0000787250 srt:SubsidiariesMember dpl:FirstMortgageBondsMember 2019-01-01 2019-12-31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2018~~2019

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934




DPL INC. (an Ohio corporation)		THE DAYTON POWER AND LIGHT COMPANY (an Ohio corporation)
Commission file number 1-9052		Commission file number 1-2385

1065 Woodman Drive Dayton, Ohio 45432		1065 Woodman Drive Dayton, Ohio 45432
937-259-7215		937-259-7215

I.R.S. Employer Identification No. 31-1163136		I.R.S. Employer Identification No. 31-0258470



Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
N/A	N/A	N/A

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



DPL Inc.	Yes o	No x
The Dayton Power and Light Company	Yes o	No x

Indicate by check mark if each registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.



DPL Inc.	Yes x	No o
The Dayton Power and Light Company	Yes x	No o

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



DPL Inc.	Yes o	No x
The Dayton Power and Light Company	Yes o	No x

DPL Inc. and The Dayton Power and Light Company are voluntary filers that have filed all applicable reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).



DPL Inc.	Yes x	No o
The Dayton Power and Light Company	Yes x	No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of each registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.



~~DPL Inc.~~	x
~~The Dayton Power and Light Company~~	x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



	Large accelerated filer	Accelerated filer	Non- accelerated filer ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	Emerging growth company
DPL Inc.	o	o	x	o	o
The Dayton Power and Light Company	o	o	x	o	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



DPL Inc.	o
The Dayton Power and Light Company	o

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



DPL Inc.	Yes o	No x
The Dayton Power and Light Company	Yes o	No x

All of the outstanding common stock of DPL Inc. is indirectly owned by The AES Corporation. All of the common stock of The Dayton Power and Light Company is owned by DPL Inc.

At December 31, ~~2018,~~2019, each registrant had the following shares of common stock outstanding:



Registrant	Description	Shares Outstanding

DPL Inc.	Common Stock, no par value	1

The Dayton Power and Light Company	Common Stock, $0.01 par value	41,172,173

Documents incorporated by reference: None

This combined Form 10-K is separately filed by DPL Inc. and The Dayton Power and Light Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to a registrant other than itself.

THE REGISTRANTS MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

DPL Inc. and The Dayton Power and Light Company - Annual Report on Form 10-K

Year Ended December 31, ~~2018~~2019



Table of Contents	Page No.
Glossary of Terms	5
Part I
Item 1 – Business	89
Item 1A – Risk Factors	1415
Item 1B – Unresolved Staff Comments	2324
Item 2 – Properties	2324
Item 3 – Legal Proceedings	2324
Item 4 – Mine Safety Disclosures	24
Part II
Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6 – Selected Financial Data	26
Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A – Quantitative and Qualitative Disclosures about Market Risk	4745
Item 8 – Financial Statements and Supplementary Data	4947
DPL Inc.	5048
Consolidated Statements of Operations	5250
Consolidated Statements of Comprehensive Income / (Loss)	5351
Consolidated Balance Sheets	5452
Consolidated Statements of Cash Flows	5553
Consolidated Statements of Shareholder's ~~Equity~~Deficit	5654
Notes to Consolidated Financial Statements	5755
Note 1 – Overview and Summary of Significant Accounting Policies	5755
Note 2 – Supplemental Financial Information	6563
Note 3 – Regulatory Matters	6664
Note 4 – Property, Plant and Equipment	7169
Note 5 – Fair Value	7270
Note 6 – Derivative Instruments and Hedging Activities	7572
Note 7 – Long-term debt	7975
Note 8 – Income Taxes	8177
Note 9 – Benefit Plans	8379
Note 10 – Equity	8986
Note 11 – Contractual Obligations, Commercial Commitments and Contingencies	9086
Note 12 – Related Party Transactions	9188
Note 13 – Business Segments	9289
Note 14 – Revenue	9491
Note 15 – Discontinued Operations	9693
Note 16 – Dispositions	9894
Note 17 – Fixed-asset ~~impairments~~Impairments	9894
The Dayton Power and Light Company	9995
Statements of Operations	~~101~~97
Statements of Comprehensive Income ~~/ (Loss)~~	~~102~~98
Balance Sheets	~~103~~99
Statements of Cash Flows	~~104~~100
Statements of Shareholder's Equity	~~105~~101
Notes to Financial Statements	~~106~~102
Note 1 – Overview and Summary of Significant Accounting Policies	~~106~~102
Note 2 – Supplemental Financial Information	~~113~~109
Note 3 – Regulatory Matters	~~114~~110
Note 4 – Property, Plant and Equipment	~~119~~115
Note 5 – Fair Value	~~120~~116
Note 6 – Derivative Instruments and Hedging Activities	~~122~~118
Note 7 – Long-term debt	~~123~~119
Note 8 – Income Taxes	~~125~~121
Note 9 – Benefit Plans	~~126~~122
Note 10 – Equity	~~132~~128
Note 11 – Contractual Obligations, Commercial Commitments and Contingencies	~~132~~128
Note 12 – Related Party Transactions	~~134~~130
Note 13 – Revenue	~~135~~131
Note 14 – Generation Separation	~~136~~132
Note 15 – Dispositions	~~138~~133
Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~139~~135
Item 9A – Controls and Procedures	~~139~~135
Item 9B – Other Information	~~139~~136
Part III
Item 10 – Directors, Executive Officers and Corporate Governance	~~140~~136
Item 11 – Executive Compensation	~~140~~136
Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	~~140~~136
Item 13 – Certain Relationships and Related Transactions and Director Independence	~~140~~136
Item 14 – Principal Accountant Fees and Services	~~140~~136
Part IV
Item 15 – Exhibits and Financial Statement Schedules	~~141~~137
Item 16 – Form 10-K Summary	~~144~~140
Signatures	~~145~~141
Schedule II – Valuation and Qualifying Accounts	~~148~~144

GLOSSARY OF TERMS

The following select terms, abbreviations or acronyms are used in this Form 10-K:



Term	Definition
2017 ESP	DP&L's ESP - which was approved October 20, 2017 and became effective November 1, 2017. This 2017 ESP was subsequently withdrawn, and DP&L reverted to its ESP 1 rate plan, effective December 18, 2019.
AEP Generation	AEP Generation Resources Inc., - a subsidiary of American Electric Power Company, Inc. (“AEP”). Columbus Southern Power Company merged into the Ohio Power Company, another subsidiary of AEP, effective December 31, 2011. The Ohio Power generating assets (including jointly-owned units) were transferred into AEP Generation.
AES	The AES Corporation - a global power company, the ultimate parent company of DPL
AES Ohio Generation	AES Ohio Generation, LLC - a wholly-owned subsidiary of DPL that owns and operates a generation facility from which it makes wholesale sales
AFUDC	Allowance for Funds Used During Construction
AMI	Advanced Metering Infrastructure
AOCI	Accumulated Other Comprehensive Income
ARO	Asset Retirement Obligation
ASU	Accounting Standards Update
CAA	U.S. Clean Air Act - the congressional act that directs the USEPA’s regulation of stationary and mobile sources of air pollution to protect air quality and stratospheric ozone
Capacity Market	The purpose of the capacity market is to enable PJM to obtain sufficient resources to reliably meet the needs of electric customers within the PJM footprint. PJM procures capacity, through a multi-auction structure, on behalf of the load serving entities to satisfy the load obligations. There are four auctions held for each Delivery Year (running from June 1 through May 31). The Base Residual Auction is held three years in advance of the Delivery Year and there is one Incremental Auction held in each of the subsequent three years. AES Ohio Generation's capacity is in the “rest of” RTO area of PJM.
CCR	Coal Combustion Residuals - which consists of bottom ash, fly ash and air pollution
Conesville	AES Ohio Generation's interest in Unit 4 at the Conesville EGU ~~which is operated by AEP~~
CPP	The Clean Power Plan - the USEPA's final carbon dioxide emission rules for existing power plants under Clean Air Act Section 111(d)
CRES	Competitive Retail Electric Service
CSAPR	Cross-State Air Pollution Rule - the USEPA's rule to address interstate air pollution transport to decrease emissions to downwind states
CWA	U.S. Clean Water Act - the congressional act that allows the USEPA’s regulation of water discharges and surface water standards
~~Dark spread~~DIR	~~A common metric used~~Distribution Investment Rider - initially established in the 2017 ESP and authorized in the DRO to ~~estimate returns over fuel costs~~recover certain distribution capital investments placed in service beginning October 1, 2015, for the number of ~~coal-fired EGUs~~years, and subject to increasing annual revenue limits and other terms, as set forth in the DRO. The annual revenue limit for 2019 was $22.0 million.
~~DOE~~Distribution Modernization Plan	~~U.S. Department of Energy~~In December 2018, DP&L filed a comprehensive grid modernization plan
DMR	Distribution ~~modernization~~Modernization Rider - established in the 2017 ESP as a non-bypassable rider ~~- designed~~ to ~~allow DP&L to modernize and/or maintain its transmission and distribution infrastructure.~~collect $105.0 million in revenue per year for the first three years of the 2017 ESP term
DPL	DPL Inc.
DPLER	DPL Energy Resources, Inc., - formerly a wholly-owned subsidiary of DPL which sold competitive electric energy and other energy services. DPLER was sold on January 1, 2016 pursuant to an agreement dated December 28, 2015.
DP&L	The Dayton Power and Light Company - the principal subsidiary of DPL and a public utility which sells, transmits and distributes electricity to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio. DP&L is wholly-owned by DPL
DRO	Distribution Rate Order - the order issued by the PUCO on September 26, 2018 establishing new base distribution rates for DP&L, which became effective October 1, 2018
~~Dths~~	~~Decatherms, unit of heat energy equal to 10 therms. One therm is equal to 100,000 British Thermal Units~~
~~Duke Energy~~	~~Affiliates of Duke Energy with which DP&L co-owns transmission lines in Ohio (Duke Energy Ohio, Inc.)~~
Dynegy	Dynegy, Inc., - the parent of various subsidiaries that, along with AEP Generation and AES Ohio Generation, ~~co-owns~~formerly co-owned coal-fired EGUs in Ohio
EBIT	Earnings before interest and taxes
EBITDA	Earnings before interest, taxes, depreciation and amortization
EGU	Electric Generating Unit
ELG	Steam Electric Power Effluent Limitations Guidelines - guidelines which cover wastewater discharges from power plants operating as utilities
ERISA	The Employee Retirement Income Security Act of 1974
ESP	The Electric Security Plan is- a cost-based plan that a utility may file with the PUCO to establish SSO rates pursuant to Ohio law
ESP 1	ESP originally approved by PUCO order dated June 24, 2009. After DP&L withdrew its 2017 ESP Application, the PUCO approved DP&L's request to revert to rates based on its ESP 1 rate plan effective December 19, 2019. DP&L is currently operating under this ESP 1 plan.
FASB	Financial Accounting Standards Board
FASC	FASB Accounting Standards Codification
FERC	Federal Energy Regulatory Commission
First and Refunding Mortgage	DP&L’s First and Refunding Mortgage, dated October 1, 1935, as amended, with the Bank of New York Mellon as Trustee
~~FTR~~	~~Financial Transmission Rights~~
~~GAAP~~	~~Generally Accepted Accounting Principles in the United States of America~~



GLOSSARY OF TERMS (cont.)
Term	Definition
FTR	Financial Transmission Rights
GAAP	Generally Accepted Accounting Principles in the United States of America
Generation Separation	The transfer on October 1, 2017, to AES Ohio Generation of the DP&L-owned generating facilities and related liabilities, excluding those of the Beckjord Facility and Hutchings EGU, pursuant to an asset contribution agreement with a subsidiary that was then merged into AES Ohio Generation
GHG	Greenhouse gas - air pollutants largely emitted from combustion
kV	Kilovolts, 1,000 volts
kWh	Kilowatt hour
LIBOR	London Inter-Bank Offering Rate
Master Trust	DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans
MATS	Mercury and Air Toxics Standards - the USEPA’s rules for existing and new power plants under Section 112 of the CAA
Merger	The merger of DPL and Dolphin Sub, Inc., a wholly-owned subsidiary of AES. On November 28, 2011, DPL became a wholly-owned subsidiary of AES.
Miami Valley Lighting	Miami Valley Lighting, LLC is a wholly-owned subsidiary of DPL established in 1985 to provide street and outdoor lighting services to customers in the Dayton region. Miami Valley Lighting serves businesses, communities and neighborhoods in West Central Ohio with over 70,000 lighting solutions for more than 190 businesses and 180 local governments.
MRO	Market Rate Option - a market-based plan that a utility may file with PUCO to establish SSO rates pursuant to Ohio law
MTM	Mark to Market
MVIC	Miami Valley Insurance Company is a wholly-owned insurance subsidiary of DPL that provides insurance services to DPL and its subsidiaries
MW	Megawatt
MWh	Megawatt hour
NAAQS	National Ambient Air Quality Standards - the USEPA’s health and environmental based standards for six specified pollutants, as found in the ambient air
NAV	Net asset value
NERC	North American Electric Reliability Corporation - a not-for-profit international regulatory authority whose mission is to assure the effective and efficient reduction of risks to the reliability and security of the electric grid
Non-bypassable	Charges that are assessed to all customers regardless of whom the customer selects as their retail electric generation supplier
NOV	Notice of Violation - an administrative action by EPA or a state agency to address non-compliance with various federal or state anti-pollution laws or regulations
NO_X	Nitrogen Oxide - an air pollutant regulated by the NAAQS under the CAA
NPDES	National Pollutant Discharge Elimination System - a permit program for industrial, municipal and other facilities that discharge to surface water
NSR	New Source ~~Review:~~Review - a preconstruction permitting program regulating new or significantly modified sources of air pollution
OCI	Other Comprehensive Income
Ohio EPA	Ohio Environmental Protection Agency
~~OTC~~	~~Over the counter~~
OVEC	Ohio Valley Electric Corporation, an electric generating company in which DP&L has a 4.9% interest
Peaker assets	The generation and related assets for the 586.0 MW Tait combustion turbine and diesel generation facility, the 236.0 MW Montpelier combustion turbine generation facility, the 101.5 MW Yankee combustion turbine generation and solar facility, the 25.0 MW Hutchings combustion turbine generation facility, the 12.0 MW Monument diesel generation facility and the 12.0 MW Sidney diesel generation facility
PJM	PJM Interconnection, LLC, an RTO
PRP	PRP - A Potentially Responsible Party is considered by the USEPA to be potentially responsible for ground contamination and the USEPA will commonly require PRPs to conduct an investigation to determine the source of contamination and to perform the cleanup before using Superfund money
PUCO	Public Utilities Commission of Ohio
RSC	Rate Stabilization Charge - approved as part of DP&L's ESP 1. After the 2017 ESP was withdrawn, the PUCO again continued ESP 1, including the RSC, effective December 18, 2019
RTO	Regional Transmission Organization
SB 221	Ohio Senate Bill 221 is an Ohio electric energy bill that requires all Ohio distribution utilities to file either an ESP or MRO. The law also contains, among other things, annual targets relating to advanced energy portfolio standards, renewable energy, demand reduction and energy efficiency standards.
SEC	Securities and Exchange Commission
SEET	Significantly Excessive Earnings Test - a test used by the PUCO to determine whether a utility's ESP or MRO produces significantly excessive earnings for the utility
Service Company	AES US Services, LLC - the shared services affiliate providing accounting, finance and other support services to AES’ U.S. SBU businesses
SIP	A State Implementation Plan is a plan for complying with the federal CAA, administered by the USEPA. The SIP consists of narrative, rules, technical documentation and agreements that an individual state will use to clean up polluted areas.



GLOSSARY OF TERMS (cont.)
Term	Definition
SO₂	Sulfur Dioxide - an air pollutant regulated by the NAAQS under the CAA
SSO	Standard Service Offer ~~represents~~- the retail transmission, distribution and generation services offered by a utility through regulated rates, authorized by the PUCO
TCJA	The Tax Cuts and Jobs Act of 2017 signed on December 22, 2017
U.S.	United States of America
USD	U.S. dollar
USEPA	U. S. Environmental Protection Agency
USF	The Universal Service Fund (USF) is a statewide program which provides qualified low-income customers in Ohio with income-based bills and energy efficiency education programs
U.S. SBU	U. S. Strategic Business Unit, AES’ reporting unit covering the businesses in the United States, including DPL

PART I

This report includes the combined filing of DPL and DP&L. DPL is a wholly-owned subsidiary of AES, a global power company. Throughout this report, the terms “we”, “us”, “our” and “ours” are used to refer to both DPL and DP&L, respectively and altogether, unless the context indicates otherwise. Discussions or areas of this report that apply only to DPL or DP&L will clearly be noted in the section.

FORWARD–LOOKING STATEMENTS

Certain statements contained in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Matters discussed in this report that relate to events or developments that are expected to occur in the future, including management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters constitute forward-looking statements. Forward-looking statements are based on management’s beliefs, assumptions and expectations of future economic performance, considering the information currently available to management. These statements are not statements of historical fact and are typically identified by terms and phrases such as “anticipate”, “believe”, “intend”, “estimate”, “expect”, “continue”, “should”, “could”, “may”, “plan”, “project”, “predict”, “will” and similar expressions. Such forward-looking statements are subject to risks and uncertainties and investors are cautioned that outcomes and results may vary materially from those projected due to various factors beyond our control, including but not limited to:

growth in our service territory and changes in demand and demographic patterns;

weather-related damage to our electrical system;

performance of our suppliers;

transmission and distribution system reliability and capacity;

regulatory actions and outcomes, including, but not limited to, the review and approval of our rates and charges by the PUCO;

federal and state legislation and regulations;

changes in our credit ratings or the credit ratings of AES;

fluctuations in the value of pension plan assets, fluctuations in pension plan expenses and our ability to fund defined benefit pension plans;


▪	changes in financial or regulatory accounting policies;


▪	environmental matters, including costs of compliance with, and liabilities related to, current and future environmental laws and requirements;


▪	interest rates and the use of interest rate hedges, inflation rates and other costs of capital;


▪	the availability of capital;


▪	the ability of subsidiaries to pay dividends or distributions to DPL;


▪	level of creditworthiness of counterparties to contracts and transactions;


▪	labor strikes or other workforce factors, including the ability to attract and retain key personnel;


▪	facility or equipment maintenance, repairs and capital expenditures;


▪	significant delays or unanticipated cost increases associated with construction projects;


▪	the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material;


▪	local economic conditions;


▪	costs and effects of legal and administrative proceedings, audits, settlements, investigations and claims and the ultimate disposition of litigation;


▪	industry restructuring, deregulation and competition;


▪	issues related to our participation in PJM, including the cost associated with membership, allocation of costs, costs associated with transmission expansion, the recovery of costs incurred and the risk of default of other PJM participants;


▪	changes in tax laws and the effects of our ~~strategies to reduce~~ tax ~~payments;~~strategies;


▪	product development, technology changes and changes in prices of products and technologies;


▪	cyberattacks and information security breaches;


▪	the use of derivative contracts;


▪	catastrophic events such as fires, explosions, terrorist acts, acts of war, pandemic events, or natural disasters such as floods, earthquakes, tornadoes, severe winds, ice or ~~snow storms,~~snowstorms, droughts, or other similar occurrences; and


▪	the risks and other factors discussed in this report and other DPL and DP&L filings with the SEC.

Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

Item 1 – Business

OVERVIEW

DPL is a regional energy company incorporated in 1985 under the laws of Ohio. All of DPL’s stock is owned by an AES subsidiary.

DPL has three primary subsidiaries, DP&L, MVIC and AES Ohio Generation. DP&L is a public utility providing electric transmission and distribution services in West Central Ohio. AES Ohio Generation owns an undivided interest in a coal-fired generating facility and sells all of its energy and capacity into the wholesale market. MVIC is our captive insurance company that provides insurance services to DPL and our other subsidiaries. For additional information, see Note 1 – Overview and Summary of Significant Accounting Policies of Notes to DPL's Consolidated Financial Statements and Note 1 – Overview and Summary of Significant Accounting Policies of Notes to DP&L's Financial Statements. All of DPL's subsidiaries are wholly-owned.

As an electric public utility in Ohio, DP&L provides regulated transmission and distribution services to its customers as well as retail SSO electric service. DP&L's sales reflect the general economic conditions, seasonal weather patterns and the growth of energy efficiency initiatives; however, our distribution revenues ~~have been~~were decoupled from weather and energy efficiency variations ~~beginning~~from January 1, 2019 asthrough December 18, 2019. In the first quarter of 2020, DP&L filed a ~~result~~petition to continue to accrue the impacts of decoupling for recovery through a future rate proceeding, but it is unknown at this time how the ~~decoupling rider approved in the DRO.~~PUCO will rule on that petition. See Note 3 – Regulatory Matters of Notes to DPL's Consolidated Financial Statements and Note 3 – Regulatory Matters of Notes to DP&L's Financial Statements for further information.

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

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. 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 or overcollections of riders.

GENERATING CAPACITY

DPL, through AES Ohio Generation, owns an undivided interest in Conesville. AES Ohio Generation's share of this EGU's capacity is 129 MW. AES Ohio Generation sells all of its energy and capacity into the wholesale market. AEP, the operator of the co-owned Conesville EGU, has announced that Unit 4 will close by May 2020. During 2019, DPL continued executing on its plan to exit generation by closing on the transfer of its Stuart and Killen EGU's, which were retired in May 2018. For additional information on this event and DPL's other previously owned EGUs, see Note 15 – Discontinued Operations of Notes to DPL's Consolidated Financial Statements.

