Related Party Transactions

3 Months Ended

Mar. 31, 2017

Service Company

The Service Company provides services including operations, accounting, legal, human resources, information technology and other corporate services on behalf of companies that are part of the U.S. SBU, including, among other companies, DPL and DP&L. The Service Company allocates the costs for these services based on cost drivers designed to result in fair and equitable allocations. This includes ensuring that the regulated utilities served, including DP&L, are not subsidizing costs incurred for the benefit of other businesses.

Benefit plans

DPL has an agreement with AES or one of its affiliates to participate in a group benefits program, including but not limited to, health, dental, vision and life benefits. AES or its affiliate administers the financial aspects of the group insurance program, receives all premium payments from the participating affiliates, and makes all vendor payments.

The following table provides a summary of these transactions:



	Three months ended
	March 31,
$ in millions	2017			2016
Transactions with the Service Company
Charges for services provided	$	13.9		$	11.6
Charges to the Service Company	$	1.0		$	1.2
Transactions with other AES affiliates:
Charges for health, welfare and benefit plans	$	4.2		$	4.1

Balances with the Service Company:	At March 31, 2017			At December 31, 2016
Net payable to the Service Company	$	—		$	(2.0	)
Net payable to other AES affiliates	$	(3.1	)	$	(2.5	)

DPL Capital Trust II

DPL has a wholly-owned business trust, DPL Capital Trust II (the "Trust"), formed for the purpose of issuing trust capital securities to third-party investors. Effective in 2003, DPL deconsolidated the Trust upon adoption of the accounting standards related to variable interest entities and currently treats the Trust as a nonconsolidated subsidiary. The Trust holds mandatorily redeemable trust capital securities. The investment in the Trust, which amounts to $0.3 million and $0.3 million at March 31, 2017 and December 31, 2016, respectively, is included in Other deferred assets within Other non-current assets. DPL also has a note payable to the Trust amounting to $15.6 million and $15.6 million at March 31, 2017 and December 31, 2016, respectively, that was established upon the Trust’s deconsolidation in 2003. See Note 7 – Debt for additional information.

In addition to the obligations under the note payable mentioned above, DPL also agreed to a security obligation which represents a full and unconditional guarantee of payments to the capital security holders of the Trust.

Income taxes

AES files federal and state income tax returns which consolidate DPL and its subsidiaries. Under a tax sharing agreement with AES, DPL is responsible for the income taxes associated with its own taxable income and records the provision for income taxes using a separate return method. DPL had net payable balances of $70.6 million and $97.2 million at March 31, 2017 and December 31, 2016, respectively, which are recorded in Accrued taxes on the accompanying Balance Sheets on a gross basis.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Related Party Transactions

Service Company

Benefit plans

The following table provides a summary of these transactions:



	Three months ended
	March 31,
$ in millions	2017			2016
DP&L Operation & Maintenance Expenses:
Premiums paid for insurance services provided by MVIC ^(a)	$	(0.8	)	$	(0.9	)
Transactions with the Service Company:
Charges for services provided	$	13.0		$	8.9
Charges to the Service Company	$	1.0		$	1.2
Transactions with other AES affiliates:
Charges for health, welfare and benefit plans	$	4.1		$	4.1


Balances with related parties:	At March 31, 2017			At December 31, 2016
Net payable to the Service Company	$	—		$	(2.0	)
Short-term loan with DPL ^(b)	$	—		$	5.0
Net prepayment with / (payable to) other AES affiliates	$	5.0		$	(2.5	)

(a)

MVIC, a wholly-owned captive insurance subsidiary of DPL, provides insurance coverage to DP&L and other DPL subsidiaries for workers’ compensation, general liability, property damages and directors’ and officers’ liability. These amounts represent insurance premiums paid by DP&L to MVIC. DP&L received insurance proceeds from MVIC of $0.0 million and $0.2 million for the three months ended March 31, 2017 and 2016, respectively.


(b)	On December 31, 2016, DPL loaned $5.0 million to DP&L through an intercompany short-term loan at 3.02%.

Income taxes

AES files federal and state income tax returns which consolidate DPL and its subsidiaries, including DP&L. Under a tax sharing agreement with DPL, DP&L is responsible for the income taxes associated with its own taxable income and records the provision for income taxes using a separate return method. DP&L had net receivable balances of $23.7 million and $9.5 million at March 31, 2017 and December 31, 2016, respectively, which are recorded in Accounts receivable, net on the accompanying Balance Sheets on a gross basis.

Gain on termination of contract

On January 1, 2016, DPL closed on the sale of DPLER. Also on January 1, 2016, DP&L terminated the contract it had with DPLER for the supply of electricity. The agreement terminating the contract was signed on December 28, 2015 and DP&L received $27.7 million of restricted cash on December 31, 2015 for the early termination of the contract. For the three months ended March 31, 2016, this amount was recorded in Gain on termination of contract in the Condensed Statements of Operations and the cash received was included in Cash flows from operating activities in the Condensed Statements of Cash Flows.

- Definition

The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

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