Business Segments

9 Months Ended

Sep. 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 25,000 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 September 30, 2011
Revenues from external customers	$	376.6	$	118.6		$	16.6			$	-		$	511.8
Intersegment revenues		90.2			-		1.1			(91.3		)		-
Total revenues	$	466.8	$	118.6		$	17.7		$	(91.3		)	$	511.8
Fuel		124.0			-		5.0				-			129.0
Purchased power		95.6		101.4			1.5			(90.2		)		108.3
Gross margin	$	247.2	$	17.2		$	11.2			$	(1.1	)	$	274.5
Depreciation and amortization	$	33.8		$	0.1	$	1.9			$	-		$	35.8
Interest expense		9.3			0.1		7.6				(0.2	)		16.8
Income tax expense (benefit)		26.8			4.2		(2.4	)			-			28.6
Net income (loss)		63.9			7.8		(6.2	)			1.6			67.1
Cash capital expenditures		49.1			-		0.8				-			49.9
Three Months Ended September 30, 2010
Revenues from external customers	$	411.1	$	84.5		$	21.3			$	-		$	516.9
Intersegment revenues		75.9			-		1.1			(77.0		)		-
Total revenues	$	487.0	$	84.5		$	22.4		$	(77.0		)	$	516.9
Fuel		97.4			-		6.9				-			104.3
Purchased power		116.4		75.9			2.6			(75.9		)		119.0
Gross margin	$	273.2		$	8.6	$	12.9			$	(1.1	)	$	293.6
Depreciation and amortization	$	30.4		$	-	$	1.8			$	-		$	32.2
Interest expense		9.4			-		8.3				(0.1	)		17.6
Income tax expense (benefit)		39.4			1.4		(0.4	)			-			40.4
Net income (loss)		83.2			4.7		(4.2	)			2.7			86.4
Cash capital expenditures		38.8			-		(0.2	)			-			38.6

									Adjustments
				Competitive					and				DPL
$ in millions		Utility		Retail		Other			Eliminations				Consolidated
Nine Months Ended September 30, 2011
Revenues from external customers	$	1,092.9	$	314.6	$	43.9			$	-		$	1,451.4
Intersegment revenues		246.3		-		3.1			(249.4		)		-
Total revenues	$	1,339.2	$	314.6	$	47.0		$	(249.4		)	$	1,451.4
Fuel		311.7		-		9.2				-			320.9
Purchased power		317.8		268.6		2.6			(246.3		)		342.7
Gross margin	$	709.7	$	46.0	$	35.2			$	(3.1	)	$	787.8
Depreciation and amortization	$	100.3	$	0.2	$	5.5			$	-		$	106.0
Interest expense		28.7		0.2		22.7				(0.3	)		51.3
Income tax expense (benefit)		69.3		14.1		(13.7	)			-			69.7
Net income (loss)		147.4		19.6		(24.7	)			-			142.3
Cash capital expenditures		139.9		-		1.4				-			141.3
Nine Months Ended September 30, 2010
Revenues from external customers	$	1,183.0	$	189.1	$	41.5			$	-		$	1,413.6
Intersegment revenues		165.9		-		3.3			(169.2		)		-
Total revenues	$	1,348.9	$	189.1	$	44.8		$	(169.2		)	$	1,413.6
Fuel		286.5		-		10.6				-			297.1
Purchased power		279.3		165.9		3.4			(165.9		)		282.7
Gross margin	$	783.1	$	23.2	$	30.8			$	(3.3	)	$	833.8
Depreciation and amortization	$	98.4	$	0.1	$	6.8			$	-		$	105.3
Interest expense		27.9		-		25.2				(0.1	)		53.0
Income tax expense (benefit)		104.6		5.7		(3.4	)			-			106.9
Net income (loss)		214.7		11.8		(7.6	)			(0.1	)		218.8
Cash capital expenditures		112.3		-		1.4				-			113.7
Total Assets
September 30, 2011	$	3,419.7	$	62.1	$	1,702.2		$	(1,507.5		)	$	3,676.5
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 25,000 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 September 30, 2011
Revenues from external customers	$	376.6	$	118.6		$	16.6			$	-		$	511.8
Intersegment revenues		90.2			-		1.1			(91.3		)		-
Total revenues	$	466.8	$	118.6		$	17.7		$	(91.3		)	$	511.8
Fuel		124.0			-		5.0				-			129.0
Purchased power		95.6		101.4			1.5			(90.2		)		108.3
Gross margin	$	247.2	$	17.2		$	11.2			$	(1.1	)	$	274.5
Depreciation and amortization	$	33.8		$	0.1	$	1.9			$	-		$	35.8
Interest expense		9.3			0.1		7.6				(0.2	)		16.8
Income tax expense (benefit)		26.8			4.2		(2.4	)			-			28.6
Net income (loss)		63.9			7.8		(6.2	)			1.6			67.1
Cash capital expenditures		49.1			-		0.8				-			49.9
Three Months Ended September 30, 2010
Revenues from external customers	$	411.1	$	84.5		$	21.3			$	-		$	516.9
Intersegment revenues		75.9			-		1.1			(77.0		)		-
Total revenues	$	487.0	$	84.5		$	22.4		$	(77.0		)	$	516.9
Fuel		97.4			-		6.9				-			104.3
Purchased power		116.4		75.9			2.6			(75.9		)		119.0
Gross margin	$	273.2		$	8.6	$	12.9			$	(1.1	)	$	293.6
Depreciation and amortization	$	30.4		$	-	$	1.8			$	-		$	32.2
Interest expense		9.4			-		8.3				(0.1	)		17.6
Income tax expense (benefit)		39.4			1.4		(0.4	)			-			40.4
Net income (loss)		83.2			4.7		(4.2	)			2.7			86.4
Cash capital expenditures		38.8			-		(0.2	)			-			38.6