DP&L also has a 4.9% interest in OVEC, an electric generating company. OVEC has two electric generating stations located in Cheshire, Ohio and Madison, Indiana with a combined generation capacity of 2,109 MW. DP&L’s share of this generation capacity is 103 MW.

SEGMENTS

DPL manages its business through one reportable operating segment, the Utility segment. See Note 13 – Business Segments of the Notes to DPL's Consolidated Financial Statements for additional information regarding DPL’s reportable segment.DP&L also manages its business through one reportable operating segment, the Utility segment.

EMPLOYEES

DPL and its subsidiaries employed ~~659~~633 people at January 31, ~~2019,~~2020, of which ~~647~~630 were employed by DP&L. Approximately ~~57%~~59% of all DPL employees are under a collective bargaining ~~agreement.~~agreement that expires on October 31, 2020.

SERVICE COMPANY

The Service Company provides services including accounting, legal, human resources, information technology and other services of a similar nature 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 businesses served, including DP&L, are not subsidizing costs incurred for the benefit of other businesses. See Note 12 – Related Party Transactions of Notes to DPL's Consolidated Financial Statements and Note 12 – Related Party Transactions of Notes to DP&L's Financial ~~Statements.~~Statements.

SEASONALITY

The power delivery business is seasonal, and weather patterns have a material effect on energy demand. In the region we serve, demand for electricity is generally greater in the summer months associated with cooling and in the winter months associated with heating compared to other times of the year. DP&L's sales typically reflect the seasonal weather patterns and the growth of energy efficiency ~~initiatives, however, after~~initiatives. However, the ~~approval~~impacts of weather, energy efficiency programs and economic changes in customer demand were almost entirely eliminated in 2019 by DP&L’s Decoupling Rider, which was in place from January 1, 2019 until December 18, 2019. Subject to PUCO decision, DP&L may, in the ~~distribution rate order in 2018, our distribution~~near future, have authority to create a regulatory asset for the ongoing revenues that would have been ~~decoupled from weather~~charged in the Decoupling Rider going back to December 18, 2019. See Note 3 – Regulatory Matters of Notes to DPL's Consolidated Financial Statements and ~~energy efficiency variations. Because~~Note 3 – Regulatory Matters of ~~the impact of the new decoupling rider (effective January 1, 2019) and because~~ ~~DPL's~~ ~~generation has greatly decreased in recent years due~~Notes to ~~plant sales and closures, we expect that weather and other factors influencing demand will have minimal impact on our net operating results going forward.~~DP&L's Financial Statements.

Storm activity can also have an adverse effect on our operating performance. Severe storms often damage transmission and distribution equipment, thereby causing power outages, which increase repair costs. Partially mitigating this impact is DP&L’s ability to timely recover certain O&M repair costs related to severe storms.

MARKET STRUCTURE

Retail rate regulation

DP&L's delivery service to all retail customers as well as the provisions of its SSO service are regulated by the PUCO. In addition, certain costs are considered to be non-bypassable and are therefore assessed to all DP&L retail customers, under the regulatory authority of the PUCO, regardless of the customer’s retail electric supplier. DP&L's transmission rates are subject to regulation by the FERC under the Federal Power Act.

Ohio law establishes the process for determining SSO and non-bypassable rates charged by public utilities. Regulation of retail rates encompasses the timing of applications, the effective date of rate changes, the cost basis upon which the rates are set and other service-related matters. Ohio law also established the Office of the OCC, which has the authority to represent residential consumers in state and federal judicial and administrative rate proceedings.

Ohio legislation extends the jurisdiction of the PUCO to the records and accounts of certain public utility holding company systems, including DPL. The legislation extends the PUCO's supervisory powers to a holding company system's general condition and capitalization, among other matters, to the extent that such matters relate to the costs associated with the provision of public utility service. Based on existing PUCO and FERC authorization, regulatory assets and liabilities are recorded on the balance sheets of both DPL and DP&L. See Note 3 –

Regulatory Matters of Notes to DPL's Consolidated Financial Statements and Note 3 – Regulatory Matters of Notes to DP&L's Financial Statements.

COMPETITION AND REGULATION

Ohio Retail Rates

~~DP&L~~ ~~filed an amended stipulation to its 2017~~ ESP ~~case on March 13, 2017. The PUCO issued a final decision on October 20, 2017, modifying and adopting the amended stipulation and recommendation. The six-year 2017 ESP~~1 establishes DP&L's framework for providing retail service on a going-forward basis including rate structures, non-bypassable charges and other specific rate recovery true-up rider mechanisms. For more information regarding DP&L's ESP, see Note 3 – Regulatory Matters of Notes to DPL's Consolidated Financial Statements and Note 3 – Regulatory Matters of Notes to DP&L's Financial Statements.

On September 26, 2018, the PUCO issued the DRO establishing new base distribution rates for DP&L, which became effective October 1, 2018. The DRO approved, without modification, a stipulation and recommendation previously filed by DP&L, along with various intervening parties and the PUCO staff. The DRO established a revenue requirement of $248.0 million for DP&L's electric service base distribution rates which reflects an increase to distribution revenues of approximately $29.8 million per year. In addition to the increase in base distribution rates, among other matters, the DRO also ~~provides~~provided for a return on equity of 9.999% and a cost of long-term debt of 4.8%.

~~For more information regarding~~ ~~DP&L's~~ ~~ESP and DRO, see Note 3 – Regulatory Matters of Notes to~~ ~~DPL's~~ ~~Consolidated Financial Statements and Note 3 – Regulatory Matters of Notes to~~ ~~DP&L's~~ ~~Financial Statements.~~

In December 2018, DP&L filed a Distribution Modernization Plan ~~(“DMP”)~~ with the PUCO proposing to invest $576.0 million in capital projects over the next 10 years. There are eight principal components of DP&L’s ~~DMP:~~ Distribution Modernization Plan: 1) Smart Meters, 2) Self-Healing Grid, 3) Customer Engagement, 4) Enhancing Sustainability and Embracing Innovation. 5) Telecommunications, 6) Physical and Cyber Security, 7) Governance and Analytics and 8) Grid Modernization R&D. This filing is pending before the PUCO.

These initiatives will also allow DP&L to be ready to leverage and integrate Distributed Energy Resources into its grid, including demonstrations of community solar, energy storage, microgrids, as well as ~~Electric Vehicle~~electric vehicle charging infrastructure. If approved, DP&L ~~will~~ plans to implement a comprehensive grid modernization project that will deliver benefits to customers, society as a whole and to the Company.

~~On January 22, 2019,~~ ~~DP&L~~ filed a request with the PUCO for a two-year extension of its DMR through October 2022, in the proposed amount of $199.0 million for each of the two additional years. The request was made pursuant to the PUCO’s October 20, 2017 ESP order, which approved the DMR and had the option for ~~DP&L~~ ~~to file for a two-year extension. The extension request was set at a level expected to reduce debt obligations at both~~ ~~DP&L~~ ~~and~~ ~~DPL~~ ~~and to position~~ ~~DP&L~~ ~~to make capital expenditures to maintain and modernize its electric grid. To that end,~~ ~~DP&L’s~~ ~~DMP investments are contingent upon the PUCO approving the two-year extension of its DMR.~~

Ohio law and the PUCO rules contain targets relating to renewable energy, peak demand reduction and energy efficiency standards. If any targets are not met, compliance penalties will apply unless the PUCO makes certain findings that would excuse performance. DP&L is currently in full compliance with energy efficiency, peak demand reduction and renewable energy targets. DP&L is required to file an energy efficiency portfolio plan to demonstrate how it plans to continue to meet the standards. On June 15, 2017, DP&L filed an energy efficiency portfolio plan for programs in years 2018 through 2020, which was settled and approved by the PUCO on December 20, 2017. DP&L recovers the costs of its compliance with Ohio energy efficiency and renewable energy standards through separate riders which are reviewed and audited by the PUCO.

The costs associated with providing high voltage transmission service and wholesale electric sales and ancillary services are subject to FERC jurisdiction. While DPL has market-based rate authority for wholesale electric sales, DPL would be required to file an application at FERC under section 101 of Title 18 of the Code of Federal Regulations to change any of its cost-based transmission or ancillary service rates.

As a member of PJM, DP&L receives revenues from the RTO related to DP&L’s transmission assets and incurs costs associated with its load obligations for retail customers. Ohio law includes a provision that would allow Ohio electric utilities to seek and obtain a reconcilable rider to recover RTO-related costs and credits. DP&L continues to recover non-market-based transmission and ancillary costs through its ~~transmission rider.~~Transmission Rider.

In response to filings made by DP&L and AES Ohio Generation, ~~filed an application before~~ the FERC ~~to adjust their rates with respect to reactive power provided to PJM from their generation units. On March 3, 2017,~~ ~~DP&L, AES Ohio Generation, and certain intervening parties filed an Offer of Settlement that was~~ approved ~~by the FERC~~ on May 16, ~~2017. The changes from current~~2017 reactive power rates for the generation facilities that were ~~not material. Additionally,~~owned at that time. In the same order, FERC ~~has~~ referred to the FERC’s Office of Enforcement for investigation, an issue regardingDP&L’s reactive power charges under the previously effective rates in light of changes in DP&L’s generation ~~portfolio. Prior to 2017,~~ ~~DP&L's~~ ~~reactive power rates had been last reset in 1998.~~portfolio between cases. As of the date of this report, DP&L is unable to predict the ultimate outcome of the investigation. Several other utilities within PJM are also being investigated by FERC’s Office of Enforcement with respect to the same issue of changes in the generation portfolio that occurred in between rate proceedings. ~~In connection with transactions and other matters discussed above, there have been subsequent reactive power filings made, including filings to reflect: the transfer of generation from~~

DP&L ~~to AES Ohio Generation; the sale of interests in the~~

~~Miami Fort and Zimmer stations to subsidiaries of Dynegy; the retirement of Stuart and Killen; and the sale of interests in the Peaker assets to subsidiaries of Kimura Power, LLC.~~

~~DP&L~~ is also subject to a retrospective SEET threshold whereby it must demonstrate its return on equity is below 12%, excluding DMR revenues. The ultimate outcome of this and ~~is required to apply general rules for calculating earnings~~the ESP v. MRO and ~~comparing them to a comparable group to determine whether there were significantly excessive earnings during a given calendar year. In future years, the~~prospective SEET could have a material adverse effect on our results of operations, financial condition and cash flows. See Note 3 –

Regulatory Matters of Notes to DPL's Consolidated Financial Statements and Note 3 – Regulatory Matters of Notes to DP&L's Financial ~~Statements.~~Statements.

Ohio Competition

Since January 2001, DP&L’s electric customers have been permitted to choose their retail electric generation supplier. DP&L continues to have the exclusive right to provide delivery service in its state-certified territory and the obligation to procure and provide electricity to SSO customers that do not choose an alternative supplier. The PUCO maintains jurisdiction over DP&L’s delivery of electricity, SSO and other retail electric services.

As part of Ohio’s electric deregulation law, all of the state’s investor-owned utilities were required to join an RTO. DP&L is a member of the PJM RTO. The role of the RTO is to administer a competitive wholesale market for electricity and ensure reliability of the transmission grid. PJM ensures the reliability of the high-voltage electric power system serving more than 5065 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the operation of the region’s transmission grid, administers the world’s largest competitive wholesale electricity market and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

Like other electric utilities and energy marketers, AES Ohio Generation may sell or purchase electric products in the wholesale market. As a co-owner of a generation plant, AES Ohio Generation competes with other generators, power marketers, privately and municipally-owned electric utilities and rural electric cooperatives when selling electricity. ~~The ability of AES Ohio Generation to sell~~Selling this electricity will depend not only on the performance of ~~its~~the generating unit, but also on how ~~AES Ohio Generation’s~~the electricity's prices, terms and conditions compare to those of other suppliers.

ENVIRONMENTAL MATTERS

DPL’s and DP&L'sfacilities and operations are subject to a wide range of federal, state and local environmental laws, rules and regulations. The environmental issues that may affect us include the following. However, as described further below, as a result of DPL’s retirement and sale of various electric generating facilities, including its Stuart and Killen generating stations, the sale of its ownership interest in the Miami Fort and Zimmer generating stations, the planned 2020 retirement of Conesville and our exiting of our generation business, certain of these environmental regulations and laws are now not expected to have a material impact on DPL with respect to these generating stations.

The federal CAA and state laws and regulations (including SIPs) which require compliance, obtaining permits and reporting as to air emissions;

Litigation with federal and certain state governments and certain special interest groups regarding whether modifications to or maintenance of certain coal-fired generating stations require additional permitting or pollution control technology, or whether emissions from coal-fired generating stations cause or contribute to global climate changes;


•	Rules and future rules issued by the USEPA, the Ohio EPA or other authorities that require or will require substantial reductions in SO₂, particulates, mercury, acid gases, NOx and other air ~~emissions.~~emissions;

Rules and future rules issued by the USEPA, the Ohio EPA or other authorities that require or will require reporting and reductions of GHGs;

Rules and future rules issued by the USEPA, the Ohio EPA or other authorities associated with the federal Clean Water Act, which prohibits the discharge of pollutants into waters of the United States except pursuant to appropriate permits; and

Solid and hazardous waste laws and regulations, which govern the management and disposal of certain waste.

In addition to imposing continuing compliance obligations, these laws, rules and regulations authorize the imposition of substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. In the normal course of business, we have investigatory and remedial activities underway at our facilities to

comply, or to determine compliance, with such laws, rules and regulations. We record liabilities for loss contingencies related to environmental matters when a loss is probable of occurring and can be reasonably estimated in accordance with the provisions of GAAP. Accordingly, we have immaterial accruals for loss contingencies for environmental matters. We also have a number of environmental matters for which we have not accrued loss contingencies because the risk of loss is not probable, or a loss cannot be reasonably

estimated. We evaluate the potential liability related to environmental matters quarterly and may revise our estimates. Such revisions in the estimates of the potential liabilities could have a material adverse effect on our results of operations, financial condition or cash flows. See Note 11 – Contractual Obligations, Commercial Commitments and Contingencies – "Environmental Matters” of Notes to DPL's Consolidated Financial Statements and Note 11 – Contractual Obligations, Commercial Commitments and Contingencies – "Environmental Matters" of Notes to DP&L's Financial Statements for more information regarding environmental risks, laws and regulations and legal proceedings to which we are and may be subject to in the future.

In response to Executive Orders from the U.S. President, the USEPA is currently evaluating various existing regulations to be considered for repeal, replacement, or modification. We cannot predict at this time the likely outcome of the USEPA’s review of these or other existing regulations or what impact it may have on our business.

We have several pending environmental matters associated with our current and ~~previously owned~~previously-owned and operated coal-fired generation units. Some of these matters could have material adverse impacts on our results of operations, financial condition or cash flows.

Environmental Matters Related to Air Quality

The CAA and the following regulations


◦	CSAPR and associated updates;


◦	MATS and any associated regulatory or judicial processes;


◦	NAAQS; and


◦	CPP or ~~a potential replacement~~Affordable Clean Energy (ACE) rule.

Litigation Involving Co-Owned Stations

As a result of a 2008 consent decree entered into with the Sierra Club and approved by the U.S. District Court for the Southern District of Ohio, DPL and the other owners of the Stuart generating station ~~are~~were subject to certain specified emission targets related to NO_X, SO₂ and particulate matter. The consent decree also includes commitments for energy efficiency and renewable energy activities. An amendment to the consent decree was entered into and approved in 2010 to clarify how emissions would be computed during startups. Given that all of the commitments have been met and with the retirement of the Stuart generating station, DPL and the other owners ~~plan to submit~~submitted a request for termination of the consent ~~decree.~~decree to the U.S. District Court.

Notices of Violation Involving Co-Owned Units

In June 2000, the USEPA issued an NOV to the then DP&L-operated Stuart generating station (co-owned by AES Ohio Generation, Dynegy and AEP Generation) for alleged violations of the CAA. The NOV contained allegations consistent with NOVs and complaints that the USEPA had brought against numerous other coal-fired utilities in the Midwest. The NOV indicated the USEPA may: (1) issue an order requiring compliance with the requirements of the Ohio SIP; or (2) bring a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation. ~~To date, neither action~~Given the retirement and sale of the Stuart generating station and the fact that there has been ~~taken.~~ ~~DPL~~ ~~cannot predict the outcome of~~no action to date, we do not expect any further material developments regarding this ~~matter.~~NOV.

In January 2015, DP&L received NOVs from the USEPA alleging violations in opacity at the Stuart and Killen generating stations in 2014. On February 15, 2017, the USEPA issued an NOV alleging violations in opacity at the Stuart generation station in 2016. Operations at both Stuart and Killen have ceased. ~~However,~~Given the retirement and sale of the Stuart and Killen generating stations and the fact there has been no recent activity, we ~~are currently unable to predict the outcome of~~do not expect any further material developments regarding these ~~matters.~~NOVs.

Notices of Violation Involving Wholly-Owned Stations

On November 18, 2009, the USEPA issued an NOV to DP&L for alleged NSR violations of the CAA at the Hutchings EGU, which was closed in 2013, relating to capital projects performed in 2001 involving Unit 3 and

Unit 6. We do not believe that the two projects described in the NOV were modifications subject to NSR. ~~We cannot predict~~Given the ~~outcome of~~fact there has been no recent activity, we do not expect any further material developments regarding this ~~matter.~~NOV.

Environmental Matters Related to Water Quality, Waste Disposal and Ash Ponds

As a result of DPL’s ~~decision to retire~~ retirement and subsequent sale of its Stuart and Killen generating stations, the sale of its ownership interest in the Miami Fort and Zimmer generating stations and the planned 2020 retirement of Conesville; the following environmental matters, regulations and requirements are now not expected to have a material impact on DPL with respect to these generating stations (although certain other requirements related to water quality, waste disposal and ash ponds are discussed further below):

water intake regulations, including those finalized by the USEPA on May 19, 2014;

the appeal of the NPDES permit governing the discharge of water from the Stuart ~~Station; and~~Station which was dismissed by the Ohio Environmental Review Appeals Commission on August 8, 2019;

revised technology-based regulations governing water discharges from steam electric generating facilities, finalized by the USEPA on November 3, 2015 and commonly referred to as the ELG ~~rules.~~

~~Clean Water Act – Regulation of Water Discharge~~

On January 7, 2013, the Ohio EPA issued a final NPDES permit to the Stuart Station which included a compliance schedule for performing a study to justify an alternate thermal limitation or take undefined measures to meet certain temperature limits. On February 1, 2013, ~~DP&L~~ ~~appealed various aspects of the final permit to the Environmental Review Appeals Commission. As a result of~~ ~~DPL’s~~ ~~decision to retire the Stuart Station we do not expect this to have a material impact on us.~~rules; and

Clean Water Act rules for ~~Selenium~~selenium.

~~On July 13, 2016,~~Notice of Potential Liability for Third Party Disposal Site

In December 2003, DP&L and other parties received notices that the USEPA ~~published the final updated chronic aquatic life criterion~~considered DP&L and other parties PRPs for the ~~pollutant selenium in freshwater per section 304(a)~~Tremont City Landfill site, located near Dayton, Ohio. On October 16, 2019, DP&L received another notice from the USEPA claiming that DP&L is a PRP for the portion of the ~~CWA. The rule will be implemented after state rulemaking occurs, and requirements will be incorporated into NPDES permits with compliance schedules in some cases. It~~site known as the barrel fill. While a review by DP&L of its records indicates that it did not contribute hazardous materials to the site, DP&L is ~~too early in~~currently unable to predict the ~~rulemaking process~~outcome of this matter. If DP&L were required to ~~determine~~contribute to the ~~impact, if any,~~clean-up of the site, it could have an adverse effect on our ~~operations,~~business, financial ~~position~~condition or results of operations.

Regulation of Waste Disposal

In 2002, DP&L and other parties received a special notice that the USEPA considered DP&L to be a PRP for the clean-up of hazardous substances at a third-party landfill known as the South Dayton Dump (“Landfill”). Several of the parties voluntarily accepted some of the responsibility for contamination at the Landfill and, in May 2010, three of those parties, Hobart Corporation, Kelsey-Hayes Company and NCR Corporation (“PRP Group”), filed a civil complaint in Ohio federal court (the “District Court”) against DP&L and numerous other defendants, alleging that the defendants contributed to the contamination at the landfill and were liable for contribution to the PRP group for costs associated with the investigation and remediation of the site.

While DP&L was able to get the initial case dismissed, the PRP Group subsequently, in 2013, entered into an additional Administrative Settlement Agreement and Order on Consent (“ASAOC”) with the USEPA relating to vapor intrusion and again filed suit against DP&L and other defendants. ~~Trial for that issue was scheduled to be held in 2019, but the District Court recently vacated that trial date and it is unknown when it will be rescheduled.~~ Plaintiffs also ~~attempted to add~~added an additional ASAOC they entered into in 2016 pertaining to the investigation and remediation of all hazardous substances present in the Landfill - potentially including undefined areas outside the original dump footprint - to the vapor intrusion trial proceeding. The ~~District Court allowed the claim to be added to the litigation~~2013 vapor intrusion ASAOC settled in early 2020, but ~~ruled that~~ the 2016 ASAOC ~~could not~~remains to be adjudicated ~~until~~ after completion of the remedial investigation feasibility ~~study, which is expected to be complete years after the vapor intrusion trial.~~study. While DP&L is unable to predict the outcome of these matters, if DP&L were required to contribute to the clean-up of the site, it could have a material adverse effect on our ~~business,~~results of operations, financial condition ~~or results of operations.~~and cash flows.

