is in process. The costs recovered through the fuel rider have decreased significantly over the past three years as more SSO supply is provided through the competitive bid. While no further fuel or purchased power costs will be recoverable through the rider, it will continue for up to six months to allow for recovery of the ending deferral amount.

Fuel costs - long-term represent unrecovered fuel costs related to DP&L’s fuel rider from 2010 through 2015 resulting from a declining SSO customer base. DP&L has requested recovery of these costs as part of its pending Distribution Rate Case filing.

Economic development costs represent costs incurred to promote economic development within the State of Ohio. These costs are being recovered through an Economic Development Rider that is subject to a bi-annual true-up process for any over/under recovery of costs.

Deferred storm costs represent costs incurred to repair the damage to DP&L’s distribution equipment by major storms in 2008, 2011 and 2012. All such costs have now been recovered.

Energy efficiency program costs represent costs incurred to develop and implement various customer programs addressing energy efficiency. These costs are being recovered through an Energy Efficiency Rider (EER) that began July 1, 2009 and that is subject to an annual true-up for any over/under recovery of costs. In addition to recovery of program costs, this rider has allowed for DP&L to recover lost margin associated with decreases in sales as a result of the programs implemented. The authority to recover lost margin included a maximum amount, which DP&L reached in the fourth quarter of 2015. Consequently, we discontinued accruing an asset for lost revenues after the maximum was reached. In addition, this rider provides that DP&L can earn a “shared savings” incentive that is tiered depending upon the level of success the programs reach. In 2014 and 2015, the maximum shared savings was accrued based upon performance, which is equal to $4.5 million per year, after income taxes.

Pension benefits represent the qualifying FASC 715 “Compensation - Retirement Benefits” costs of our regulated operations that for ratemaking purposes are deferred for future recovery. We recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status, and recognize, as a component of OCI, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. This regulatory asset represents the regulated portion that would otherwise be charged as a loss to OCI.

Deferred recoverable income taxes represent deferred income tax assets recognized from the normalization of flow-through items as the result of tax benefits previously provided to customers. This is the cumulative flow-through benefit given to regulated customers that will be collected from them in future years. Since currently existing temporary differences between the financial statements and the related tax basis of assets will reverse in subsequent periods, these deferred recoverable income taxes will decrease over time.

Unrecovered OVEC charges represent the portion of capacity charges from OVEC that were not recoverable through DP&L’s fuel rider beginning in October 2014. DP&L expects to recover these costs through a future rate proceeding.

Unamortized loss on reacquired debt represents losses on long-term debt reacquired or redeemed in prior periods that have been deferred. These deferred losses are being amortized over the lives of the original issues in accordance with FERC and PUCO rules.

Smart Grid and AMI costs represent costs incurred as a result of studying and developing distribution system upgrades and the implementation of AMI. On October 19, 2010, DP&L elected to withdraw its case pertaining to the Smart Grid and AMI programs. The PUCO accepted the withdrawal in an order issued on January 5, 2011. The PUCO also indicated that it expects DP&L to continue to monitor other utilities' Smart Grid and AMI programs and to explore the potential benefits of investing in Smart Grid and AMI programs and that DP&L will, when appropriate, file new Smart Grid and/or AMI business cases in the future. This plan is currently under development and we plan to seek recover of these deferred costs in a regulatory rate proceeding in the near future. Based on past PUCO precedent, we believe these costs are probable of future recovery in rates.

Generation separation costs represent financing, redemption and other costs related to the divestiture of DP&L’s generation assets. The PUCO directed DP&L to divest its generation assets by January 1, 2017. DP&L requested and was granted permission by the PUCO to defer all financing, redemption and related costs it incurs to transfer its generation assets. DP&L has requested recovery of these costs as part of its pending Distribution Rate Case filing.

Retail settlement system costs represent costs to implement a retail settlement system that reconciles the energy a CRES supplier delivers to its customers with what its customers actually use. DP&L has requested recovery of these costs as part of its pending Distribution Rate Case filing.

Consumer education campaign represents costs for consumer education advertising regarding electric deregulation. DP&L has requested recovery of these costs as part of its pending distribution rate case filing.

Rate case costs represent costs associated with preparing a distribution rate case. DP&L has requested recovery of these costs as part of its pending Distribution Rate Case filing.

Regulatory liabilities

Energy efficiency program costs see “Regulatory Assets - Energy efficiency program costs” above.

Competitive bidding represents costs associated with the development and implementation of a Competitive Bidding Process, establishing contracts to supply power for a portion of DP&L’s Standard Service Offer load, as well as the net over/under recovery of the cost of the power purchased from the bid winners.

Transmission costs represent the costs related to transmission, ancillary service and other PJM-related charges that have been incurred as a member of PJM. On an annual basis, retail rates are adjusted to true-up costs with recovery in rates.

Reconciliation rider represents the costs that exceed 10 percent of the base amount of the following riders: Fuel, RPM, Alternative Energy and Competitive Bidding. This rider is in an overcollection position and will be discontinued after this overcollection has been refunded to customers.

Estimated costs of removal – regulated property reflect an estimate of amounts collected in customer rates for costs that are expected to be incurred in the future to remove existing transmission and distribution property from service when the property is retired.

Postretirement benefits represent the qualifying FASC 715 “Compensation – Retirement Benefits” gains related to our regulated operations that, for ratemaking purposes, are probable of being reflected in future rates. We recognize an asset for a plan’s overfunded status or a liability for a plan’s underfunded status, and recognize, as a component of OCI, the changes in the funded status of the plan that arise during the year that are not recognized as a component of net periodic benefit cost. This regulatory liability represents the regulated portion that would otherwise be reflected as a gain to OCI.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Regulatory Assets [Line Items]

Regulatory Assets and Liabilities