									Adjustments
				Competitive					and				DPL
$ in millions		Utility		Retail		Other			Eliminations				Consolidated
Nine Months Ended September 30, 2011
Revenues from external customers	$	1,092.9	$	314.6	$	43.9			$	-		$	1,451.4
Intersegment revenues		246.3		-		3.1			(249.4		)		-
Total revenues	$	1,339.2	$	314.6	$	47.0		$	(249.4		)	$	1,451.4
Fuel		311.7		-		9.2				-			320.9
Purchased power		317.8		268.6		2.6			(246.3		)		342.7
Gross margin	$	709.7	$	46.0	$	35.2			$	(3.1	)	$	787.8
Depreciation and amortization	$	100.3	$	0.2	$	5.5			$	-		$	106.0
Interest expense		28.7		0.2		22.7				(0.3	)		51.3
Income tax expense (benefit)		69.3		14.1		(13.7	)			-			69.7
Net income (loss)		147.4		19.6		(24.7	)			-			142.3
Cash capital expenditures		139.9		-		1.4				-			141.3
Nine Months Ended September 30, 2010
Revenues from external customers	$	1,183.0	$	189.1	$	41.5			$	-		$	1,413.6
Intersegment revenues		165.9		-		3.3			(169.2		)		-
Total revenues	$	1,348.9	$	189.1	$	44.8		$	(169.2		)	$	1,413.6
Fuel		286.5		-		10.6				-			297.1
Purchased power		279.3		165.9		3.4			(165.9		)		282.7
Gross margin	$	783.1	$	23.2	$	30.8			$	(3.3	)	$	833.8
Depreciation and amortization	$	98.4	$	0.1	$	6.8			$	-		$	105.3
Interest expense		27.9		-		25.2				(0.1	)		53.0
Income tax expense (benefit)		104.6		5.7		(3.4	)			-			106.9
Net income (loss)		214.7		11.8		(7.6	)			(0.1	)		218.8
Cash capital expenditures		112.3		-		1.4				-			113.7
Total Assets
September 30, 2011	$	3,419.7	$	62.1	$	1,702.2		$	(1,507.5		)	$	3,676.5
December 31, 2010	$	3,475.4	$	35.7	$	1,828.8		$	(1,526.6		)	$	3,813.3