Regulation of CCR

On October 19, 2015, a USEPA rule regulating CCR under the Resource Conservation and Recovery Act as nonhazardous solid waste became effective. The rule established nationally applicable minimum criteria for the disposal of CCR in new and currently operating landfills and surface impoundments, including location restrictions, design and operating criteria, groundwater monitoring, corrective action and closure requirements and post-closure care. The primary enforcement mechanisms under this regulation would be actions commenced by the states and private lawsuits. On December 16, 2016, President Obama signed into law the Water Infrastructure Improvements for the Nation Act ("~~WIN~~WIIN Act"), which includes provisions to implement the

CCR rule through a state permitting program, or if the state chooses not to participate, a possible federal permit program. ~~EPA~~The USEPA has indicated that they will implement a phased approach to amending the CCR ~~Rule.~~Rule which is in process.

~~On September 13, 2017, the USEPA indicated that it would reconsider certain provisions of the CCR rule in response to two petitions it received to reconsider the final rule.~~ It is too early to determine whether the CCR rule or any revisions to or reconsideration of the rule may have a material impact on our business, financial condition or results of operations.

Notice of Violation Involving Co-Owned Units

On September 9, 2011, DP&L received an NOV from the USEPA with respect to its previously co-owned Stuart generating station based on a compliance evaluation inspection conducted by the USEPA and the Ohio EPA in

2009. The notice alleged non-compliance by DP&L with certain provisions of the RCRA, the CWA NPDES permit program and the station’s storm water pollution prevention plan. The notice requested that DP&L respond with the actions it has subsequently taken or plans to take to remedy the USEPA’s findings and ensure that further violations will not occur. Based on its review of the findings, although there can be no assurance, we believe that the notice will not result in ~~any~~a material adverse effect on ~~DPL’s~~our results of operations, financial condition orand cash flows.

HOW TO CONTACT DPL AND DP&L

DPL is a regional energy company incorporated in 1985 under the laws of Ohio. Our executive offices are located at 1065 Woodman Drive, Dayton, Ohio 45432 - telephone 937-259-7215. ~~DPL’s~~ ~~public internet site is http://www.dplinc.com.~~ DP&L’s public internet site is http://www.dpandl.com. The information on ~~these websites~~this website is not incorporated by reference into this report.

Item 1A – Risk Factors

Investors should consider carefully the following risk factors that could cause our business, operating results and financial condition to be materially adversely affected. New risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect our business or financial performance. These risk factors should be read in conjunction with the other detailed information concerning DPL set forth in the Notes to DPL's Consolidated Financial Statements and concerning DP&L set forth in the Notes to DP&L's Financial Statements in Part II – Item 8 – Financial Statements and Supplementary Data and additional information in Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations herein. The risks and uncertainties described below are not the only ones that we face. In light of executing on our plan to exit generation, our generation business and the risks associated with that business have significantly lessened, such as risks associated with operations of generation plants and with greenhouse gas emission requirements.

We may not always be able to recover our costs to deliver electricity to our retail customers. The costs we can recover and the return on capital we are permitted to earn for certain aspects of our business are regulated and governed by the laws of Ohio and the rules, policies and procedures of the PUCO.

In Ohio, retail generation rates are not subject to cost-based regulation, while the transmission and distribution businesses are still regulated. Even though rate regulation is premised on full recovery of prudently incurred costs and a reasonable rate of return on invested capital, there can be no assurance that the PUCO will agree that all of our costs have been prudently incurred or are recoverable. On May 1, 2008, SB 221, an Ohio electric energy bill, was adopted that requires all Ohio distribution utilities to file either an ESP or an MRO and established a significantly excessive earnings test for Ohio public utilities that measures a utility’s earnings to determine whether there have been significantly excessive earnings during a given calendar year. There can be no assurance that the regulatory process in which rates are determined will always result in rates that will produce a full or timely recovery of our costs or permitted rates of return. Accordingly, the revenue DP&L receives may or may not match its expenses at any given time.

Changes in or reinterpretations of, or the unexpected application of the laws, rules, policies and procedures that set or govern electric rates, permitted rates of return, rate structures, operation of a competitive bid structure to supply retail generation service to SSO customers, reliability initiatives, capital expenditures and investments and the recovery of these and other costs on a full or timely basis through rates, power market prices and the frequency and timing of rate increases, could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Our increased costs due to renewable energy and energy efficiency requirements may not be fully recoverable in the future.

Ohio law contains annual targets for energy efficiency which began in 2009 and require increasing energy reductions each year compared to a baseline energy usage, up to 22.3% by 2027. Peak demand reduction targets began in 2009 with increases in required percentages each year, up to 7.75% by 2020. The renewable energy standards have increased our costs and are expected to continue to increase (and could materially increase) these costs. DP&L is currently entitled to recover costs associated with its renewable energy compliance costs, as well as its energy efficiency and demand response programs. If, in the future, we are unable to timely or fully recover these costs, it could have a material adverse effect on our results of operations, financial condition and cash flows. In addition, if we were found not to be in compliance with these standards, monetary penalties could apply. These penalties are not permitted to be recovered from customers and significant penalties could have a material adverse effect on our results of operations, financial condition and cash flows. The demand reduction and energy efficiency standards by design result in reduced energy and demand that could have a material adverse effect on our results of operations, financial condition and cash flows.

We may be negatively affected by a lack of growth or a decline in the number of customers.

Customer growth is affected by a number of factors outside our control, such as population changes, job and income growth, housing starts, new business formation and the overall level of economic activity. A lack of growth, or a decline, in the number of customers in our service territory could have a material adverse effect on our results of operations, financial condition and cash flows and may cause us to fail to fully realize anticipated benefits from investments and expenditures.

We are subject to numerous environmental laws, rules and regulations that require capital expenditures, increase our cost of operations and may expose us to environmental liabilities.

We are subject to various federal, state, regional and local environmental protection and health and safety laws and regulations governing, among other things, the remediation of retired generation and other facilities, storage, handling, use, storage, disposal and transportation of coal combustion residuals and other materials, some of which may be defined as hazardous materials, the emission and discharge of hazardous and other materials into the environment; and the health and safety of our employees. Such laws, rules and regulations ~~tend to~~can become stricter over time, and we could also become subject to additional environmental laws, rules and regulations and other requirements in the future. Environmental laws, rules and regulations also require us to comply with inspections and obtain and comply with a wide variety of environmental licenses, permits, inspections and other governmental authorizations. These laws, rules and regulations often require a lengthy and complex process of obtaining and renewing licenses, permits and other governmental authorizations from federal, state and local agencies. If we are not able to timely comply with inspections and obtain, maintain or comply with all environmental laws, rules and regulations and all licenses, permits and other government authorizations required to operate our business, then our operations could be prevented, delayed or subject to additional costs. A violation of environmental laws, rules, regulations, licenses, permits or other requirements can result in substantial fines, penalties, other sanctions, permit revocation, facility shutdowns, the imposition of stricter environmental standards and controls or other injunctive measures affecting operating assets. In addition, any actual or alleged violation of these laws, rules or regulations and other requirements may require us to expend significant resources to defend against any such actual or alleged violations. DP&L has an ownership interest in OVEC, which operates generating stations, and DPL owns an undivided interest in ~~one~~a separate generating station operated by ~~our co-owner. As a non-controlling owner in this generating station,~~ ~~DPL~~ isDPL's co-owner of that facility. We generally are responsible for ~~its~~our respective pro rata share of expenditures for complying with environmental laws, rules, regulations, licenses, permits and other requirements at this generating station, but ~~has~~have limited control over the compliance measures taken by ~~our co-owner.~~the operator. Under certain environmental laws, we could also be held strictly, jointly and severally responsible for costs relating to contamination at our past or present facilities and at third-party waste disposal sites. We could also be held liable for human exposure to such hazardous substances or for other environmental damage.

In particular, we are subject to potentially significant remediation expenses, enforcement initiatives, private-party lawsuits and reputational risk associated with ~~CCR.~~ CCR, which consists of bottom ash, fly ash and air pollution control wastes generated at our current ~~and former~~ coal-fired generation plant sites, is currently handled and/or has been handled in the past in the following ways: placement in onsite CCR ponds; disposal and beneficial use in onsite and offsite permitted, engineered landfills; use in various beneficial use applications, including encapsulated uses and structural fill; and used in permitted offsite mine reclamation.sites. CCR currently remains onsite at ~~several of~~ our ~~facilities,~~Conesville EGU and at OVEC's EGUs, including in CCR ponds. The USEPA's final CCR rule, which became effective in October 2015 and is currently subject to litigation and undergoing revisions by the USEPA, regulates CCR as nonhazardous solid waste and establishes national minimum criteria for existing and new CCR landfills, impoundments and ponds, including location restrictions, design and operating criteria, groundwater monitoring, corrective action and closure

requirements and post-closure care. On December 16, 2016, President Obama signed the Water Infrastructure Improvements for the Nation (WIIN) Act into law, which includes provisions to implement the CCR rule through a state permitting program, or if the state chooses not to participate, a possible federal permit program. The primary enforcement mechanisms for the CCR rule could be actions commenced by the USEPA, states and private lawsuits. Compliance with the CCR rule, amendments to the federal CCR rule, or other federal, state, or foreign rules or programs addressing CCR may require us to incur substantial costs. In addition, CCR, particularly with respect to its beneficial use and regulation as nonhazardous solid waste, has been the subject of interest from environmental non-governmental organizations and the media. Any of the foregoing could have a material adverse effect on our results of operations, financial condition and cash flows.

From time to time we are subject to enforcement and litigation actions for claims of noncompliance with environmental laws, rules and regulations or other environmental requirements. ~~DPL~~We cannot assure that itwe will be successful in defending against any claim of noncompliance. Any actual or alleged violation of these laws, rules, regulations and other requirements may require us to expend significant resources to defend against any such actual or alleged violations and expose us to unexpected costs. Our costs and liabilities relating to environmental matters could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows. See Item 1 - Business - Environmental Matters for a more comprehensive discussion of these and other environmental matters impacting us.

We are reliant upon the performance of a co-owner who operates our remaining co-owned operational EGU.

We co-own an EGU operated by ~~one of our co-owners.~~the co-owner. Poor operational performance by our co-owner, misalignment of ~~co-owners’~~co-owner's interests with our own or lack of control over costs (such as fuel costs) incurred at this station could have an adverse effect on us. In addition, any sale of this co-owned EGU by the co-owner to a third party could enhance the risk of a misalignment of interests, lack of cost control and other operational failures.

The use of non-derivative and derivative instruments in the normal course of business could result in losses that could negatively impact our results of operations, financial position and cash flows.

From time to time, we use non-derivative and derivative instruments, such as swaps, options, futures and forwards, to manage financial risks. These trades are affected by a range of factors, including fluctuations in interest rates and optimization opportunities. We have attempted to manage our risk exposure by establishing and enforcing risk limits and risk management policies. Despite our efforts, however, these risk limits and management policies may not work as planned and fluctuating prices and other events could adversely affect our results of operations, financial condition and cash flows. In the absence of actively quoted market prices and pricing information from external sources, the valuation of these instruments can involve management’s judgment or the use of estimates. As a result, changes in the underlying assumptions or use of alternative valuation methods could affect the reported fair value of some of these contracts. We could also recognize financial losses as a result of volatility in the market values of these contracts, a counterparty failing to perform or the underlying transactions which the instruments are intended to hedge failing to materialize, which could result in a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

The Dodd-Frank Act contains significant requirements related to derivatives that, among other things, could reduce the cost effectiveness of entering into derivative transactions.

In July 2010, The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) was signed into law. The Dodd-Frank Act contains significant requirements relating to derivatives, including, among others, a requirement that certain transactions be cleared on exchanges that would necessitate the posting of cash collateral for these transactions. We are considered an end-user under the Dodd-Frank Act and therefore are exempt from most of the collateral and margining requirements. We are required to report our bilateral derivative contracts, unless our counterparty is a major swap participant or has elected to report on our behalf. Even though we qualify for an exception from these requirements, our counterparties that do not qualify for the exception may pass along any increased costs incurred by them through higher prices and reductions in unsecured credit limits or be unable to enter into certain transactions with us. The occurrence of any of these events could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Our business is sensitive to weather and seasonal variations.

Weather conditions significantly affect the demand for electric power and, accordingly, our business is affected by variations in general weather conditions and unusually severe weather. As a result of these factors, our operating revenues and associated operating expenses are not generated evenly by month during the year. We forecast electric sales based on ~~the basis of~~ normal weather, which represents a long-term historical average. In addition, severe or unusual weather, such as ~~hurricanes~~floods, tornadoes and ice or ~~snow storms,~~snowstorms, may cause outages and property damage that may

require us to incur additional costs that may not be insured or recoverable from customers. While DP&L is permitted to seek recovery of storm damage costs, if DP&L is unable to fully recover such costs in a timely manner, it could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Our membership in a regional transmission organization presents risks that could have a material adverse effect on our results of operations, financial condition and cash flows.

On October 1, 2004, in compliance with Ohio law, DP&L turned over control of its transmission functions and fully integrated into PJM, a regional transmission organization.

The rules governing the various regional power markets may also change from time to time which could affect our costs and revenues and have a material adverse effect on our results of operations, financial condition and cash flows. We may be required to expand our transmission system according to decisions made by PJM rather than our internal planning process. Various proposals and proceedings before the FERC may cause transmission rates to change from time to time. In addition, PJM developed and continues to refine rules associated with the allocation and methodology of assigning costs associated with improved transmission reliability, reduced transmission congestion and firm transmission rights that may have a financial effect on us. We also incur fees and costs to participate in PJM.

~~SB 221 includes a provision that allows electric utilities to seek and obtain recovery of~~Non-market-based RTO-related ~~charges. Therefore, non-market-based costs~~charges are being recovered from all retail customers through the ~~transmission rider.~~Transmission Rider. If in the future, however, we are unable to recover all of these costs in a timely manner this could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

As members of PJM, DP&L and AES Ohio Generation are also subject to certain additional risks including those associated with the allocation of losses caused by unreimbursed defaults of other participants in PJM markets among PJM members and those associated with complaint cases filed against PJM that may seek refunds of

revenues previously earned by PJM members including DP&L and AES Ohio Generation. These amounts could be significant and have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Costs associated with new transmission projects could have a material adverse effect on our results of operations, financial condition and cash flows.

Annually, PJM performs a review of the capital additions required to provide reliable electric transmission services throughout its territory. PJM traditionally allocated the costs of constructing these facilities to those entities that benefited directly from the additions. Over the last several years, however, some of the costs of constructing new large transmission facilities have been “socialized” across PJM without a direct relationship between the costs assigned to and benefits received by particular PJM members. To date, the additional costs charged to DP&L for new large transmission approved projects have not been material. Over time, as more new transmission projects are constructed and if the allocation method is not changed, the annual costs could become material. DP&L is recovering the Ohio retail jurisdictional share of these allocated costs from its retail customers through the ~~transmission rider.~~Transmission Rider. To the extent that any costs in the future are material and we are unable to recover them from our customers, such costs could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

If we were found not to be in compliance with the mandatory reliability standards, we could be subject to sanctions, including substantial monetary penalties.

As an owner of a bulk power transmission system, DP&L is subject to mandatory reliability standards promulgated by the NERC and enforced by the FERC. The standards are based on the functions that need to be performed to ensure the bulk power system operates reliably and is guided by reliability and market interface principles. In addition, DP&L is subject to Ohio reliability standards and targets. Compliance with reliability standards may subject us to higher operating costs or increased capital expenditures. Although we expect to recover costs and expenditures from customers through regulated rates, there can be no assurance that the PUCO will approve full recovery in a timely manner. If we were found not to be in compliance with the mandatory reliability standards, we could be subject to sanctions, including substantial monetary penalties, which could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

We rely on access to the financial markets. General economic conditions and disruptions in the financial markets could adversely affect our ability to raise capital on favorable terms, or at all, and cause increases in our interest expense.

From time to time we rely on access to the capital and credit markets as a source of liquidity for capital requirements not satisfied by operating cash flows. These capital and credit markets experience volatility and disruption from time to time and the ability of corporations to raise capital can be negatively affected. Disruptions in the capital and credit markets make it harder and more expensive to raise capital. ~~It is possible that our~~Our ability to raise capital on favorable terms, or at all, ~~could~~can be adversely affected by ~~future~~unfavorable market conditions or declines in our creditworthiness, and we may be unable to access adequate funding to refinance our debt as it becomes due or finance capital expenditures. The extent of any impact will depend on several factors, including our operating cash flows, financial condition and prospects, the overall supply and demand in the credit markets, our credit ratings, credit capacity, the cost of financing, the financial condition, performance and prospects of other companies in our industry or with similar financial circumstances and other general economic and business conditions. It may also depend on the performance of credit counterparties and financial institutions with which we do business. Access to funds under our existing financing arrangements is also dependent on the ability of our counterparties to meet their financing ~~commitments.~~commitments and our satisfying conditions to borrowing. Our inability to obtain financing on reasonable terms, or at all, with creditworthy counterparties could adversely affect our results of operations, financial condition and cash flows. If our available funding is limited or we are forced to fund our operations at a higher cost, these conditions may require us to curtail our business activities and increase our cost of funding, both of which ~~could reduce~~would adversely impact our profitability. See Note 7 – Long-term debt of Notes to DPL's Consolidated Financial Statements and Note 7 – Long-term debt of Notes to DP&L's Financial Statements for information regarding indebtedness. See also Item 7A - Quantitative and Qualitative Disclosure about Market Riskfor information related to market risks.

Our transmission and distribution system is subject to operational, reliability and capacity risks.

The ongoing reliable performance of our transmission and distribution system is subject to risks due to, among other things, weather damage, intentional or unintentional damage, equipment or process failure, catastrophic events, such as fires and/or explosions, facility outages, labor disputes, accidents or injuries, operator error or inoperability of key infrastructure internal or external to us and events occurring on third party systems that interconnect to and affect our system. The failure of our transmission and distribution system to fully operate and

deliver the energy demanded by customers could have a material adverse effect on our results of operations, financial condition and cash flows, and if such failures occur frequently and/or for extended periods of time, could result in adverse regulatory action. In addition, the advent and quick adoption of new products and services that require increased levels of electrical energy cannot be predicted and could result in insufficient transmission and distribution system capacity. Also, as a result of the above risks and other potential risks and hazards associated with transmission and distribution operations, we may from time to time become exposed to significant liabilities for which we may not have adequate insurance coverage. We maintain an amount of insurance protection that we believe is adequate, but there can be no assurance that our insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject. Further, any increased costs or adverse changes in the insurance markets may cause delays or inability in maintaining insurance coverage on terms similar to those presently available to us or at all. A successful claim for which we are not fully insured could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Current and future conditions in the economy may adversely affect our customers, suppliers and other counterparties, which may adversely affect our results of operations, financial condition and cash flows.

Our business, results of operations, financial condition and cash flows have been and will continue to be affected by general economic conditions. Slowing economic growth, credit market conditions, fluctuating consumer and business confidence, fluctuating commodity prices and other challenges currently affecting the general economy, have caused and may continue to cause some of our customers to experience deterioration of their businesses, cash flow shortages and difficulty obtaining financing. As a result, existing customers may reduce their electricity consumption and may not be able to fulfill their payment obligations to us in a normal, timely fashion. In addition, some existing commercial and industrial customers may discontinue their operations. Sustained downturns, recessions or a sluggish economy generally affect the markets in which we operate and negatively influence our energy operations. A contracting, slow or sluggish economy could reduce the demand for energy in areas in which we are doing business. For example, during economic downturns, our commercial and industrial customers may see a decrease in demand for their products, which in turn may lead to a decrease in the amount of energy they require. Furthermore, projects which may result in potential new customers may be delayed until economic conditions improve. Some of our suppliers, customers, other counterparties and others with whom we transact business ~~may also~~ experience financial difficulties, which may impact their ability to fulfill their obligations to us or result in their declaring bankruptcy or similar insolvency-type proceedings. For example, our counterparties on

forward purchase contracts and financial institutions involved in our credit facility may become unable to fulfill their contractual obligations. We may not be able to enter into replacement agreements on terms as favorable as our existing agreements. Reduced demand for our electric services, failure by our customers to timely remit full payment owed to us and supply delays or unavailability could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows. In particular, the projected economic growth and total employment in DP&L’s service territory are important to the realization of our forecasts for annual energy sales.

The level of our indebtedness, and the security provided for this indebtedness, could adversely affect our financial flexibility, and a material change in market interest rates could adversely affect our results of operations, financial condition and cash flows.

As of December 31, ~~2018,~~2019, the carrying value of DPL's debt was ~~$1,475.9~~$1,507.1 million and the carrying value of DP&L's debt was ~~$586.1~~$614.4 million. Of DP&L's indebtedness, there was ~~$576.1~~$565.0 million of First Mortgage Bonds and tax-exempt bonds ~~and a term loan outstanding~~ as of December 31, ~~2018,~~2019, which are ~~each~~ secured by the pledge of substantially all of the assets of DP&L under the terms of DP&L’s First & Refunding Mortgage.DPL's revolving credit facility is also secured by a pledge of common stock that DPL owns in DP&L. This level of indebtedness and related security could have important consequences, including:

increasing our vulnerability to general adverse economic and industry conditions;

requiring us to dedicate a substantial portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund other corporate purposes;

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

limiting, along with the financial and other restrictive covenants in our indebtedness, our ability to borrow additional funds, as needed.

