Overview and Summary of Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2011

Overview and Summary of Significant Accounting Policies [Abstract]

Description of Business

Description of Business

DPL is a diversified regional energy company organized in 1985 under the laws of Ohio. DPL's two reportable segments are the Utility segment, comprised of its DP&L subsidiary, and the Competitive Retail segment, comprised of its DPLER subsidiary. Refer to Note 15 of Notes to Condensed Consolidated Financial Statements for more information relating to these reportable segments. DP&L does not have any reportable segments.

DP&L is a public utility incorporated in 1911 under the laws of Ohio. DP&L is engaged in generation, transmission, distribution and the sale of electricity to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio. Electricity for DP&L's 24 county service area is primarily generated at eight coal-fired power plants and is distributed to more than 500,000 retail customers. Principal industries served include automotive, food processing, paper, plastic manufacturing and defense.

DP&L's sales reflect general economic conditions, customers switching to other retail electric suppliers and seasonal weather patterns of the area. DP&L sells any excess energy and capacity into the wholesale market.

DPLER sells competitive retail electric service, under contract, to residential, commercial and industrial customers. DPLER's operations include those of its wholly-owned subsidiary, MC Squared, which was purchased on February 28, 2011. DPLER has approximately 25,000 customers currently located throughout Ohio and Illinois. DPLER does not have any transmission or generation assets, and all of DPLER's electric energy was purchased from DP&L or PJM to meet its sales obligations.

DPL's other significant subsidiaries include DPLE, which owns and operates peaking generating facilities from which it makes wholesale sales of electricity and MVIC, DPL's captive insurance company that provides insurance services to us and DPL's subsidiaries.

DPL also has a wholly-owned business trust, DPL Capital Trust II, formed for the purpose of issuing trust capital securities to investors.

All of DPL's subsidiaries are wholly-owned. DP&L does not have any subsidiaries.

DP&L's electric transmission and distribution businesses are subject to rate regulation by federal and state regulators while its generation business is deemed competitive under Ohio law. Accordingly, DP&L applies the accounting standards for regulated operations to its electric transmission and distribution businesses and records regulatory assets when incurred costs are expected to be recovered in future customer rates, and regulatory liabilities when current cost recoveries in customer rates relate to expected future costs.

DPL and its subsidiaries employed 1,528 people as of September 30, 2011, of which 1,497 employees were employed by DP&L. Approximately 53% of all employees are under a collective bargaining agreement which expires on October 31, 2011.  We began negotiations with employees covered under our collective bargaining agreement during the three months ended September 30, 2011.  See Note 14 of Notes to Condensed Consolidated Financial Statements for more information relating to the collective bargaining agreement.

Property, Plant and Equipment

Property, Plant and Equipment

We record our ownership share of our undivided interest in jointly-held plants as an asset in property, plant and equipment. Property, plant and equipment are stated at cost. For regulated transmission and distribution property, cost includes direct labor and material, allocable overhead expenses and an allowance for funds used during construction (AFUDC). AFUDC represents the cost of borrowed funds and equity used to finance regulated construction projects. Capitalization of AFUDC ceases at either

project completion or at the date specified by regulators. AFUDC capitalized during the three and nine months ended September 30, 2011 and 2010 was not material.

For unregulated generation property, cost includes direct labor and material, allocable overhead expenses and interest capitalized during construction using the provisions of GAAP relating to the accounting for capitalized interest.

For substantially all depreciable property, when a unit of property is retired, the original cost of that property less any salvage value is charged to Accumulated depreciation and amortization.

Property is evaluated for impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable.

At September 30, 2011, neither DPL nor DP&L had any material plant acquisition adjustments or other plant-related adjustments.

Short-Term Investments

Short-Term Investments

DPL utilizes VRDNs as part of its short-term investment strategy. The VRDNs are of high credit quality and are secured by irrevocable letters of credit from major financial institutions. VRDN investments have variable rates tied to short-term interest rates. Interest rates are reset every seven days and these VRDNs can be tendered for sale back to the financial institution upon notice. Although DPL's VRDN investments have original maturities over one year, they are frequently re-priced and trade at par. We account for these VRDNs as available-for-sale securities and record them as short-term investments at fair value, which approximates cost, since they are highly liquid and are readily available to support DPL's current operating needs.

DPL also utilizes investment-grade fixed income corporate securities in its short-term investment portfolio. These securities are accounted for as held-to-maturity investments.

Related Party Transactions

Related Party Transactions

In the normal course of business, DP&L enters into transactions with other subsidiaries of DPL. All material intercompany accounts and transactions are eliminated in DPL's Condensed Consolidated Financial Statements. The following table provides a summary of these transactions:

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
$ in millions		2011			2010			2011			2010
DP&L Revenues:
Sales to DPLER (a)	$	90.2		$	75.9		$	246.3		$	165.9
DP&L Operation & Maintenance Expenses:
Premiums paid for insurance services provided by MVIC (b)	$	(0.8	)	$	(0.8	)	$	(2.4	)	$	(2.5	)
Expense recoveries for services provided to DPLER (c)	$	1.1		$	1.6		$	2.8		$	4.0

(a)	DP&L sells power to DPLER in Ohio to satisfy the electric requirements of its retail customers. The revenues associated with sales to DPLER are recorded as wholesale sales in DP&L's Condensed Financial Statements. The increase in DP&L's sales to DPLER in Ohio during the three and nine months ended September 30, 2011 compared to the similar periods in 2010 is primarily due to an increase in customers electing to switch their generation service from DP&L to DPLER. DP&L did not sell any physical power to MC Squared during either of these periods.
(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 paid by DP&L to MVIC.
(c)	In the normal course of business DP&L incurs and records expenses on behalf of DPLER (including MC Squared). Such expenses include but are not limited to employee-related expenses, accounting, information technology, payroll, legal and other administration expenses. DP&L subsequently charges these expenses to DPLER at DP&L's cost and credits the expense in which they were initially recorded.