Related Party Transactions

12 Months Ended

Dec. 31, 2017

Service Company

Effective January 1, 2014, the Service Company began providing 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 participates in an agreement with Health and Welfare Benefit Plans LLC, an affiliate of AES, to participate in a group benefits program, including but not limited to, health, dental, vision and life benefits. Health and Welfare Benefit Plans LLC administers the financial aspects of the group insurance program, receives all premium payments from the participating affiliates, and makes all vendor payments.

Long-term Compensation Plan

During 2017, 2016 and 2015, many of DPL’s non-union employees received benefits under the AES Long-term Compensation Plan, a deferred compensation program. This type of plan is a common employee retention tool used in our industry. Benefits under this plan are granted in the form of performance units payable in cash and AES restricted stock units and options to purchase shares of AES common stock, however no stock options were granted in 2016. All such components vest over a three-year period and the terms of the AES restricted stock units issued prior to 2011 also include a two-year minimum holding period after the awards vest. Awards made in 2011 and for subsequent years are not subject to a two-year holding period. In addition, the performance units payable in cash are subject to certain AES performance criteria. Total deferred compensation expense recorded during 2017, 2016 and 2015 was $0.4 million, $0.5 million and $0.5 million, respectively, and was included in “Other Operating Expenses” on DPL’s Consolidated Statements of Operations. The value of these benefits is being recognized over the 36-month vesting period and a portion is recorded as miscellaneous deferred credits with the remainder recorded as “Paid in capital” on DPL’s Consolidated Balance Sheets in accordance with FASC 718 “Compensation - Stock Compensation.”

The following table provides a summary of these transactions:



	Years ended December 31,
$ in millions	2017			2016			2015
Transactions with the Service Company
Charges for services provided	$	46.5		$	42.8		$	36.0
Charges to the Service Company	$	4.2		$	4.6		$	6.2
Transactions with other AES affiliates:
Payments for health, welfare and benefit plans	$	15.4		$	9.6		$	15.5

Balances with related parties:	At December 31, 2017			At December 31, 2016
Net payable to the Service Company	$	(3.9	)	$	(2.0	)
Net payable to other AES affiliates	$	(0.6	)	$	(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 amounted to $0.3 million and $0.3 million at December 31, 2017 and 2016, respectively, is included in Other deferred assets within Other noncurrent assets. DPL also has a note payable to the Trust amounting to $15.6 million and $15.6 million at December 31, 2017 and 2016, respectively, that was established upon the Trust’s deconsolidation in 2003. See Note 8 – 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. Under this agreement, DPL had a net payable balance of $0.0 million at December 31, 2016, respectively, which is recorded in Accrued taxes on the accompanying Consolidated Balance Sheets. Effective with the approval of DP&L's 2017 ESP, DPL is restricted from making tax sharing payments to AES throughout the term of the DMR and amounts that would otherwise have been tax sharing liabilities are considered deemed capital contributions. See Note 9 – Income Taxes for more information.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Entity Information [Line Items]

Related Party Transactions

Service Company

Benefit plans

Long-term Compensation Plan

During 2017, 2016 and 2015, many of DP&L’s non-union employees received benefits under the AES Long-term Compensation Plan, a deferred compensation program. This type of plan is a common employee retention tool used in our industry. Benefits under this plan are granted in the form of performance units payable in cash and AES restricted stock units and options to purchase shares of AES common stock, however no stock options were granted in 2016. All such components vest over a three-year period and the terms of the AES restricted stock units issued prior to 2011 also include a two-year minimum holding period after the awards vest. Awards made in 2011 and for subsequent years are not subject to a two-year holding period. In addition, the performance units payable in cash are subject to certain AES performance criteria. Total deferred compensation expense recorded during 2017, 2016 and 2015 was $0.4 million, $0.5 million and $0.5 million, respectively, and was included in “Other Operating Expenses” on DP&L’s Statements of Operations. The value of these benefits is being recognized over the 36-month vesting period and a portion is recorded as miscellaneous deferred credits with the remainder recorded as “Paid in capital” on DP&L’s Balance Sheets in accordance with FASC 718 “Compensation - Stock Compensation.”

The following table provides a summary of these transactions:



	Years ended December 31,
$ in millions	2017			2016			2015
DP&L revenues:
Sales to DPLER (including MC Squared) ^(a)	$	—		$	—		$	303.3
DP&L Cost of revenues:
Fuel and power purchased from AES Ohio Generation	$	5.4		$	8.7		$	5.2
DP&L Operation & Maintenance Expenses:
Premiums charged for insurance services provided by MVIC ^(b)	$	3.1		$	3.4		$	3.2
Expense recoveries for services provided to DPLER ^(c)	$	—		$	—		$	2.4
Transactions with the Service Company:
Charges for services provided	$	39.0		$	38.7		$	30.9
Charges to the Service Company	$	4.2		$	4.5		$	6.1
Transactions with other AES affiliates:
Charges for health, welfare and benefit plans	$	14.3		$	9.4		$	14.8
Charges to affiliates for non-power goods or services ^(c)	$	3.7		$	5.7		$	4.9

Balances with related parties:	At December 31, 2017			At December 31, 2016
Net payable to the Service Company	$	(3.9	)	$	(2.0	)
Short-term loan with DPL	$	—		$	5.0
Net receivable from / (payable) to other AES affiliates	$	4.8		$	(2.5	)


(a)	DP&L sold power to DPLER and MC Squared to satisfy the electric requirements of their retail customers. The revenue dollars associated with sales to DPLER and MC Squared are recorded as wholesale revenues in DP&L’s Financial Statements. These agreements were terminated on the sale of DPLER on January 1, 2016.


(b)	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 charged by MVIC to DP&L.

(c)

In the normal course of business DP&L incurred and recorded expenses on behalf of DPL affiliates, which included DPLER. Such expenses included but were not limited to employee-related expenses, accounting, information technology, payroll, legal and other administration expenses. DP&L subsequently charged these expenses to the affiliates at DP&L’s cost and credited the expense in which they were initially recorded.

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. Under this agreement, DP&L had a net receivable balance of $8.6 million and $9.5 million at December 31, 2017 and 2016, respectively, which is recorded in Other current assets on the accompanying Balance Sheets.