If DP&L issues additional debt in the future, we will be subject to the terms of such debt agreements and be required to obtain regulatory approvals. To the extent we increase our leverage, the risks described above would also increase. Further, actual cash requirements in the future may be greater than expected. Accordingly, our cash flows from operations may not be sufficient to repay all of the outstanding debt as it becomes due and, in that event,

we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt as it becomes due. Additionally, any failure to comply with covenants in the instruments governing our debt could result in an event of default thereunder. For a further discussion of our outstanding debt obligations, see Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and Capital Requirements and Note 7 – Long-term debt of Notes to DPL's Consolidated Financial Statements and Note 7 – Long-term debt of Notes to DP&L's Financial ~~Statements.~~Statements.

DP&L has variable rate debt that bears interest based on a prevailing rate that is reset based on a market index that can be affected by market demand, supply, market interest rates and other market conditions. We also maintain both cash on deposit and investments in cash equivalents from time to time that could be impacted by interest rate fluctuations. As such, any event which impacts market interest rates could have a material effect on our results of operations, financial condition and cash flows. In addition, rating agencies issue ratings on our credit and our debt that affect our borrowing costs under our financial arrangements and affect our potential pool of investors and funding sources. Credit ratings also govern the collateral provisions of certain of our contracts. If the rating agencies were to downgrade our credit ratings further, our borrowing costs would likely further increase, our potential pool of investors and funding resources could be reduced, and we could be required to post additional collateral under select contracts. These events would likely reduce our liquidity and profitability and could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Economic conditions relating to the asset performance and interest rates of our pension and postemployment benefit plans could materially and adversely impact our results of operations, financial condition and cash flows.

Pension costs are based upon a number of actuarial assumptions, including an expected long-term rate of return on pension plan assets, level of employer contributions, the expected life span of pension plan beneficiaries and the discount rate used to determine the present value of future pension obligations. Any of these assumptions could prove to be wrong, resulting in a shortfall of our pension and postemployment benefit plan assets compared to obligations under our pension and postemployment benefit plans. Further, the performance of the capital markets affects the values of the assets that are held in trust to satisfy future obligations under our pension and postemployment benefit plans. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below our projected return rates. A decline in the market value of the pension and postemployment benefit plan assets will increase the funding requirements under our pension and postemployment benefit plans if the actual asset returns do not recover these declines in value in the foreseeable future. Future pension funding

requirements, and the timing of funding payments, may also be subject to changes in legislation. We are responsible for funding any shortfall of our pension and postemployment benefit plans’ assets compared to obligations under the pension and postemployment benefit plans, and a significant increase in our pension liabilities could materially and adversely impact our results of operations, financial condition and cash flows. We are subject to the Pension Protection Act of 2006, which requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, our required contributions to these plans, at times, have increased and may increase in the future. In addition, our pension and postemployment benefit plan liabilities are sensitive to changes in interest rates. When interest rates decrease, the discounted liabilities increase benefit expense and funding requirements. Further, changes in demographics, including increased numbers of retirements or changes in life expectancy assumptions, may also increase the funding requirements for the obligations related to the pension and other postemployment benefit plans. Declines in market values and increased funding requirements could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Counterparties providing materials or services may fail to perform their obligations, which could harm our results of operations, financial condition and cash flows.

We enter into transactions with and rely on many counterparties in connection with our business, including for purchased power, for our capital improvements and additions and to provide professional services, such as actuarial calculations, payroll processing and various consulting services. If any of these counterparties fails to perform its obligations to us or becomes unavailable, our business plans may be materially disrupted, we may be forced to discontinue certain operations if a cost-effective alternative is not readily available or we may be forced to enter into alternative arrangements at then-current market prices that may exceed our contractual prices and cause delays. Although our agreements are designed to mitigate the consequences of a potential default by the counterparty, our actual exposure may be greater than relief provided by these mitigation provisions. Any of the foregoing could result in regulatory actions, cost overruns, delays or other losses, any of which (or a combination of which) could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Further, from time to time our construction program may call for extensive expenditures for capital improvements and additions, including the installation of upgrades, improvements to transmission and distribution facilities, as well as other initiatives. As a result, we may engage contractors and enter into agreements to acquire necessary materials and/or obtain required construction related services. In addition, some contracts may provide for us to assume the risk of price escalation and availability of certain metals and key components. This could force us to enter into alternative arrangements at then-current market prices that may exceed our contractual prices and cause construction delays. It could also subject us to enforcement action by regulatory authorities to the extent that such a contractor failure resulted in a failure by DP&L to comply with requirements or expectations, particularly with regard to the cost of the project. If these events were to occur, we might incur losses or delays in completing construction.

Accidental improprieties and undetected errors in our internal controls and information reporting could result in the disallowance of cost recovery, noncompliant disclosure or incorrect payment processing.

Our internal controls, accounting policies and practices and internal information systems are designed to enable us to capture and process transactions and information in a timely and accurate manner in compliance with GAAP in the United States of America, laws and regulations, taxation requirements and federal securities laws and regulations in order to, among other things, disclose and report financial and other information in connection with the recovery of our costs and with our reporting requirements under federal securities, tax and other laws and regulations and to properly process payments. We have also implemented corporate governance, internal control and accounting policies and procedures in connection with the Sarbanes-Oxley Act of 2002. Our internal controls and policies have been and continue to be closely monitored by management and our Board of Directors. While we believe these controls, policies, practices and systems are adequate to verify data integrity, unanticipated and unauthorized actions of employees, temporary lapses in internal controls due to shortfalls in oversight or resource constraints could lead to improprieties and undetected errors that could result in the disallowance of cost recovery, noncompliant disclosure and reporting or incorrect payment processing. The consequences of these events could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

New accounting standards or changes to existing accounting standards could materially affect how we report our results of operations, financial condition and cash flows.

DPL's Consolidated Financial Statements and DP&L's Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. The SEC, FASB or other authoritative bodies or governmental entities may issue new pronouncements or new interpretations of existing accounting standards that may require us to change our accounting policies. These changes are beyond our control, can be

difficult to predict and could materially affect how we report our results of operations, financial condition and cash flows. We could be required to apply a new or revised standard retroactively, which could adversely affect our financial condition. In addition, in preparing our Financial Statements, management is required to make estimates and assumptions. Actual results could differ significantly from those estimates.

We are subject to extensive laws and local, state and federal regulation, as well as litigation and other proceedings that could affect our operations and costs.

As an electric utility, DP&L is subject to extensive regulation at both the federal and state level. For example, at the federal level, DP&L is regulated by the FERC and the NERC and, at the state level, by the PUCO. The regulatory power of the PUCO over DP&L is both comprehensive and typical of the traditional form of regulation generally imposed by state public utility commissions. We face the risk of unexpected or adverse regulatory action. Regulatory discretion is reasonably broad in Ohio. DP&L is subject to regulation by the PUCO as to our services and facilities, the valuation of property, the construction, purchase, or lease of electric facilities, the classification of accounts, rates of depreciation, the increase or decrease in retail rates and charges, the issuance of securities and incurrence of debt, the acquisition and sale of some public utility properties or securities and certain other matters. As a result of the Energy Policy Act of 2005 and subsequent legislation affecting the electric utility industry, we have been required to comply with rules and regulations in areas including mandatory reliability standards, cybersecurity, transmission expansion and energy efficiency. Complying with the regulatory environment to which we are subject requires us to expend a significant amount of funds and resources. The failure to comply with this regulatory environment could subject us to substantial financial costs and penalties and changes, either forced or voluntary, in the way we operate our business that could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

We ~~may be~~are subject to ~~material~~ litigation, regulatory proceedings, administrative proceedings, audits, settlements, investigations and claims from time to time ~~which may~~that require us to expend significant funds to address. There can be no assurance that the outcome of these matters will not have a material adverse effect on our business, results of operations, financial condition and cash flows. Asbestos and other regulated substances are, and may continue to be, present at our

facilities, and we have been named as a defendant in asbestos litigation. The continued presence of asbestos and other regulated substances at these facilities could result in additional litigation being brought against us, which could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows. See Item 1 - Business - Competition and Regulation, Item 1 - Business - Environmental Matters, and Item 3 - Legal Proceedings for a summary of significant regulatory matters and legal proceedings involving us.

Tax legislation initiatives or challenges to our tax positions could adversely affect our operations and financial condition.

We are subject to the tax laws and regulations of the U.S. federal, state and local governments. From time to time, legislative measures may be enacted that could adversely affect our overall tax positions regarding income or other taxes. There can be no assurance that our effective tax rate or tax payments will not be adversely affected by these legislative measures.

For example, the United States federal government recently enacted tax reform that, among other things, reduces U.S. federal corporate income tax rates, imposes limits on tax deductions for interest expense and changes the rules related to capital expenditure cost recovery. There are a number of uncertainties and ambiguities as to the interpretation and application of many of the provisions of the newly enacted tax reform measure. Given the unpredictability of these possible changes and their potential interdependency, it remains difficult to assess the overall effect such tax changes will have on our earnings and cash flow, and the extent to which such changes could adversely impact our results of operations. As the impacts of the new law are determined, and as yet-to-be-released regulations and other guidance interpreting the new law are issued and finalized, our financial results could be materially impacted.

In addition, U.S. federal, state and local tax laws and regulations are extremely complex and subject to varying interpretations. There can be no assurance that our tax positions will be sustained if challenged by relevant tax authorities and if not sustained, there could be a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

If we are unable to maintain a qualified and properly motivated workforce, it could have a material adverse effect on our results of operations, financial condition and cash flows.

One of the challenges we face is to retain a skilled, efficient and cost-effective workforce while recruiting new talent to replace losses in knowledge and skills due to resignations, terminations or retirements. This undertaking could

require us to make additional financial commitments and incur increased costs. If we are unable to successfully attract and retain an appropriately qualified workforce, it could have a material adverse effect on our results of operations, financial condition and cash flows. In addition, we have employee compensation plans that reward the performance of our employees. We seek to ensure that our compensation plans encourage acceptable levels for risk and high performance through pay mix, performance metrics and timing. We may not be able to successfully train new personnel as current workers with significant knowledge and expertise retire. We also may be unable to staff our business with qualified personnel in the event of significant absenteeism related to a pandemic illness. Excessive risk-taking by our employees to achieve performance targets, through mitigated by policies and procedures, could result in events that have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

We are subject to collective bargaining agreements that could adversely affect our business, results of operations, financial condition and cash flows.

We are subject to collective bargaining agreements with employees who are members of a union. Over half of our employees are represented by a collective bargaining ~~agreement that expires on October 31, 2020.~~agreement. While we believe that we maintain a satisfactory relationship with our employees, it is possible that labor disruptions affecting some or all of our operations could occur during the period of the collective bargaining agreement or at the expiration of the collective bargaining agreement before a new agreement is negotiated. Work stoppages by, or poor relations or ineffective negotiations with, our employees or other workforce issues could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

Potential security breaches (including cybersecurity breaches) and terrorism risks could adversely affect our businesses.

We operate in a highly regulated industry that requires the continued operation of sophisticated systems and network infrastructure at our generation stations, fuel storage facilities and transmission and distribution facilities. We also use various financial, accounting and other systems in our businesses. These systems and facilities are vulnerable to unauthorized access due to hacking, viruses, other cybersecurity attacks and other causes. In

particular, given the importance of energy and the electric grid, there is the possibility that our systems and facilities could be targets of terrorism or acts of war. We have implemented measures to help prevent unauthorized access to our systems and facilities, including network and system monitoring, identification and deployment of secure technologies and certain other measures to comply with mandatory regulatory reliability standards. Pursuant to NERC requirements, we have a robust cybersecurity plan in place and are subject to regular audits by an independent auditor approved by the NERC. We routinely test our systems and facilities against these regulatory requirements in order to measure compliance, assess potential security risks and identify areas for improvement. In addition, we provide cybersecurity training for our employees and perform exercises designed to raise employee awareness of cyber risks on a regular basis. To date, cyber-attacks on our business and operations have not had a material impact on our operations or financial results. Despite these efforts, if our systems or facilities were to be breached or disabled, we may be unable to recover them in a timely manner to fulfill critical business functions, including the supply of electric services to our customers, and we could experience decreases in revenues and increases in costs that could have a material adverse effect on our results of operations, financial condition and cash ~~flows.~~flows.

In the course of our business, we also store and use customer, employee and other personal information and other confidential and sensitive information, including personally identifiable information and personal financial information. If our or our third-party vendors’ systems were to be breached or disabled, sensitive and confidential information and other data could be compromised, which could result in negative publicity, remediation costs and potential litigation, damages, consent orders, injunctions, fines and other relief.

To help mitigate these risks, we maintain insurance coverage against some, but not all, potential losses, including coverage for illegal acts against us. However, insurance may not be adequate to protect us against all costs and liabilities associated with these risks.

DPL is a holding company and parent of DP&L and other subsidiaries. DPL’s cash flow is dependent on the ~~operating~~ cash flows of DP&L and its other subsidiaries and their ability to pay cash to DPL.

DPL is a holding company with no material assets other than the ownership of its subsidiaries, and accordingly all cash is generated by the ~~operating~~ activities of its subsidiaries, principally DP&L. As such, DPL’s cash flow is largely dependent on the ~~operating~~ cash flows of DP&L and its ability to pay cash to DPL. ~~See Item 7 - Management’s Discussion~~The impact of the recent ESP and ~~Analysis~~other regulatory proceedings on DP&L's revenues adversely affects DPL's ability to satisfy the financial covenants in its secured revolving credit facility. In addition, there are a number of ~~Financial Condition and Results~~other rate proceedings pending or anticipated that we cannot predict the outcome of, ~~Operations - Capital Resources and Liquidity for a discussion of~~which could adversely affect DPL's ability to satisfy these ~~restrictions.~~covenants. See Note 73 – ~~Long-term debt~~Regulatory Matters of Notes to DPL's Consolidated

Financial Statements and Note 3 – Regulatory Matters of Notes to DP&L's Financial Statements for descriptions of DP&L's ESP and other regulatory proceedings and Note 7 – Long-term debt of Notes to ~~DP&L's~~DPL's Consolidated Financial Statements and Note 7 – Long-term debt of Notes to DP&L's Financial Statements for information regarding indebtedness and our financial covenants related to indebtedness. In addition, DP&L is regulated by the PUCO, which possesses broad oversight powers to ensure that the needs of utility customers are being met. The PUCO could impose additional restrictions on the ability of DP&L to distribute, loan or advance cash to DPL pursuant to these broad powers. ~~See Note 3 – Regulatory Matters of Notes to~~ ~~DPL's~~ ~~Consolidated Financial Statements and Note 3 – Regulatory Matters of Notes to~~ ~~DP&L's~~ ~~Financial Statements for more information the regulatory environment. As part of the PUCO’s approval of the Merger,~~ ~~DP&L~~ ~~agreed to maintain certain capital structure levels. See Note 10 – Equity of Notes to~~ ~~DPL's~~ ~~Consolidated Financial Statements and Note 10 – Equity of Notes to~~ ~~DP&L's~~ ~~Financial Statements for information related to these capital structure levels and restrictions on~~ ~~DP&L's~~ ~~equity and its ability to declare and pay dividends to~~ ~~DPL.~~ ~~While we do not expect any of the foregoing to significantly affect~~ ~~DP&L’s~~ ~~ability to pay funds to~~ ~~DPL~~ ~~in the near future, a~~A significant limitation on DP&L’s ability to pay dividends or loan or advance funds to DPL could have a material adverse effect onDPL’sresults of operations, financial condition and cash ~~flows. In addition, as a result of any non-compliance with PUCO requirements, the PUCO could impose additional restrictions on~~ ~~DP&L~~ ~~operations that could have a material adverse effect on our results of operations, financial condition and cash flows.~~flows.

Our ownership by AES subjects us to potential risks that are beyond our control.

All of DP&L’s common stock is owned by DPL, and DPL is an indirectly wholly owned subsidiary of AES. Due to our relationship with AES, any adverse developments and announcements concerning AES may impair our ability to access the capital markets and to otherwise conduct business. In particular, downgrades in AES’s credit ratings could result in DPL’s or DP&L’s credit ratings being downgraded.

Impairment of long-lived assets would negatively affect our consolidated results of operations and net worth.

Long-lived assets are amortized or depreciated over their estimated useful lives. Long-lived assets are evaluated for impairment only when impairment indicators are present. The recoverability assessment of long-lived assets requires making estimates and assumptions to determine fair value, as described above. ~~See Note 17 – Fixed-asset impairments or Notes to~~ ~~DPL's~~ ~~Consolidated Financial Statements for more information on the impairment of fixed assets.~~

Item 1B – Unresolved Staff Comments

None.

Item 2 – Properties

Information relating to our properties is contained in Note 4 – Property, Plant and Equipment of Notes to DPL's Consolidated Financial Statements and Note 4 – Property, Plant and Equipment of Notes to DP&L's Financial ~~Statements.~~Statements.

Our executive offices are located at 1065 Woodman Drive, Dayton, Ohio. This facility and the remainder of our material properties are owned directly by DP&L or AES Ohio Generation. These properties include our distribution service center in Dayton, Ohio, various substations and other transmission and distribution equipment and property.

Substantially all property, plant & equipment of DP&L is subject to the lien of the mortgage securing DP&L’s First and Refunding Mortgage. All generation assets were released from the lien of DP&L's first and refunding mortgage in connection with the completion of Generation Separation on October 1, 2017. See Note 14 – Generation Separation of Notes to DP&L's Financial ~~Statements.~~Statements.

Item 3 – Legal Proceedings

DPL and DP&L are involved in certain claims, suits and legal proceedings in the normal course of business. DPL and DP&L have accrued for litigation and claims where it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. DPL and DP&L believe, based upon information they currently possess and considering established reserves for estimated liabilities and insurance coverage, that the ultimate

outcome of these proceedings and actions is unlikely to have a material adverse effect on their financial statements. It is reasonably possible, however, that some matters could be decided unfavorably and could require DPL or DP&L to pay damages or make expenditures in amounts that could be material but cannot be estimated as of December 31, ~~2018.~~2019.

The following additional information is incorporated by reference into this Item: information about the legal proceedings contained in Item 1 - Business - Competition and Regulation and Item 1 - Business - Environmental Matters.

Item 4 – Mine Safety Disclosures

Not applicable.

PART II

Item 5 – Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

All of the outstanding common stock of DPL is owned indirectly by AES and directly by a wholly-owned subsidiary of AES. As a result, DPL’s stock is not listed for trading on any stock exchange. DP&L’s common stock is held solely by DPL and, as a result, is not listed for trading on any stock exchange.

Dividends and return of capital

During the years ended December 31, 2019, 2018 and 2017, ~~and 2016,~~ DPL paid no dividends to AES. DP&L declares and pays dividends on its common shares to its parent DPL from time to time as declared by the DP&L board. Return of capital payments and dividends on common shares in the amounts of $95.0 million, $43.8 million ~~$39.0 million~~ and ~~$70.0~~$39.0 million were declared and paid in the years ended December 31, 2019, 2018 and 2017, ~~and 2016,~~ respectively.~~DP&L~~ ~~declared and paid dividends on preferred shares of $0.7 million in the year ended December 31, 2016.~~

DPL’s Amended Articles of Incorporation contain restrictions on DPL’s ability to make dividends, distributions and affiliate loans (other than to its subsidiaries), including restrictions on making such dividends, distributions and loans if certain financial ratios exceed specified levels and DPL’s senior long-term debt rating from a rating agency is below investment grade. As of December 31, ~~2018,~~ 2019, DPL’s leverage ratio was at ~~1.47~~1.32 to 1.00 and DPL’s senior long-term debt rating from a major credit rating agency was below investment grade. As a result, as of December 31, ~~2018,~~ 2019, DPL was prohibited under its Articles of Incorporation from making a distribution to its shareholder or making a loan to any of its affiliates (other than its subsidiaries).

DP&L's 2017 ESP ~~also contains~~contained restrictions on dividend or tax sharing payments from DPL to AES. See Note 10 – Equity for more information and Note 8 – Income Taxes for more information about the tax sharing payment restrictions.

~~On October 13, 2016 (the "Redemption Date"),~~ ~~DPL's~~ ~~subsidiary,~~ ~~DP&L~~ ~~redeemed all of its issued and outstanding preferred stock. See Note 10 – Equity of Notes to~~ ~~DPL's~~ ~~Consolidated Financial Statements for more information and Note 10 – Equity of Notes to~~ ~~DP&L's~~ ~~Financial Statements.~~

Item 6 – Selected Financial Data

The following table presents our selected financial data which should be read in conjunction with DPL's audited Consolidated Financial Statements and the related Notes thereto, DP&L's audited Financial Statements and the related Notes thereto and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations. The “Results of Operations” discussion in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses significant fluctuations in operating data. DPL’s common stock is wholly-owned by an indirect subsidiary of AES and therefore DPL does not report earnings or dividends on a per-share basis. Other information that management believes is important in understanding trends in our business is also included in this table. The total electric sales and Statements of Operations Data for DPL for ~~2014 and~~ 2015 and the Balance Sheet Data for DPL for ~~2014~~2015 - 2016 are not comparable to the total electric sales and Statements of Operations Data for 2016 - ~~2018~~2019 and the Balance Sheet Data for 2017 ~~and 2018,~~- 2019, respectively, as these periods have not been adjusted to reflect the reclassification of the generation business, excluding Conesville, as a discontinued operation. The ~~Statements of Operations Data for~~ ~~DP&L~~ ~~for 2014 and the~~ total electric sales and Balance Sheet Data for DP&L for ~~2014 -~~ 2015 are not comparable to ~~the Statements of Operations Data for 2015 - 2018 and~~ the total electric sales and Balance Sheet Data for 2016 - ~~2018,~~2019, respectively, as these periods have not been adjusted to reflect the Generation Separation and its reclassification as a discontinued operation.

																															DPL
	Years ended December 31,															Years ended December 31,
$ in millions except per share amounts or as indicated	2018			2017			2016			2015			2014			2019			2018			2017			2016			2015
Total electric sales (millions of kWh)	15,728			14,679			15,406			20,756			19,060			15,108			15,728			14,679			15,406			20,756
Statements of Operations Data
Revenues	$	775.9		$	743.9		$	834.2		$	1,612.8		$	1,716.5		$	763.3		$	775.9		$	743.9		$	834.2		$	1,612.8
Goodwill impairment ^(a)	$	—		$	—		$	—		$	317.0		$	—		$	—		$	—		$	—		$	—		$	317.0
Fixed-asset impairment ^(b)(a)	$	2.8		$	—		$	23.9		$	—		$	11.5		$	3.5		$	2.8		$	—		$	23.9		$	—
Operating income / (loss)	$	135.5		$	105.2		$	119.0		$	(109.9	)	$	230.7		$	147.5		$	135.5		$	105.2		$	119.0		$	(109.9	)
Income / (loss) from continuing operations	$	31.2		$	(1.5	)	$	14.8		$	(251.4	)	$	57.2		$	45.9		$	31.2		$	(1.5	)	$	14.8		$	(251.4	)
Income / (loss) from discontinued operations, net of tax	$	38.9		$	(93.1	)	$	(500.0	)	$	12.4		$	(131.8	)	$	59.5		$	38.9		$	(93.1	)	$	(500.0	)	$	12.4
Net income / (loss)	$	70.1		$	(94.6	)	$	(485.2	)	$	(239.0	)	$	(74.6	)	$	105.4		$	70.1		$	(94.6	)	$	(485.2	)	$	(239.0	)
Capital expenditures	$	103.6		$	121.5		$	148.5		$	137.2		$	118.1		$	168.1		$	103.6		$	121.5		$	148.5		$	137.2

Balance Sheet Data (end of period):
Total assets	$	1,883.1		$	2,049.2		$	2,419.2		$	3,324.7		$	3,559.1		$	1,935.8		$	1,883.1		$	2,049.2		$	2,419.2		$	3,324.7
Long-term debt ^(c)(b)	$	1,372.3		$	1,700.2		$	1,828.7		$	1,420.5		$	2,120.9		$	1,223.3		$	1,372.3		$	1,700.2		$	1,828.7		$	1,420.5
Redeemable preferred stock of subsidiary	$	—		$	—		$	—		$	18.4		$	18.4		$	—		$	—		$	—		$	—		$	18.4
Total common shareholder's equity / (deficit)	$	(471.7	)	$	(584.3	)	$	(587.6	)	$	(80.6	)	$	148.2
Total common shareholder's deficit																$	(371.9	)	$	(471.7	)	$	(584.3	)	$	(587.6	)	$	(80.6	)

~~The establishment of a~~ ~~three-year non-bypassable Distribution Modernization Rider (DMR) designed to collect~~ ~~$105.0 million~~ ~~in revenue per year to pay debt obligations at~~ ~~DPL~~ ~~and~~ ~~DP&L~~ ~~and position~~ ~~DP&L~~ ~~to modernize and/or maintain its transmission and distribution infrastructure with an option for~~ ~~DP&L~~ ~~to file for~~


•	A bypassable standard offer energy rider for DP&L’s customers based on competitive bid auctions;


•	The establishment of a three-year non-bypassable DMR to collect $105.0 million in revenue per year to pay debt obligations at DPL and DP&L and position DP&L to modernize and/or maintain its transmission and distribution infrastructure;


•	The establishment of the DIR, a non-bypassable Distribution Investment Rider to recover distribution capital investments incremental to the amount included in rate base in the DP&L DRO;


•	A non-bypassable Reconciliation Rider, which allowed DP&L to recover its net ongoing costs from its investment in OVEC;

~~an extension of the rider for an additional two years in an amount subject to approval by the PUCO. Consistent with that settlement and the PUCO order, on January 22, 2019,~~ ~~DP&L~~ ~~filed a request to extend the DMR for the additional two years at an annual revenue amount of~~ ~~$199.0 million. That request is pending PUCO review;~~

~~The establishment of a non-bypassable Distribution Investment Rider to recover incremental distribution capital investments, the amount of which was established in the~~ ~~DP&L~~ ~~DRO;~~

~~A non-bypassable Reconciliation Rider permitting~~ ~~DP&L~~ ~~to defer, recover or credit the net proceeds from selling energy and capacity received as part of~~ ~~DP&L’s~~ ~~investment in OVEC and~~ ~~DP&L's~~ ~~OVEC related costs;~~

Implementation, by ~~DP&L~~effective November 1, 2017, of a Smart Grid Rider, Economic Development Rider, Economic Development Fund, Regulatory Compliance Rider and certain other new, or changes to existing rates and riders and competitive retail market enhancements, with tariffs consistent with the ~~order. These riders became effective~~2017 ESP;


•	A commitment to commence a sale process to sell our ownership interests in the Miami Fort, Zimmer and Conesville coal-fired generation plants, with all sales proceeds used to pay debt of DPL and DP&L, and


•	Restrictions on DPL making dividend or tax sharing payments and an obligation to convert then existing tax payments owed by DPL to AES into equity investments in DPL.

On November ~~1, 2017;~~

~~A commitment to commence~~21, 2019, the PUCO issued a ~~sale process to sell our ownership interests in~~supplemental order modifying the ~~Miami Fort, Zimmer and Conesville coal-fired generation plants, with all sales proceeds used to pay debt of~~ ~~DPL~~ ~~and~~ ~~DP&L;~~

~~Restrictions on~~ ~~DPL~~ ~~making dividend or tax sharing payments and an obligation to convert then existing tax payments owed~~2017 ESP Stipulation by, ~~DPL~~ ~~to AES into equity investments in~~ ~~DPL. See~~ ~~Note 8 – Income Taxes and Note 10 – Equity for more information on~~among other matters, removing the ~~tax sharing payment restrictions; and~~

~~Various other riders and competitive retail market enhancements.~~

~~On October 19, 2018 IGS,~~DMR, which reduced DPL’s annual revenues by $105.0 million beginning November 29, 2019. As a ~~retail electricity supplier,~~result, DP&L filed a Notice of Withdrawal ~~from the amended settlement, citing a material modification by the PUCO's October~~of its 2017 ~~order. To address the withdrawal,~~ESP Application and requested to revert to rates based on its ESP 1. On December 18, 2019, the PUCO ~~established~~approved DP&L’s Notice of Withdrawal and reversion to its ESP 1 rate plan. Among other items, the PUCO Order approving the ESP 1 rate plan includes:

Reinstating the non-bypassable RSC Rider, which provides annual revenues of approximately $79.0 million;


•	Continuation of DP&L’s Transmission Cost Recovery Rider, Storm Rider and the bypassable standard offer energy rate for DP&L’s customers based on competitive bid auctions;

A placeholder rider to recover grid modernization costs, called the Infrastructure Investment Rider;

A requirement to conduct both an ESP v. MRO Test and a ~~new procedural schedule, including a hearing currently scheduled to begin~~prospective SEET no later than April 1, ~~2019~~. ~~Additionally, on January 7, 2019,~~2020; and

Removal of the ~~Ohio Consumers' Counsel appealed~~DIR, Reconciliation Rider, Decoupling Rider, Regulatory Compliance rider, and the ~~2017 ESP Order to the Supreme Court of Ohio. That appeal~~Uncollectible rider.

DP&L is ~~pending.~~

~~DP&L~~ isalso subject to a retrospective SEET threshold and is required to apply general rules for calculating earnings and comparing them to a comparable group to determine whether there were significantly excessive earnings during a given calendar year. The 2017 ESP maintains ~~DP&L’s~~whereby it must demonstrate its return on equity ~~SEET threshold at~~ is below 12%, excluding DMR revenues. The ultimate outcome of this and ~~provides that DMR amounts are excluded from~~ the ~~SEET calculation. On October 22, 2018, a stipulation was reached agreeing that~~ ~~DP&L~~ ~~did not exceed the SEET threshold for 2016 or 2017. That stipulation is pending PUCO approval. In future years, the~~ESP v. MRO and prospective SEET could have a material adverse effect on our results of operations, financial condition and cash flows.

Separate from the ESP process, DP&L filed a petition seeking recovery of ongoing OVEC costs through a Legacy Generation Rider and was granted approval effective January 1, 2020. Additionally, in the first quarter of 2020, DP&L filed a separate petition seeking authority to record a regulatory asset to accrue revenues that would have otherwise been collected under the 2017 ESP through the Decoupling Rider. The outcome of this petition is pending.

Certain parties which intervened in the ESP proceedings have filed petitions for rehearing of the recent PUCO ESP orders; some of which seek to eliminate DP&L’s RSC from the ESP 1 rates that are currently in place and others seek to re-implement the 2017 ESP, but without the DMR. We are unable to predict the outcomes of these petitions, but if these result in terms that are more adverse than DP&L's current ESP rate plan, it could have a material adverse effect on our results of operations, financial condition and cash flows.

Regulatory Impact of Tax Reform

On January 10, 2018 the PUCO initiated a proceeding to consider the impacts of the TCJA to determine the appropriate course of action to pass benefits resulting from the legislation on to ratepayers. The PUCO also directed Ohio utilities to record deferred liabilities for the estimated reduction in federal income tax resulting from the TCJA beginning January 1, 2018. Under the terms of the ~~ESP,~~ ~~DPL~~ ~~will not make tax sharing payments. Under the terms of the~~ stipulation in the distribution rate case mentioned above, DP&L ~~agreed to file~~ filed an application at the PUCO ~~by March 1, 2019~~ to refund eligible excess accumulated deferred income taxes (ADIT) and any related regulatory liability over a 10-year ~~period.~~period with a minimum reversal of $4.0 million per year over the first five years. Excess ADIT related to depreciation life and method differences will be returned to customers in accordance with federal tax law and related regulations. DP&L’s rates were set using the new tax rate as a result of the distribution rate case. Consistent with the DRO requirement, DP&L filed an application on March 1, 2019 and subsequently entered into a stipulation to resolve all remaining TCJA items related to its distribution rates. That stipulation was approved by the PUCO on September 26, 2019. In accordance with terms of that stipulation, DP&L will return a total of $65.1 million ($83.2 million when including taxes associated with the refunds). In connection with this stipulation, we reduced our long-term regulatory liability related to deferred income taxes by $23.4 million. See Note 8 – Income Taxes for additional information.

FERC Proceedings

On May 8, 2018, DP&L filed to adjust its FERC jurisdictional transmission rates to reflect the effects of the decrease in federal income tax rates on the current portion of income tax expense as part of the TCJA, resulting in a decrease of approximately ~~$2.4~~$2.4 million annually. The revised rates are in effect and all DP&L over and undercollections dating back to the March 21st effective date were settled in December 2018.

On November 15, 2018 FERC issued a Notice of Proposed Rulemaking to address amortization of excess accumulated deferred income taxes resulting from the TCJA and their impact on transmission rates. Such notice requires all public utility transmission providers with stated transmission rates under an Open Access Transmission Tariff (OATT) to determine the amount of excess deferred income taxes caused by the TCJA. DP&L is unable to predict the outcome of this notice or the impact it may have on our Consolidated Financial Statements.

PJM Transmission Enhancement Settlement

the settlement which reduces DP&L’s transmission costs through PJM beginning in August 2018, including credits to reimburse DP&L for amounts overcharged in prior years. DP&L estimates the prior overcharge by PJM to be $~~41.6~~41.1 million, of which approximately $~~14.3~~30.4 million has been repaid to DP&L through December 31, ~~2018~~2019 and $~~16.5~~1.8 million is classified as current in "Accounts receivable, net" and ~~$10.8~~$8.9 million is classified as non-current in "Other ~~deferred~~non-current assets" on the accompanying Consolidated Balance Sheet. All of the transmission charges and credits impacted by this FERC order are items that are included for full recovery in DP&L’s ~~nonbypassable~~ non-bypassable TCRR. Accordingly, DP&L has also established offsetting regulatory liabilities. While this development will have a temporary cash flow benefit to DP&L, there is no impact to operating income or net income as all credits will be passed to DP&L’s customers through the TCRR, which began in November 2018.

Regulatory Assets and Liabilities

In accordance with FASC 980, we have recognized total regulatory assets of ~~$193.7~~$193.5 million and ~~$187.1~~$193.7 million at December 31, ~~2018~~2019 and ~~2017,~~2018, respectively, and total regulatory liabilities of ~~$313.2~~$271.5 million and ~~$236.0~~$313.2 million at December 31, ~~2018~~2019 and ~~2017,~~2018, 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:



	Type of Recovery	Amortization Through	December 31,
$ in millions	Type of Recovery	Amortization Through	2019		2018
Regulatory assets, current:
Undercollections to be collected through rate riders	A/B	2020	$	19.1	$	40.5
Rate case expenses being recovered in base rates	B	2020	0.6		0.6
Total regulatory assets, current			19.7		41.1

Regulatory assets, non-current:
Pension benefits	B	Ongoing	83.9		87.5
Unrecovered OVEC charges	C	Undetermined	29.1		28.7
Fuel costs	B		—		3.3
Regulatory compliance costs	B	Undetermined	6.3		6.1
Smart grid and AMI costs	B	Undetermined	8.5		8.5
Unamortized loss on reacquired debt	B	Various	10.0		6.0
Deferred storm costs	A	Undetermined	5.1		4.7
Deferred vegetation management and other	A/B	Undetermined	12.7		7.8
Decoupling deferral	C	Undetermined	13.8		—
Uncollectible deferral	C	Undetermined	4.4		—
Total regulatory assets, non-current			173.8		152.6

Total regulatory assets			$	193.5	$	193.7

Regulatory liabilities, current:
Overcollection of costs to be refunded through rate riders	A/B	2020	$	27.9	$	34.9
Total regulatory liabilities, current			27.9		34.9

Regulatory liabilities, non-current:
Estimated costs of removal - regulated property		Not Applicable	143.6		139.1
Deferred income taxes payable through rates		Various	73.6		116.3
TCJA regulatory liability	B	Ongoing	12.9		—
PJM transmission enhancement settlement	A	2025	8.9		16.9
Postretirement benefits	B	Ongoing	4.6		6.0
Total regulatory liabilities, non-current			243.6		278.3

Total regulatory liabilities			$	271.5	$	313.2

Type of Recovery Amortization Through December 31,
$ in millions 2018 2017
Regulatory assets, current:
Undercollections to be collected through rate riders A/B
2019 $ 40.5
$ 23.9
Rate case expenses being recovered in base rates B 2019 0.6
—
Total regulatory assets, current

41.1
23.9

Regulatory assets, non-current:

Pension benefits B
Ongoing 87.5
92.4
Unrecovered OVEC charges C
Undetermined 28.7
27.8
Fuel costs B
2020 3.3
9.3
Regulatory compliance costs B
2020 6.1
9.2
Smart grid and AMI costs B
Undetermined 8.5
7.3
Unamortized loss on reacquired debt B
Various 6.0
7.0
Deferred storm costs A
Undetermined 4.7
2.1
Deferred vegetation management and other A/B Undetermined 7.8
8.1
Total regulatory assets, non-current

152.6
163.2

Total regulatory assets

$ 193.7
$ 187.1

Regulatory liabilities, current:

Overcollection of costs to be refunded through rate riders A/B
2019 $ 34.9
$ 14.8
Total regulatory liabilities, current

34.9
14.8

Regulatory liabilities, non-current:

Estimated costs of removal - regulated property

Not Applicable 139.1
132.8
Deferred income taxes payable through rates

Various 116.3
83.4
PJM transmission enhancement settlement A 2025 16.9
—
Postretirement benefits B
Ongoing 6.0
5.0
Total regulatory liabilities, non-current

278.3
221.2

Total regulatory liabilities

$ 313.2
$ 236.0

A – Recovery of incurred costs plus rate of return.

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

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

Current regulatory assets and liabilities primarily represent costs that are being recovered per specific rate order; recovery for the remaining costs is probable, but not certain. DP&L is earning a net return on ~~$5.5~~$5.5 million of this net deferral. These items include undercollection of: (i) ~~Distribution Modernization~~Energy Efficiency Rider, ~~revenues,~~ (ii) ~~decoupling rider (see above),~~Alternative Energy Rider, (iii) ~~uncollectible rider~~unrecovered OVEC costs and (iv) ~~energy efficiency rider.~~Economic Development Rider. It also includes the current portion of ~~the following~~ deferred fuel costs and deferred storm costs, which are described in greater detail ~~below: unbilled fuel, regulatory compliance rider costs and deferred storm costs.~~below. As current liabilities, this includes overcollection ~~of: (i)~~of competitive bidding energy and auction costs ~~(ii) energy efficiency program costs, (iii) alternative energy rider, (iv) economic development rider, (v)~~and certain transmission related costs including the current portion of the PJM transmission enhancement settlement (see above) ~~and (vi) reconciliation rider.~~.

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. As per PUCO and FERC precedents, these costs are probable of future rate recovery.

Unrecovered OVEC charges includes the portion of charges from OVEC that were not recoverable through DP&L’s ~~fuel rider~~ Fuel Rider from October 2014 through October 2017. Additionally, it includes net OVEC costs from December 19, 2019 through December 31, 2019. DP&L expects to recover these costs through a future rate proceeding. Beginning on November 1, 2017, ~~such~~through December 18, 2019, current OVEC costs ~~are~~were being recovered through DP&L’s ~~Reconciliation Rider~~ reconciliation rider which was authorized as part of the 2017 ESP. Beginning January 1, 2020, DP&L began recovering its current net OVEC costs through its Legacy Generation Rider, established pursuant to ORC 4928.148.

Fuel costs represent unrecovered fuel costs related to DP&L’s ~~fuel rider~~ Fuel Rider from 2010 through 2015 resulting from a declining SSO customer base. DP&L was granted recovery of these costs without a return through the SSO as approved in the 2017 ~~ESP.~~ESP; this authorization continued in the approval of ESP 1. These costs are being recovered over the three-year period that began November 1, 2017.

Regulatory compliance ~~rider~~ ~~represents~~costs represent the long-term portion of the regulatory compliance ~~rider~~costs which ~~was established by the 2017 ESP to recover~~include the following costs: (i) Consumer Education Campaign, (ii) Retail Settlement System, (iii) Generation Separation, (iv) Bill Format Redesign, (v) Green Pricing Tariff and (vi) Supplier Consolidated Billing. All of these costs except for Generation Separation earn a return. These costs ~~are~~were being recovered over a three-year ~~period.~~period that began November 1, 2017 through a rider approved in the 2017 ESP. That rider was eliminated with the approval of the ESP 1 rate plan, so the balance as of December 18, 2019 remains a regulatory asset for future recovery.

Rate case costs represents costs associated with preparing a distribution rate case. DP&L was granted recovery of these costs which do not earn a return, as part of the DRO.

Smart Grid and AMI costs represent costs incurred as a result of studying and developing distribution system upgrades and implementation of AMI. ~~On October 19, 2010,~~ ~~DP&L~~ ~~elected to withdraw its case pertaining to the Smart Grid and AMI programs. The~~In a PUCO ~~accepted the withdrawal in an~~ order ~~issued~~ on January 5, ~~2011. The~~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. DP&L requested recovery of these costs as part of the December 2018 ~~DMP~~Distribution Modernization Plan filing with the PUCO described ~~earlier.~~in Item 1 Business - COMPETITION AND REGULATION.

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 the rules of the FERC and the PUCO.

Deferred storm costs represent the long-term portion of deferred costs for major storms which occurred during 2017, 2018 and ~~2018.~~2019. The 2017 ESP granted DP&L approval to establish a rider by which to seek recovery of these types of costs with a return. This authorization continued in the approval of ESP 1. DP&L plans to file petitions seeking recovery of each calendar year of storm costs in the following calendar year. Recovery of these costs is probable, ~~by 2020,~~ but not certain.

Vegetation management costs represents costs incurred from outside contractors for tree trimming and other vegetation management services. Calculation terms were agreed to in the stipulation approved in the DRO. The terms were an annual baseline of $10.7 million in 2018 and $15.7 million thereafter. Amounts over the baseline will be deferred subject to an annual deferral maximum of $4.6 million. Annual spending less than the vegetation management baseline amount will result in a reduction to the regulatory asset or creation of a regulatory liability. A future filing will be made to determine how this cost will be collected from or returned to customers.

Decoupling deferral represents the change in the revenue requirement based on a per customer methodology in the stipulation approved in the DRO and includes deferrals through December 18, 2019. These costs were previously recovered through a Decoupling Rider; however, DP&L withdrew its application in the 2017 ESP and in doing so, the PUCO ordered on December 18, 2019 in the ESP 1 order, that DP&L no longer has a Decoupling Rider. As described above, DP&L recently filed a petition seeking authority to record a regulatory asset to accrue revenues that would have otherwise been collected through the Decoupling Rider.

Uncollectible deferral represents deferred uncollectible expense associated with the nonpayment of electric service, less the revenues associated with the bypassable uncollectible portion of the standard offer rate. The DRO established that these costs would be recovered in a rider outside of base rates, thus no uncollectible expense is included in base rates. A future filing will be made to determine how these expenses will be collected from 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.

Deferred income taxes payable through rates represent deferred income tax liabilities recognized from the normalization of flow-through items as the result of taxes previously charged to customers. A deferred income tax asset or liability is created from a difference in income recognition between tax laws and accounting methods. As a

regulated utility, DP&L includes in ratemaking the impacts of current income taxes and changes in deferred income tax liabilities or assets. On December 22, 2017, the TCJA was signed, which includes a provision to, among other things, reduce the federal corporate income tax rate to 21%, beginning January 1, 2018. As required by GAAP, on December 31, 2017, ~~DP&L~~ ~~remeasured its deferred income tax assets and liabilities using the new expected tax rate.~~ ~~DP&L~~ believes that the portion of the reduction in the net deferred tax liability which is related to deferred taxes considered in ratemaking will be used in future ratemaking to reduce jurisdictional retail rates. Accordingly, this liability reflects the estimated deferred taxes DP&L expects to return to customers in future periods.

TCJA regulatory liability represents the long-term portion of both protected and unprotected excess ADIT for both transmission and distribution portions, grossed up to reflect the revenue requirement. As a part of the DRO, DP&L agreed that savings from the TCJA attributable to distribution facilities, including the excess ADIT and the regulatory liability, constitute amounts that will be returned to customers. As a result of the TCJA and subsequent DRO, DP&L entered into a stipulation to resolve all remaining TCJA items related to its distribution rates, including a proposal to return no less than $4.0 million per year for the first five years unless fully returned in the first five years via a tax savings cost rider for the distribution portion of the balance. On September 26, 2019, an order approved the stipulation in its entirety.

Transmission rates are regulated by FERC and DP&L has reduced its stated transmission rate to reflect the effects of the lower current tax rate. With respect to the transmission portion of amortization of excess ADIT, on November 15, 2018, FERC issued a Notice of Proposed Rulemaking entitled, “Public Utility Transmission Rate Changes to Address Accumulated Deferred Income Taxes.” Among other things, this notice proposes “to require all public utilities with transmission stated rates to determine the amount of excess and deferred income tax caused by the Tax Cuts and Jobs Act’s reduction to the federal corporate income tax rate and return or recover this amount to or from customers.” DP&L is a public utility with transmission stated rates and will make a filing in conformance to the requirements once the proposed rule is finalized.

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.

Note 4 – Property, Plant and Equipment

The following is a summary of DPL’s Property, plant and equipment with corresponding composite depreciation rates at December 31, ~~2018~~2019 and ~~2017:~~2018:



	December 31, 2019			December 31, 2018
$ in millions			Composite Rate			Composite Rate
Regulated:
Transmission	$	235.8	3.9%	$	223.2	4.1%
Distribution	1,364.2		4.1%	1,289.8		4.5%
General	16.5		9.0%	13.2		8.5%
Non-depreciable	61.6		N/A	60.4		N/A
Total regulated	1,678.1			1,586.6
Unregulated:
Other	19.0		7.6%	21.2		6.7%
Non-depreciable	4.8		N/A	7.8		N/A
Total unregulated	23.8			29.0

Total property, plant and equipment in service	$	1,701.9	4.0%	$	1,615.6	4.3%

December 31, 2018 December 31, 2017
$ in millions Composite Rate
Composite Rate ^(a)
Regulated:
Transmission $ 223.2
4.1% $ 242.7
4.0%
Distribution 1,289.8
4.5% 1,197.5
4.9%
General 13.2
8.5% 13.7
7.1%
Non-depreciable 60.4
N/A 64.7
N/A
Total regulated 1,586.6
1,518.6

Unregulated:
Production / Generation —
N/A 0.2
N/A
Other 21.2
6.7% 21.1
7.0%
Non-depreciable 7.8
N/A 4.2
N/A
Total unregulated 29.0
25.5

Total property, plant and equipment in service $ 1,615.6
4.3% $ 1,544.1
5.0%


~~(a)~~	~~Composite rates for 2017 include property classified in non-current assets of discontinued operations and held-for-sale businesses.~~

In June 2018, DP&L closed on a transmission asset transaction with Duke and AEP, where ownership stakes in certain previously co-owned transmission assets were exchanged to eliminate co-ownership. Each previously co-owned transmission asset became wholly-owned by one of DP&L, Duke or AEP after the transaction. This transaction also resulted in cash proceeds to DP&L of ~~$10.6~~$10.6 million and no gain or loss was recorded on the transaction.

AROs

We recognize AROs in accordance with GAAP which requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time those obligations are incurred. Upon initial recognition of a legal liability, costs are capitalized as part of the related long-lived asset and depreciated over the useful life of the related asset. Our legal obligations are associated with the retirement of our long-lived assets,

consisting primarily of ~~river intake and discharge structures, coal unloading facilities, loading docks, ice breakers~~asbestos abatement and ash disposal facilities. Our generation AROs related to Conesville and the closed Hutchings EGU ~~and the previously owned Beckjord Facility~~ are recorded within ~~Asset retirement obligations~~Other non-current liabilities on the consolidated balance sheets. ~~The generation~~As of December 31, 2018, the AROs related to ~~our other~~the retired ~~or sold generation~~Stuart and Killen generating facilities ~~are~~were recorded in Non-current liabilities of discontinued operations and held-for-sale businesses on the consolidated balance sheets and are excluded from the table below. See Note 15 – Discontinued Operations for additional information.

Estimating the amount and timing of future expenditures of this type requires significant judgment. Management routinely updates these estimates as additional information becomes available.

Changes in the Liability for AROs

$ in millions
Balance at December 31, 2016 $ 15.0
Calendar 2017
Revisions to cash flow and timing estimates (0.1 )
Accretion expense 0.4
Settlements (0.2 )
Balance at December 31, 2017 15.1
Calendar 2018
Revisions to cash flow and timing estimates (2.6 )
Accretion expense 0.3
Settlements ^(a)
(3.4 )
Balance at December 31, 2018 $ 9.4



	2019		2018
Balance as of January 1	$	9.4	$	15.1
Revisions to cash flow and timing estimates	3.4		(2.6		)
Accretion expense	0.2		0.3
Settlements ^(a)	—		(3.4		)
Balance as of December 31	$	13.0	$	9.4


(a)	Primarily includes settlement related to transfer of Beckjord Facility. See Note 16 – Dispositions for additional information.

~~See Note 5 – Fair Value for further discussion on ARO revisions to cash flow and timing estimates.~~

Asset Removal Costs

We continue to record costs of removal for our regulated transmission and distribution assets through our depreciation rates and recover those amounts in rates charged to our customers. There are no known legal AROs associated with these assets. We have recorded ~~$139.1~~$143.6 million and ~~$132.8~~$139.1 million in estimated costs of removal at December 31, ~~2018~~2019 and ~~2017,~~2018, respectively, as regulatory liabilities for our transmission and distribution property. These amounts represent the excess of the cumulative removal costs recorded through depreciation rates versus the cumulative removal costs actually incurred. See Note 3 – Regulatory Matters for additional information.

Changes in the Liability for Transmission and Distribution Asset Removal Costs



	2019			2018
Balance as of January 1	$	139.1		$	132.8
Additions	14.8			14.3
Settlements	(10.3		)	(8.0		)
Balance as of December 31	$	143.6		$	139.1

$ in millions
Balance at December 31, 2016 $ 126.5
Calendar 2017
Additions 12.0
Settlements (5.7 )
Balance at December 31, 2017 132.8
Calendar 2018
Additions 14.3
Settlements (8.0 )
Balance at December 31, 2018 $ 139.1

Note 5 – Fair Value

The fair values of our financial instruments are based on published sources for pricing when possible. We rely on valuation models only when no other method is available to us. The fair value of our financial instruments represents estimates of possible value that may or may not be realized in the future.

The table below presents the fair value and cost of our non-derivative instruments at December 31, ~~2018~~2019 and ~~2017.~~2018. See Note 6 – Derivative Instruments and Hedging Activities for the fair values of our derivative instruments.



	December 31, 2019				December 31, 2018
$ in millions	Cost		Fair Value		Cost		Fair Value
Assets
Money market funds	$	0.3	$	0.3	$	0.4	$	0.4
Equity securities	2.3		4.2		2.4		3.5
Debt securities	4.0		4.1		4.1		4.0
Hedge funds	0.1		0.1		0.1		0.1
Tangible assets	0.1		0.1		0.1		0.1
Total assets	$	6.8	$	8.8	$	7.1	$	8.1

	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
Long-term debt	$	1,363.1	$	1,404.0	$	1,475.9	$	1,519.6

December 31, 2018 December 31, 2017
$ in millions Cost Fair Value Cost Fair Value
Assets
Money market funds $ 0.4
$ 0.4
$ 0.3
$ 0.3
Equity securities 2.4
3.5
2.5
4.2
Debt securities 4.1
4.0
4.3
4.3
Hedge funds 0.1
0.1
0.1
0.2
Tangible assets 0.1
0.1
0.1
0.1
Total assets $ 7.1
$ 8.1
$ 7.3
$ 9.1

Carrying Value Fair Value Carrying Value Fair Value
Liabilities
Long-term debt $ 1,475.9
$ 1,519.6
$ 1,704.8
$ 1,819.3

Fair Value Hierarchy

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. These inputs are then categorized as:

Level 1 (quoted prices in active markets for identical assets or liabilities);

Level 2 (observable inputs such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active); or

Level 3 (unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability).

Valuations of assets and liabilities reflect the value of the instrument including the values associated with counterparty risk. We include our own credit risk and our counterparty’s credit risk in our calculation of fair value using global average default rates based on an annual study conducted by a large rating agency.

We did not have any transfers of the fair values of our financial instruments among Level 1, Level 2 or Level 3 of the fair value hierarchy during the years ended December 31, ~~2018~~2019 and ~~2017.~~2018.

Debt

The fair value of debt is based on current public market prices for disclosure purposes only. Unrealized gains or losses are not recognized in the financial statements as debt is presented at the carrying value, net of unamortized premium or discount, in the financial statements. The debt amounts include the current portion payable in the next twelve months and have maturities that range from ~~2019~~2020 to 2061.

Master Trust Assets

DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans and these assets are not used for general operating purposes. ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” was effective as of January 1, 2018. This ASU requires the change in the fair value of equity instruments to be recorded in income rather than in OCI. Equity Instruments were defined to include all mutual funds, regardless of the underlying investments. Therefore, as of January 1, 2018, AOCI of ~~$1.6~~$1.6 million ($1.0 million net of tax) was reversed to Accumulated Deficit and all future changes to fair value on the Master Trust Assets will be included in income in the period that the changes occur. These changes to fair value were not material for the ~~year~~years ended December 31, 2019 or 2018. These assets are primarily comprised of open-ended mutual funds, which are valued using the net asset value per unit. These investments are recorded at fair value within Other deferred assets on the consolidated balance sheets and classified as available for sale.

During the year ended December 31, ~~2018, $0.5~~2019, $0.3 million ($~~0.4~~0.2 million after tax) of various investments were sold to facilitate the distribution of benefits.

The fair value of assets and liabilities at December 31, ~~2018~~2019 and ~~2017~~2018 and the respective category within the fair value hierarchy for DPL was determined as follows:



$ in millions	Fair Value at December 31, 2019 (a)								Fair Value at December 31, 2018 (a)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Master trust assets
Money market funds	$	0.3	$	—	$	—	$	0.3	$	0.4	$	—	$	—	$	0.4
Equity securities	—		4.2		—		4.2		—		3.5		—		3.5
Debt securities	—		4.1		—		4.1		—		4.0		—		4.0
Hedge funds	—		0.1		—		0.1		—		0.1		—		0.1
Tangible assets	—		0.1		—		0.1		—		0.1		—		0.1
Total Master trust assets	0.3		8.5		—		8.8		0.4		7.7		—		8.1
Derivative assets
Interest rate hedge	—		0.1		—		0.1		—		1.5		—		1.5
Total Derivative assets	—		0.1		—		0.1		—		1.5		—		1.5

Total assets	$	0.3	$	8.6	$	—	$	8.9	$	0.4	$	9.2	$	—	$	9.6

Liabilities
Long-term debt	$	—	$	1,386.5	$	17.5	$	1,404.0	$	—	$	1,501.9	$	17.7	$	1,519.6

Total liabilities	$	—	$	1,386.5	$	17.5	$	1,404.0	$	—	$	1,501.9	$	17.7	$	1,519.6

$ in millions Fair Value at December 31, 2018 (a) Fair Value at December 31, 2017 (a)
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Master trust assets
Money market funds $ 0.4
$ —
$ —
$ 0.4
$ 0.3
$ —
$ —
$ 0.3
Equity securities —
3.5
—
3.5
—
4.2
—
4.2
Debt securities —
4.0
—
4.0
—
4.3
—
4.3
Hedge funds —
0.1
—
0.1
—
0.2
—
0.2
Tangible assets —
0.1
—
0.1
—
0.1
—
0.1
Total Master trust assets 0.4
7.7
—
8.1
0.3
8.8
—
9.1
Derivative assets
Interest rate hedge —
1.5
—
1.5
—
1.5
—
1.5
Total Derivative assets —
1.5
—
1.5
—
1.5
—
1.5

Total assets $ 0.4
$ 9.2
$ —
$ 9.6
$ 0.3
$ 10.3
$ —
$ 10.6

Liabilities
Long-term debt $ —
$ 1,501.9
$ 17.7
$ 1,519.6
$ —
$ 1,801.5
$ 17.8
$ 1,819.3

Total liabilities $ —
$ 1,501.9
$ 17.7
$ 1,519.6
$ —
$ 1,801.5
$ 17.8
$ 1,819.3


(a)	Includes credit valuation adjustment

Our financial instruments are valued using the market approach in the following categories:

Level 1 inputs are used for money market accounts that are considered cash equivalents. The fair value is determined by reference to quoted market prices and other relevant information generated by market transactions.

Level 2 inputs are used to value derivatives such as interest rate hedge contracts which are valued using a benchmark interest rate. Other Level 2 assets include open-ended mutual funds in the Master Trust, which are valued using the end of day NAV per unit.

Level 3 inputs such as certain debt balances are considered a Level 3 input because the notes are not publicly traded. Our long-term debt is fair valued for disclosure purposes only.

All of the inputs to the fair value of our derivative instruments are from quoted market prices.

Our long-term debt is fair valued for disclosure purposes only and most of the fair values are determined using quoted market prices in inactive markets. These fair value inputs are considered Level 2 in the fair value hierarchy. As the Wright-Patterson Air Force Base note is not publicly traded, fair value is assumed to equal carrying value. These fair value inputs are considered Level 3 in the fair value hierarchy as there are no observable inputs. Additional Level 3 disclosures are not presented since our long-term debt is not recorded at fair value.

~~Non-recurring Fair Value Measurements~~

We use the cost approach to determine the fair value of our AROs, which are estimated by discounting expected cash outflows to their present value at the initial recording of the liability. Cash outflows are based on the approximate future disposal cost as determined by market information, historical information or other management estimates. These inputs to the fair value of the AROs would be considered Level 3 inputs under the fair value hierarchy. In 2018, ~~DPL~~ recorded a net reduction to its ARO liability for Conesville's ash pond and landfill of $2.6 million to reflect revisions to cash flow and timing estimates. The balance of AROs was $9.4 million and $15.1 million at December 31, 2018 and 2017, respectively, which excludes AROs associated with our discontinued operations. See Note 15 – Discontinued Operations for additional information on AROs associated with our discontinued operations.

When evaluating impairment of long-lived assets, we measure fair value using the applicable fair value measurement guidance. Impairment expense is measured by comparing the fair value at the evaluation date to the carrying amount.

~~The following table summarizes major categories of assets measured at fair value on a nonrecurring basis during the period and their level within the fair value hierarchy:~~

Measurement Carrying Fair Value Gross
$ in millions Date Amount (b) Level 1 Level 2 Level 3 Loss
Long-lived assets ^(a)

Year ended December 31, 2016
Conesville December 31, 2016 $ 25.0
$ —
$ —
$ 1.1
23.9


~~(a)~~	~~See Note 17 – Fixed-asset Impairments for further information~~


~~(b)~~	~~Carrying amount at date of valuation~~

~~The following summarizes the significant unobservable inputs used in the Level 3 measurement on a non-recurring basis during the year ended December 31, 2016:~~

$ in millions Measurement date Fair value Valuation technique Unobservable input Range (weighted average)
Long-lived assets held and used:
Year ended December 31, 2016
Conesville December 31, 2016 $ 1.1
Discounted cash flow Annual revenue growth -19.3% to 10.9% (0.6%)
Annual pre-tax operating margin -54.3% to 99.4% (20.2%)
Weighted-average cost of capital N/A

Note 6 – Derivative Instruments and Hedging Activities

In the normal course of business, DPL enters into various financial instruments, including derivative financial instruments. We use derivatives principally to manage the interest rate risk associated with our long-term debt. The derivatives that we use to economically hedge these risks are governed by our risk management policies for forward and futures contracts. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. We monitor and value derivative positions monthly as part of our risk management processes. We use published sources for pricing, when possible, to mark positions to market. All of our derivative instruments are used for risk management purposes and are designated as cash flow hedges if they qualify under FASC 815 for accounting purposes.

AtDPL's interest rate swaps are designated as a cash flow hedge and have a combined notional amount of $140.0 million as of December 31, ~~2018,~~ ~~DPL's~~ ~~outstanding derivative instruments were as follows:~~2019 and 2018.

Commodity
Accounting Treatment ^(a)
Unit Purchases
(in thousands) Sales
(in thousands) Net Purchases/ (Sales)
(in thousands)
Interest Rate Swaps Designated USD $ 140,000.0
$ —
$ 140,000.0


~~(a)~~	~~Refers to whether the derivative instruments have been designated as a cash flow hedge.~~

~~At December 31, 2017,~~ ~~DPL's~~ ~~outstanding derivative instruments were as follows:~~

Commodity
Accounting Treatment ^(a)
Unit Purchases
(in thousands) Sales
(in thousands) Net Purchases/ (Sales)
(in thousands)
FTRs ^(b)
Not designated MWh 2.1
—
2.1
Natural Gas ^(b)
Not designated Dths 3,322.5
(390.0 ) 2,932.5
Forward Power Contracts ^(b)
Designated MWh 678.5
(1,667.0 ) (988.5 )
Forward Power Contracts ^(b)
Not designated MWh 871.0
(765.6 ) 105.4
Interest Rate Swaps Designated USD $ 200,000.0
$ —
$ 200,000.0


~~(a)~~	~~Refers to whether the derivative instruments have been designated as a cash flow hedge.~~


~~(b)~~	~~As of December 31, 2017, the related asset and liability balances for these derivative instruments were classified in assets and liabilities of discontinued operations and held-for-sale businesses.~~

Cash Flow Hedges

values of cash flow hedges determined by current public market prices will continue to fluctuate with changes in market prices up to contract expiration. The effective portion of the hedging transaction is recognized in AOCI and transferred to earnings using specific identification of each contract when the forecasted hedged transaction takes place or when the forecasted hedged transaction is probable of not occurring. The ineffective portion of the cash flow hedge is recognized in earnings in the current period. All risk components were considered to determine the hedge effectiveness of the cash flow hedges. With the adoption of ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities effective January 1, 2019, we will no longer be required to calculate effectiveness and thus the entire change in the fair value of a hedging instrument will be recorded in other comprehensive income and amounts deferred will be reclassified to earnings in the same income statement line as the hedged item in the period in which it settles.

In prior years, we entered into forward power contracts and forward natural gas contracts to manage commodity price risk exposure related to our generation of electricity. We do not hedge all commodity price risk. We reclassify gains and losses on forward power contracts from AOCI into earnings in those periods in which the contracts settle. As of December 31, 2018, we no longer held any positions in forward power contracts or forward natural gas contracts.

We have ~~two~~2 interest rate swaps to hedge the variable interest on our $140.0 million variable interest rate tax-exempt First Mortgage ~~Bonds.~~Bonds due August 2020. The interest rate swaps have a combined notional amount of $140.0 million and will settle monthly based on a one-month LIBOR. ~~As of December 31, 2017, the interest rate swaps had a combined~~The original notional amount ofwas $200.0 ~~million. On~~million, but on March 29, 2018, we settled $60.0 million of these interest rate swaps due to the partial repayment of the underlying debt and a gain of $0.8 million was recorded as a reduction to interest expense. Since the swap was partially settled, the remaining swaps were de-designated and then re-designated with a new hypothetical derivative. The AOCI associated with the remaining swaps will be amortized out of AOCI into interest expense over the remaining life of the underlying debt.

We use the income approach to value the swaps, which consists of forecasting future cash flows based on contractual notional amounts and applicable and available market data as of the valuation date. The most common market data inputs used in the income approach include volatilities, spot and forward benchmark interest rates (LIBOR). Forward rates with the same tenor as the derivative instrument being valued are generally obtained from published sources, with these forward rates being assessed quarterly at a portfolio-level for reasonableness versus comparable published rates. We reclassify gains and losses on the swaps out of AOCI and into earnings in those periods in which hedged interest payments occur.

The following tables provide information on gains or losses recognized in AOCI for the cash flow hedges for the periods indicated:



	Years ended December 31,
	2019						2018						2017
$ in millions (net of tax)	Power			Interest Rate Hedges			Power			Interest Rate Hedges			Power			Interest Rate Hedges
Beginning accumulated derivative gain / (loss) in AOCI	$	0.4		$	16.6		$	(2.8	)	$	17.5		$	(4.3	)	$	17.4

Net gains / (losses) associated with current period hedging transactions	—			(1.0		)	—			(0.1		)	8.8			0.8
Net (gains) / losses reclassified to earnings:
Interest Expense	—			(1.1		)	—			(0.8		)	—			(0.7		)
(Income) / loss from discontinued operations before income tax	(0.4		)	—			3.2			—			(7.3		)	—
Ending accumulated derivative gain / (loss) in AOCI	$	—		$	14.5		$	0.4		$	16.6		$	(2.8	)	$	17.5

Portion expected to be reclassified to earnings in the next twelve months				$	(1.1	)
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)				8

Years ended December 31,
2018 2017 2016
$ in millions (net of tax) Power Interest Rate
Hedges Power Interest Rate
Hedges Power Interest Rate
Hedges
Beginning accumulated derivative gain / (loss) in AOCI $ (2.8 ) $ 17.5
$ (4.3 ) $ 17.4
$ 9.2
$ 17.5

Net gains / (losses) associated with current period hedging transactions —
(0.1 ) 8.8
0.8
15.7
0.4
Net gains / (losses) reclassified to earnings:
Interest Expense —
(0.8 ) —
(0.7 ) —
(0.5 )
Income / (loss) from discontinued operations before income tax 3.2
—
(7.3 ) —
(29.2 ) —
Ending accumulated derivative gain / (loss) in AOCI $ 0.4
$ 16.6
$ (2.8 ) $ 17.5
$ (4.3 ) $ 17.4

Portion expected to be reclassified to earnings in the next twelve months ^(a)
$ —
$ (0.8 )
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months) 0
20


~~(a)~~	~~The actual amounts that we reclassify from AOCI to earnings related to power can differ from the estimate above due to market price changes.~~

Net gains or losses associated with the ineffective portion of the hedging transactions were immaterial infor the ~~periods presented.~~years ended December 31, 2018 and 2017.

Derivatives Not Designated as Hedges

In prior years certain derivative contracts were entered into on a regular basis as part of our risk management program but did not qualify for hedge accounting or the normal purchases and sales exceptions under FASC 815. Accordingly, such contracts were recorded at fair value with changes in the fair value charged or credited to the consolidated statements of operations in the period in which the change occurred. This is commonly referred to as “MTM accounting”. Contracts we entered into as part of our risk management program may have been settled financially, by physical delivery or net settled with the counterparty. ~~We marked to market FTRs, natural gas futures and certain forward power contracts.~~ For the years ended December 31, 2018 ~~2017,~~ and ~~2016,~~2017, all amounts related to such contracts are presented in discontinued operations. As of December 31, 2018, we no longer ~~have~~had any such contracts.

Certain qualifying derivative instruments we previously held were designated as normal purchases or normal sales contracts, as provided under GAAP. Derivative contracts that have been designated as normal purchases or normal sales under GAAP are not subject to MTM accounting treatment and are recognized in the consolidated statements of operations on an accrual basis. For the years ended December ~~31,~~ 2018 ~~2017,~~ and ~~2016,~~2017, all amounts related to such contracts are presented in discontinued operations. As of December 31, 2018, we no longer ~~have~~had any such contracts.

The following tables show the amount and classification within the Consolidated Statements of Operations or Balance Sheets of the gains and losses on DPL’s derivatives not designated as hedging instruments for the years ended December 31, 2018 ~~2017~~ and ~~2016:~~2017:



	Year ended December 31, 2018
$ in millions	FTRs		Power		Natural Gas			Total
Change in unrealized gain / (loss)	$	0.3	$	—	$	(0.1	)	$	0.2
Realized gain / (loss)	0.4		—		0.3			0.7
Total	$	0.7	$	—	$	0.2		$	0.9

Recorded in Statement of Operations: gain / (loss)
Income / (loss) from discontinued operations before income tax	$	0.7	$	—	$	0.2		$	0.9
Total	$	0.7	$	—	$	0.2		$	0.9



	Year ended December 31, 2017
$ in millions	FTRs			Power			Natural Gas		Total
Change in unrealized gain / (loss)	$	(0.4	)	$	1.9		$	0.1	$	1.6
Realized gain / (loss)	0.8			(0.7		)	1.5		1.6
Total	$	0.4		$	1.2		$	1.6	$	3.2

Recorded in Statement of Operations: gain / (loss)
Income / (loss) from discontinued operations before income tax	$	0.4		$	1.2		$	1.6	$	3.2
Total	$	0.4		$	1.2		$	1.6	$	3.2

Year ended December 31, 2017
$ in millions FTRs Power Natural Gas Total
Change in unrealized gain / (loss) $ (0.4 ) $ 1.9
$ 0.1
$ 1.6
Realized gain / (loss) 0.8
(0.7 ) 1.5
1.6
Total $ 0.4
$ 1.2
$ 1.6
$ 3.2

Recorded in Statement of Operations: gain / (loss)
Income / (loss) from discontinued operations before income tax $ 0.4
$ 1.2
$ 1.6
$ 3.2
Total $ 0.4
$ 1.2
$ 1.6
$ 3.2

Year ended December 31, 2016
$ in millions FTRs Power Natural Gas Total
Change in unrealized gain / (loss) $ 0.3
$ 4.0
$ —
$ 4.3
Realized gain / (loss) (0.6 ) (7.2 ) 2.6
(5.2 )
Total $ (0.3 ) $ (3.2 ) $ 2.6
$ (0.9 )

Recorded in Statement of Operations: gain / (loss)
Income / (loss) from discontinued operations before income tax $ (0.3 ) $ (3.2 ) $ 2.6
$ (0.9 )
Total $ (0.3 ) $ (3.2 ) $ 2.6
$ (0.9 )

When applicable, DPL has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of December 31, 2019 and 2018, DPL did not have any offsetting positions.

The following ~~tables summarize the derivative positions presented in the balance sheet where a right of offset exists under these arrangements and related cash collateral received or pledged; as well as~~table summarizes the fair value, balance sheet classification and hedging designation of DPL’s derivative instruments.



			December 31,
	Hedging Designation	Balance sheet classification	2019		2018
Interest rate hedges in a current asset position	Cash Flow Hedge	Prepayments and other current assets	$	0.1	$	0.9
Interest rate hedges in a non-current asset position	Cash Flow Hedge	Other non-current assets	$	—	$	0.6

Fair Values of Derivative Instruments
December 31, 2018
Gross Amounts Not Offset in the Consolidated Balance Sheets
$ in millions Hedging Designation
Gross Fair Value as presented in the Consolidated Balance Sheets ^(a)
Financial Instruments with Same Counterparty in Offsetting Position Cash Collateral Net Amount
Assets
Short-term derivative positions (presented in Other prepayments and current assets)
Interest Rate Swaps Designated $ 0.9
$ —
$ —
$ 0.9

Long-term derivative positions (presented in Other deferred assets)
Interest Rate Swaps Designated 0.6
—
—
0.6
Total assets $ 1.5
$ —
$ —
$ 1.5


~~(a)~~	~~Includes credit valuation adjustment.~~

Fair Values of Derivative Instruments
December 31, 2017
Gross Amounts Not Offset in the Consolidated Balance Sheets
$ in millions Hedging Designation
Gross Fair Value as presented in the Consolidated Balance Sheets ^(a)
Financial Instruments with Same Counterparty in Offsetting Position Cash Collateral Net Amount
Assets
Short-term derivative positions (presented in Current assets of discontinued operations and held-for-sale businesses)
Forward power contracts Designated $ 4.9
$ (4.9 ) $ —
$ —
Forward power contracts Not designated 5.3
(3.7 ) —
1.6
FTRs Not designated 0.2
(0.1 ) —
0.1

Long-term derivative positions (presented in Other deferred assets)
Interest rate swaps Designated 1.5
—
—
1.5

Long-term derivative positions (presented in Non-current assets of discontinued operations and held-for-sale businesses)
Forward power contracts Not designated 0.6
—
—
0.6
Total assets $ 12.5
$ (8.7 ) $ —
$ 3.8

Liabilities
Short-term derivative positions (presented in Current liabilities of discontinued operations and held-for-sale businesses)
Forward power contracts Designated $ 9.0
$ (4.9 ) $ (1.4 ) 2.7
Forward power contracts Not designated 5.9
(3.7 ) —
2.2
Natural gas Not designated 0.1
(0.1 ) —
—
FTRs Not designated 0.3
—
—
0.3
Total liabilities $ 15.3
$ (8.7 ) $ (1.4 ) $ 5.2


~~(a)~~	~~Includes credit valuation adjustment.~~

Note 7 – Long-term debt


Long-term debt
$ in millions	Interest Rate	Maturity	December 31, 2018			December 31, 2017			Interest Rate	Maturity	December 31, 2019			December 31, 2018
First Mortgage Bonds									3.95%	2049	$	425.0		$	—
Term loan - rates from: 3.57% - 4.82% (a) and 4.00% - 4.60% (b)		2022	$	436.1		$	440.6			2022	—			436.1
Tax-exempt First Mortgage Bonds - rates from: 2.49% - 2.93% (a) and 1.29% - 1.42% (b)		2020	140.0			200.0				2020	140.0			140.0
U.S. Government note	4.2%	2061	17.7			17.8			4.2%	2061	17.5			17.7
Unamortized deferred financing costs			(6.3		)	(9.8		)			(5.4		)	(6.3		)
Unamortized debt discounts and premiums, net			(1.4		)	(2.0		)			(2.7		)	(1.4		)
Total long-term debt at subsidiary			586.1			646.6					574.4			586.1

Bank term loan - rates from: 3.02% - 4.10% (a) and 2.67% - 3.02% (b)		2020	—			70.0
Senior unsecured bonds									6.75%		—			99.0
Senior unsecured bonds	6.75%	2019	99.0			200.0			7.25%	2021	380.0			780.0
Senior unsecured bonds	7.25%	2021	780.0			780.0			4.35%	2029	400.0			—
Note to DPL Capital Trust II (c)	8.125%	2031	15.6			15.6			8.125%	2031	15.6			15.6
Unamortized deferred financing costs			(4.3		)	(6.8		)			(5.9		)	(4.3		)
Unamortized debt discounts and premiums, net			(0.5		)	(0.6		)			(1.0		)	(0.5		)
Total long-term debt			1,475.9			1,704.8					1,363.1			1,475.9
Less: current portion			(103.6		)	(4.6		)			(139.8		)	(103.6		)
Long-term debt, net of current portion			$	1,372.3		$	1,700.2				$	1,223.3		$	1,372.3

~~The establishment of a three-year non-bypassable Distribution Modernization Rider (DMR) designed to collect $105.0 million~~ ~~in revenue per year to pay debt obligations at~~ ~~DPL~~ ~~and~~ ~~DP&L~~ ~~and position~~ ~~DP&L~~ ~~to modernize and/or maintain its transmission and distribution infrastructure with an option for~~ ~~DP&L~~ ~~to file for an extension of the rider for an additional two years in an amount subject to approval by the PUCO.~~


•	A bypassable standard offer energy rider for DP&L’s customers based on competitive bid auctions;


•	The establishment of a three-year non-bypassable DMR to collect $105.0 million in revenue per year to pay debt obligations at DPL and DP&L and position DP&L to modernize and/or maintain its transmission and distribution infrastructure;


•	The establishment of the DIR, a non-bypassable Distribution Investment Rider to recover distribution capital investments incremental to the amount included in rate base in the DP&L DRO;


•	A non-bypassable Reconciliation Rider, which allowed DP&L to recover its net ongoing costs from its investment in OVEC;

~~Consistent with that settlement and the PUCO order, on January 22, 2019,~~ ~~DP&L~~ ~~filed a request to extend the DMR for the additional two years at an annual revenue amount of~~ ~~$199.0 million. That request is pending PUCO review;~~

~~The establishment of a non-bypassable Distribution Investment Rider to recover incremental distribution capital investments, the amount of which was established in the~~ ~~DP&L~~ ~~DRO;~~


•	A commitment to commence a sale process to sell our ownership interests in the Miami Fort, Zimmer and Conesville coal-fired generation plants, with all sales proceeds used to pay debt of DPL and DP&L, and


•	Restrictions on DPL making dividend or tax sharing payments and an obligation to convert then existing tax payments owed by DPL to AES into equity investments in DPL.

On November ~~1, 2017;~~

~~Restrictions on~~ ~~DPL~~ ~~making dividend or tax sharing payments and an obligation to convert then existing tax payments owed~~2017 ESP Stipulation by, ~~DPL~~ ~~to AES into equity investments in~~ ~~DPL. See~~ ~~; Note 8 – Income Taxes and Note 10 – Equity for more information on~~among other matters, removing the ~~tax sharing payment restrictions; and~~

~~Various other riders and competitive retail market enhancements.~~

~~On October 19, 2018 IGS,~~DMR, which reduced DP&L’s annual revenues by $105.0 million beginning November 29, 2019. As a ~~retail electricity supplier,~~result, DP&L filed a Notice of Withdrawal ~~from the amended settlement, citing a material modification by the PUCO's October~~of its 2017 ~~order. To address the withdrawal,~~ESP Application and requested to revert to rates based on its ESP 1. On December 18, 2019, the PUCO ~~established a new procedural schedule, including a hearing currently scheduled~~approved DP&L’s Notice of Withdrawal and reversion to ~~begin April~~its ESP 1 ~~2019~~. ~~Additionally, on January 7, 2019,~~rate plan. Among other items, the ~~Ohio Consumers' Counsel appealed~~PUCO Order approving the ~~2017~~ ESP ~~Order to~~1 rate plan includes:

Reinstating the ~~Supreme Court~~non-bypassable RSC Rider, which provides annual revenues of ~~Ohio. That appeal~~approximately $79.0 million;


•	Continuation of DP&L’s Transmission Cost Recovery Rider, Storm Rider and the bypassable standard offer energy rate for DP&L’s customers based on competitive bid auctions;


•	A placeholder rider to recover grid modernization costs, called the Infrastructure Investment Rider;


•	A requirement to conduct both an ESP v. MRO Test and a prospective SEET no later than April 1, 2020; and

Removal of the DIR, Reconciliation Rider, Decoupling Rider, Regulatory Compliance rider, and the Uncollectible rider.

DP&L is ~~pending.~~

Regulatory Impact of Tax Reform

FERC Proceedings

decrease of approximately ~~$2.4~~$2.4 million annually. The revised rates are in effect and all DP&L over and undercollections dating back to the March 21st effective date were settled in December 2018.

PJM Transmission Enhancement Settlement

On May 31, 2018, the FERC issued an Order on Contested Settlement regarding the cost allocation method for existing and new transmission facilities contained in the PJM Interconnection’s OATT. The FERC order approved the settlement which reduces DP&L’s transmission costs through PJM beginning in August 2018, including credits

to reimburse DP&L for amounts overcharged in prior years. DP&L estimates the prior overcharge by PJM to be ~~$41.6~~$41.1 million, of which approximately ~~$14.3~~$30.4 million has been repaid to DP&L through December 31, ~~2018~~2019 and ~~$16.5~~$1.8 million is classified as current in "Accounts receivable, net" and ~~$10.8~~$8.9 million is classified as non-current in "Other ~~deferred~~non-current assets" on the accompanying Balance Sheet. All of the transmission charges and credits impacted by this FERC order are items that are included for full recovery in DP&L’s ~~nonbypassable~~ non-bypassable TCRR. Accordingly, DP&L has also established offsetting regulatory liabilities. While this development will have a temporary cash flow benefit to DP&L, there is no impact to operating income or net income as all credits will be passed to DP&L’s customers through the TCRR, which began in November 2018.

Regulatory Assets and Liabilities

The following table presents DP&L’s Regulatory assets and liabilities:



	Type of Recovery	Amortization Through	December 31,
$ in millions	Type of Recovery	Amortization Through	2019		2018
Regulatory assets, current:
Undercollections to be collected through rate riders	A/B	2020	$	19.1	$	40.5
Rate case expenses being recovered in base rates	B	2020	0.6		0.6
Total regulatory assets, current			19.7		41.1

Regulatory assets, non-current:
Pension benefits	B	Ongoing	83.9		87.5
Unrecovered OVEC charges	C	Undetermined	29.1		28.7
Fuel costs	B		—		3.3
Regulatory compliance costs	B	Undetermined	6.3		6.1
Smart grid and AMI costs	B	Undetermined	8.5		8.5
Unamortized loss on reacquired debt	B	Various	10.0		6.0
Deferred storm costs	A	Undetermined	5.1		4.7
Deferred vegetation management and other	A/B	Undetermined	12.7		7.8
Decoupling deferral	C	Undetermined	13.8		—
Uncollectible deferral	C	Undetermined	4.4		—
Total regulatory assets, non-current			173.8		152.6

Total regulatory assets			$	193.5	$	193.7

Regulatory liabilities, current:
Overcollection of costs to be refunded through rate riders	A/B	2020	$	27.9	$	34.9
Total regulatory liabilities, current			27.9		34.9

Regulatory liabilities, non-current:
Estimated costs of removal - regulated property		Not Applicable	143.6		139.1
Deferred income taxes payable through rates		Various	73.6		116.3
TCJA regulatory liability	B	Ongoing	12.9		—
PJM transmission enhancement settlement	A	2025	8.9		16.9
Postretirement benefits	B	Ongoing	4.6		6.0
Total regulatory liabilities, non-current			243.6		278.3

Total regulatory liabilities			$	271.5	$	313.2

Type of Recovery Amortization Through December 31,
$ in millions 2018 2017
Regulatory assets, current:
Undercollections to be collected through rate riders A/B 2019 $ 40.5
$ 23.9
Rate case expenses being recovered in base rates B 2019 0.6
—
Total regulatory assets, current 41.1
23.9

Regulatory assets, non-current:
Pension benefits B Ongoing 87.5
92.4
Unrecovered OVEC charges C Undetermined 28.7
27.8
Fuel costs B 2020 3.3
9.3
Regulatory compliance costs B 2020 6.1
9.2
Smart grid and AMI costs B Undetermined 8.5
7.3
Unamortized loss on reacquired debt B Various 6.0
7.0
Deferred storm costs A Undetermined 4.7
2.1
Deferred vegetation management and other A/B Undetermined 7.8
8.1
Total regulatory assets, non-current 152.6
163.2

Total regulatory assets $ 193.7
$ 187.1

Regulatory liabilities, current:
Overcollection of costs to be refunded through rate riders A/B 2018 $ 34.9
$ 14.8
Total regulatory liabilities, current 34.9
14.8

Regulatory liabilities, non-current:
Estimated costs of removal - regulated property Not Applicable 139.1
132.8
Deferred income taxes payable through rates Various 116.3
83.4
PJM transmission enhancement settlement A 2025 16.9
—
Postretirement benefits B Ongoing 6.0
5.0
Total regulatory liabilities, non-current 278.3
221.2

Total regulatory liabilities $ 313.2
$ 236.0

A – Recovery of incurred costs plus rate of return.

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

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

Rate case costs represents costs associated with preparing a distribution rate case. DP&L was granted recovery of these costs which do not earn a return, as part of the DRO.

Note 4 – Property, Plant and Equipment

The following is a summary of DP&L’s Property, plant and equipment with corresponding composite depreciation rates at December 31, ~~2018~~2019 and ~~2017:~~2018:



	December 31, 2019			December 31, 2018
$ in millions			Composite Rate			Composite Rate
Regulated:
Transmission	$	391.7	2.3%	$	386.7	2.4%
Distribution	1,851.2		3.0%	1,796.4		3.2%
General	30.0		4.9%	30.9		3.6%
Non-depreciable	60.7		N/A	60.4		N/A
Total property, plant and equipment in service	$	2,333.6	2.9%	$	2,274.4	3.0%

December 31, 2018 December 31, 2017
$ in millions Composite Rate
Composite Rate ^(a)
Regulated:
Transmission $ 386.7
2.4% $ 414.6
2.4%
Distribution 1,796.4
3.2% 1,735.9
3.4%
General 30.9
3.6% 31.2
3.1%
Non-depreciable 60.4
N/A 64.6
N/A
Total regulated 2,274.4
2,246.3

Unregulated:
Other —
N/A 0.2
2.7%
Non-depreciable —
N/A 0.7
N/A
Total unregulated —
0.9

Total property, plant and equipment in service $ 2,274.4
3.0% $ 2,247.2
3.4%

In June 2018, DP&L closed on a transmission asset transaction with Duke and AEP, where ownership stakes in certain previously co-owned transmission assets were exchanged to eliminate co-ownership. Each previously co-owned transmission asset became wholly-owned by one of DP&L, Duke or AEP after the transaction. This transaction also resulted in cash proceeds to DP&L of ~~$10.6 million.~~$10.6 million and no gain or loss was recorded on the transaction.

AROs

We recognize AROs in accordance with GAAP which requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time those obligations are incurred. Upon initial recognition of a legal liability, costs are capitalized as part of the related long-lived asset and depreciated over the useful life of the related asset. The DP&L AROs are for our retired Hutchings EGU and relate primarily to asbestos removal. These AROs are recorded within Other non-current liabilities on the balance sheets.

Estimating the amount and timing of future expenditures of this type requires significant judgment. Management routinely updates these estimates as additional information becomes available.

Changes in the Liability for Generation AROs

$ in millions
Balance at December 31, 2016 $ 8.2
Calendar 2017
Accretion expense 0.1
Settlements (0.3 )
Balance at December 31, 2017 8.0
Calendar 2018
Settlements ^(a)
(3.3 )
Balance at December 31, 2018 $ 4.7



	2019		2018
Balance at beginning of year	$	4.7	$	8.0
Settlements ^(a)	—		(3.3		)
Balance at end of year	$	4.7	$	4.7


(a)	Primarily includes settlement related to transfer of Beckjord Facility. See Note 15 – Dispositions for additional information.

~~See Note 5 – Fair Value for further discussion on ARO fair value measurements.~~

Asset Removal Costs

December 31, ~~2018~~2019 and ~~2017,~~2018, respectively, as regulatory liabilities for our transmission and distribution property. These amounts represent the excess of the cumulative removal costs recorded through depreciation rates versus the cumulative removal costs actually incurred. See Note 3 – Regulatory Matters for additional information.

Changes in the Liability for Transmission and Distribution Asset Removal Costs



	2019			2018
Balance at beginning of year	$	139.1		$	132.8
Additions	14.8			14.3
Settlements	(10.3		)	(8.0		)
Balance at end of year	$	143.6		$	139.1

Note 5 – Fair Value

The table below presents the fair value and cost of our non-derivative instruments at December 31, ~~2018~~2019 and ~~2017.~~2018. See also Note 6 – Derivative Instruments and Hedging Activities for the fair values of our derivative instruments.



	December 31, 2019				December 31, 2018
$ in millions	Cost		Fair Value		Cost		Fair Value
Assets
Money market funds	$	0.3	$	0.3	$	0.4	$	0.4
Equity securities	2.3		4.2		2.4		3.5
Debt securities	4.0		4.1		4.1		4.0
Hedge funds	0.1		0.1		0.1		0.1
Tangible assets	0.1		0.1		0.1		0.1
Total assets	$	6.8	$	8.8	$	7.1	$	8.1

	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
Long-term debt	$	574.4	$	600.5	$	586.1	$	593.8

Fair Value Hierarchy

Level 1 (quoted prices in active markets for identical assets or liabilities);

Level 2 (observable inputs such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active); or

Level 3 (unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability).

Debt

Master Trust Assets

DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans and these assets are not used for general operating purposes. ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” was effective as of January 1, 2018. This ASU requires the change in the fair value of equity instruments to be recorded in income rather than in OCI. Equity Instruments were defined to include all mutual funds, regardless of the underlying investments. Therefore, as of January 1, 2018, AOCI of ~~$1.7~~$1.7 million ($1.1 million net of tax) was reversed to Accumulated Deficit and all future changes to fair value on the Master Trust Assets will be included in income in the period that the changes occur. These changes to fair value were not material for the ~~year~~years ended December 31, 2019 or 2018. These assets are primarily comprised of open-ended mutual funds, which are valued using the net asset value per unit. These investments are recorded at fair value within Other deferred assets on the consolidated balance sheets and classified as available for sale.

During the year ended December 31, ~~2018, $0.5~~2019, $0.3 million ($~~0.4~~0.2 million after tax) of various investments were sold to facilitate the distribution of benefits.

The fair value of assets and liabilities at December 31, ~~2018~~2019 and ~~2017~~2018 and the respective category within the fair value hierarchy for DP&L was determined as follows:



$ in millions	Fair Value at December 31, 2019 (a)								Fair Value at December 31, 2018 (a)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Master trust assets
Money market funds	$	0.3	$	—	$	—	$	0.3	$	0.4	$	—	$	—	$	0.4
Equity securities	—		4.2		—		4.2		—		3.5		—		3.5
Debt securities	—		4.1		—		4.1		—		4.0		—		4.0
Hedge funds	—		0.1		—		0.1		—		0.1		—		0.1
Tangible assets	—		0.1		—		0.1		—		0.1		—		0.1
Total Master trust assets	0.3		8.5		—		8.8		0.4		7.7		—		8.1
Derivative assets
Interest rate hedges	—		0.1		—		0.1		—		1.5		—		1.5
Total derivative assets	—		0.1		—		0.1		—		1.5		—		1.5

Total assets	$	0.3	$	8.6	$	—	$	8.9	$	0.4	$	9.2	$	—	$	9.6

Liabilities
Long-term debt	$	—	$	583.0	$	17.5	$	600.5	$	—	$	576.1	$	17.7	$	593.8

Total liabilities	$	—	$	583.0	$	17.5	$	600.5	$	—	$	576.1	$	17.7	$	593.8

$ in millions Fair Value at December 31, 2018 (a) Fair Value at December 31, 2017 (a)
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets
Master trust assets
Money market funds $ 0.4
$ —
$ —
$ 0.4
$ 0.3
$ —
$ —
$ 0.3
Equity securities —
3.5
—
3.5
—
4.2
—
4.2
Debt securities —
4.0
—
4.0
—
4.3
—
4.3
Hedge funds —
0.1
—
0.1
—
0.2
—
0.2
Tangible assets —
0.1
—
0.1
—
0.1
—
0.1
Total Master trust assets 0.4
7.7
—
8.1
0.3
8.8
—
9.1
Derivative assets
Interest rate hedges —
1.5
—
1.5
—
1.5
—
1.5
Total derivative assets —
1.5
—
1.5
—
1.5
—
1.5

Total assets $ 0.4
$ 9.2
$ —
$ 9.6
$ 0.3
$ 10.3
$ —
$ 10.6

Liabilities
Long-term debt $ —
$ 576.1
$ 17.7
$ 593.8
$ —
$ 640.6
$ 17.8
658.4

Total liabilities $ —
$ 576.1
$ 17.7
$ 593.8
$ —
$ 640.6
$ 17.8
$ 658.4


(a)	Includes credit valuation adjustment

Our financial instruments are valued using the market approach in the following categories:

Level 3 inputs such as certain debt balances are considered a Level 3 input because the notes are not publicly traded. Our long-term debt is fair valued for disclosure purposes only.

All of the inputs to the fair value of our derivative instruments are from quoted market prices.

~~Non-recurring Fair Value Measurements~~

Note 6 – Derivative Instruments and Hedging Activities

In the normal course of business, DP&L enters into various financial instruments, including derivative financial instruments. We use derivatives principally to manage the interest rate risk associated with our long-term debt. The derivatives that we use to economically hedge these risks are governed by our risk management policies for forward and futures contracts. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. We monitor and value derivative positions monthly as part of our risk management processes. We use published sources for pricing, when possible, to mark positions to market. All of our derivative instruments are used for risk management purposes and are designated as cash flow hedges if they qualify under FASC 815 for accounting purposes.

DP&L's interest rate swaps are designated as a cash flow ~~hedge. At~~hedge and have a combined notional amount of $140.0 million as of December 31, ~~2018~~2019 and ~~2017, the principal balance of the interest rate hedges was $140.0 million and $200.0 million, respectively.~~2018.

Cash Flow Hedges

As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair values of cash flow hedges determined by current public market prices will continue to fluctuate with changes in market prices up to contract expiration. The effective portion of the hedging transaction is recognized in AOCI and transferred to earnings using specific identification of each contract when the forecasted hedged transaction takes place or when the forecasted hedged transaction is probable of not occurring. The ineffective portion of the cash flow hedge is recognized in earnings in the current period. All risk components were considered to determine the hedge effectiveness of the cash flow hedges. With the adoption of ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities effective January 1, 2019, we will no longer be required to calculate effectiveness and thus the entire change in the fair value of a hedging instrument will be recorded in other comprehensive income and amounts deferred will be reclassified to earnings in the same income statement line as the hedged item in the period in which it settles.

The following tables provide information on gains or losses recognized in AOCI for the cash flow hedges for the periods indicated:



	Years ended December 31,
	2019			2018			2017
$ in millions (net of tax)	Interest Rate Hedges			Interest Rate Hedges			Power			Interest Rate Hedges
Beginning accumulated derivative gain / (loss) in AOCI	$	0.6		$	1.4		$	(4.3	)	$	1.6

Net (gains) / losses associated with current period hedging transactions	(0.8		)	(0.1		)	11.9			0.5
Net gains reclassified to earnings:
Interest expense	(0.2		)	(0.7		)	—			(0.7		)
Loss from discontinued operations	—			—			(5.5		)	—
Transfer of generation assets to subsidiary of parent	—			—			(2.1		)	—
Ending accumulated derivative gain / (loss) in AOCI	$	(0.4	)	$	0.6		$	—		$	1.4

Portion expected to be reclassified to earnings in the next twelve months	$	(0.2	)
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)	8

Years ended December 31,
2018 2017 2016
$ in millions (net of tax) Interest Rate
Hedges Power Interest Rate
Hedges Power Interest Rate
Hedges
Beginning accumulated derivative gain / (loss) in AOCI $ 1.4
$ (4.3 ) $ 1.6
$ 9.2
$ 2.0

Net gains / (losses) associated with current period hedging transactions (0.1 ) 11.9
0.5
15.7
0.4
Net gains / (losses) reclassified to earnings:
Interest expense (0.7 ) —
(0.7 ) —
(0.8 )
Loss from discontinued operations —
(5.5 ) —
(29.2 ) —
Transfer of generation assets to subsidiary of parent —
(2.1 ) —
—
—
Ending accumulated derivative gain / (loss) in AOCI $ 0.6
$ —
$ 1.4
$ (4.3 ) $ 1.6

Portion expected to be reclassified to earnings in the next twelve months $ 0.7

Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months) 20

Net gains or losses associated with the ineffective portion of the hedging transactions were immaterial infor the ~~periods presented.~~years ended December 31, 2018 and 2017.

When applicable, DP&L has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. As of December 31, 2019 and 2018, DP&L did not have any offsetting positions.

The following table summarizes the fair value, balance sheet classification and hedging designation of DP&L’sderivative ~~position of~~ ~~DP&L's~~ ~~interest rate swaps are as follows:~~instruments.:



			December 31,
	Hedging Designation	Balance sheet classification	2019		2018
Interest rate hedges in a current asset position	Cash Flow Hedge	Prepayments and other current assets	$	0.1	$	0.9
Interest rate hedges in a non-current asset position	Cash Flow Hedge	Other non-current assets	$	—	$	0.6

December 31,
Hedging Designation Balance sheet classification 2018 2017
Interest rate hedges in a Current asset position Cash Flow Hedge Other prepayments and current assets
Gross Fair Value as presented in the Balance Sheets $ 0.9
$ —

Interest rate hedges in a non-current asset position Cash Flow Hedge Other deferred assets
Gross Fair Value as presented in the Balance Sheets $ 0.6
$ 1.5

Note 7 – Long-term debt

Long-term debt is as follows:


Long-term debt
$ in millions	Interest Rate	Maturity	December 31, 2018			December 31, 2017			Interest Rate	Maturity		December 31, 2019			December 31, 2018
First Mortgage Bonds									3.95%	2049		$	425.0		$	—
Term loan - rates from: 3.57% - 4.82% (a) and 4.00% - 4.60% (b)		2022	$	436.1		$	440.6			2022		—			436.1
Tax-exempt First Mortgage Bonds - rates from: 2.49% - 2.93% (a) and 1.29% - 1.42% (b)		2020	140.0			200.0				2020	��	140.0			140.0
U.S. Government note	4.2%	2061	17.7			17.8			4.2%	2061		17.5			17.7
Unamortized deferred financing costs			(6.3		)	(9.8		)				(5.4		)	(6.3		)
Unamortized debt discount			(1.4		)	(2.0		)				(2.7		)	(1.4		)
Total long-term debt			586.1			646.6						574.4			586.1
Less: current portion			(4.6		)	(4.6		)				(139.8		)	(4.6		)
Long-term debt, net of current portion			$	581.5		$	642.0					$	434.6		$	581.5

																											DP&L
	Years ended December 31,													Years ended December 31,
$ in millions except per share amounts or as indicated	2018		2017			2016			2015			2014		2019		2018		2017			2016			2015
Total electric sales (millions of kWh)	15,194		14,401			15,008			26,394			28,634		14,628		15,194		14,401			15,008			26,394
Statements of Operations Data
Revenues	$	738.7	$	720.0		$	808.0		$	857.0		$	1,668.3	$	735.4	$	738.7	$	720.0		$	808.0		$	857.0
Fixed-asset impairment ^(a)	$	—	$	—		$	—		$	—		$	—
Operating income	$	135.1	$	122.1		$	169.0		$	222.2		$	188.8	$	150.7	$	135.1	$	122.1		$	169.0		$	222.2
Income from continuing operations	$	86.7	$	57.4		$	97.6		$	130.0		$	114.1	$	124.9	$	86.7	$	57.4		$	97.6		$	130.0
Loss from discontinued operations, net of tax	$	—	$	(40.4	)	$	(870.3	)	$	(23.6	)	$	—
Loss from discontinued operations, net of tax ^(a)														$	—	$	—	$	(40.4	)	$	(870.3	)	$	(23.6	)
Net income / (loss) attributable to common stock	$	86.7	$	17.0		$	(773.4	)	$	105.5		$	114.1	$	124.9	$	86.7	$	17.0		$	(773.4	)	$	105.5
Capital expenditures	$	93.1	$	101.7		$	128.3		$	127.0		$	114.2	$	167.1	$	93.1	$	101.7		$	128.3		$	127.0

Balance Sheet Data (end of period):
Total assets	$	1,819.6	$	1,695.9		$	2,035.1		$	3,359.6		$	3,328.8	$	1,883.2	$	1,819.6	$	1,695.9		$	2,035.1		$	3,359.6
Long-term debt ^(b)	$	581.5	$	642.0		$	731.5		$	313.6		$	868.2	$	434.6	$	581.5	$	642.0		$	731.5		$	313.6
Redeemable preferred stock	$	—	$	—		$	—		$	22.9		$	22.9	$	—	$	—	$	—		$	—		$	22.9
Total common shareholder's equity	$	445.3	$	330.7		$	362.3		$	1,212.7		$	1,143.4	$	473.4	$	445.3	$	330.7		$	362.3		$	1,212.7

Number of shareholders - preferred stock	—		—			—			180			186		—		—		—			—			180



$ in millions	2018 vs. 2017
Favorable impact of DMR rider following 2017 ESP	$	28.0
Higher rates from DRO	9.9
Higher retail revenue volumes driven by favorable weather	31.9
Lower interest expense due to debt payments made in 2017 and 2018	12.0
Decrease due to higher purchased power volumes, driven by higher retail demand	(25.7		)
Loss on transfer of Beckjord facility	(11.7		)
Other	(6.0		)
Net change in income / (loss) from continuing operations before income tax	$	38.4



$ in millions	2019 vs. 2018
Decrease due to a higher loss on early extinguishment of debt in 2019, primarily due to the make-whole premium on the partial prepayment of the 7.25% Senior Notes due 2021	$	(38.4	)
Decrease due to the deferral of revenue to adjust for the impacts of the TCJA	(14.0		)
Decrease due to higher taxes other than income	(4.7		)
Impact of the distribution rate order, including higher distribution rates, the DIR, and the Decoupling Rider, partially offset by changes to DP&L's ESP	22.4
Increase due to the loss on transfer of the Beckjord facility in the first quarter of 2018	11.7
Lower interest expense due to debt payments made in 2017 and 2018	15.8
Other	(0.6		)
Net change in income from continuing operations before income tax	$	(7.8	)



$ in millions	2017 vs. 2016
Decrease from reverting to ESP 1 rates in September 2016, partially offset by the implementation of the DMR in November 2017	$	(22.0	)
Lower retail revenue volumes driven by unfavorable weather	(28.4		)
Increase due to lower purchased power volumes, driven by lower retail demand	6.7
Fixed asset impairment recorded in 2016 on Conesville facility	23.9
Other	0.9
Net change in income / (loss) from continuing operations before income tax	$	(18.9	)



$ in millions	2019 vs. 2018
Impact of the distribution rate order, including higher distribution rates, the DIR, and the Decoupling Rider, partially offset by changes to DP&L's ESP	$	22.4
Increase due to the loss on transfer of the Beckjord facility in the first quarter of 2018	12.4
Decrease due to the deferral of revenue to adjust for the impacts of the TCJA	(14.0		)
Decrease due to higher taxes other than income	(4.6		)
Other	3.7
Net change in income from continuing operations before income tax	$	19.9


(a)	~~The goodwill impairment of $135.8 million in 2014 related to DPLER has been reclassified to discontinued operations.~~


~~(b)~~	Fixed-asset impairments of $175.8 million and $835.2 million in 2017 and 2016, respectively, have been reclassified to discontinued operations.


~~(c)~~(b)	Excluded from this line are the current maturities of long-term debt.


(a)	Fixed-asset ~~impairment~~impairments of $66.3 million and $1,353.5 million in 2017 and 2016, ~~has~~respectively, have been reclassified to discontinued operations.


(a)	For purposes of discussing operating results, we present and discuss Income / (loss) from continuing operations before income tax. This format is useful to investors because it allows analysis and comparability of operating trends and includes the same information that is used by management to make decisions regarding our financial performance.


ELECTRIC SALES AND CUSTOMERS ^(a)	ELECTRIC SALES AND CUSTOMERS ^(a)				ELECTRIC SALES AND CUSTOMERS ^(a)
		DPL				DPL
		Years ended December 31,				Years ended December 31,
		2018	2017	2016		2019	2018
Retail electric sales ^(b)		14,439	13,863	14,499		14,049	14,439
Wholesale electric sales ^(c)		1,289	816	907		1,059	1,289
Total electric sales		15,728	14,679	15,406		15,108	15,728

Billed electric customers (end of period)		525,166	521,609	519,128		525,801	525,166


(b)	DPL retail electric sales represent the total transmission and distribution retail sales for the periods presented. SSO sales were 3,913 million kWh and 3,977 ~~KWh, 3,684 KWh and 3,856 KWh~~million kWh for the years ended December 31, 2019 and 2018, ~~2017 and 2016,~~ respectively.


(c)	Included within DPL wholesale electric sales are DP&L's 4.9% share of the generation output of OVEC and the generation output of Conesville.



$ in millions	2018 vs. 2017
Retail
Rate
Decrease in energy efficiency and USF revenue rate riders	$	(46.6	)
Decrease in competitive bid revenue rate rider	(12.5		)
Increase due to implementation of the DMR in November 2017	28.0
Increase due to DRO	9.9
Other	4.7
Net change in retail rate	(16.5		)

Volume
Increase due to favorable weather, as shown above by the 51% increase in cooling degree-days and 15% increase in heating degree-days	31.9

Total retail change	15.4

Wholesale
Increase due to increased volumes sold by Conesville of 93% and higher wholesale prices and increased volumes for DP&L's 4.9% share of the generation output of OVEC, which is sold into PJM at market prices	20.1

RTO revenues and RTO capacity revenues
RTO revenues and RTO capacity revenues	(1.9		)

Other
Other revenues	(1.6		)

Net change in Revenues	$	32.0


(a)	The PUCO order approving the ESP 1 rate plan on December 18, 2019 included the removal of the DIR and Decoupling Rider. For more information, see Part II, Item 8, Note 3 – Regulatory Matters in the Notes to DPL's Consolidated Financial Statements.



$ in millions	2019 vs. 2018
Net purchased power
Purchased power
Rate
Increase due to pricing in the competitive bid process	$	1.4
Volume
Decrease primarily due to lower retail load served due to milder weather and lower purchases as DP&L stopped purchasing power to serve the load of other parties through their competitive bid process after May of 2018	(18.4		)
Total purchased power change	(17.0		)
RTO charges
Decrease due to lower transmission and congestion charges, including a decrease due to benefits of the PJM Transmission Enhancement Settlement. RTO charges are incurred by DP&L as a member of PJM and primarily include transmission charges within our network, which are incurred and charged to customers in the Transmission Rider	(33.8		)

RTO capacity charges	(1.2		)

Net change in purchased power	$	(52.0	)



$ in millions	2018 vs. 2017
Fuel
Net fuel costs
Increase due to higher internal generation at Conesville of 93%	$	8.5

Net purchased power
Purchased power
Rate
Decrease due to lower rates in the competitive bid process	(12.2		)
Volume
Increase due to higher competitive bid purchases due to increased DP&L retail demand	25.7
Total purchased power change	13.5

RTO charges	0.3
RTO capacity charges	0.2
Net change in purchased power	14.0

Net change in Cost of Revenues	$	22.5



$ in millions	2019 vs. 2018
Increase in alternative energy and energy efficiency programs ^(a)	$	26.7
Increase in uncollectible expenses for the low-income payment program, which is funded by the USF Revenue Rate Rider ^(a)	12.7
Decrease due to prior year write-off of previously deferred rate case costs no longer deemed probable for recovery	(5.3		)
Other, net	0.5
Net change in Operations and Maintenance expense	$	34.6



$ in millions	2018 vs. 2017
Decrease in alternative energy and energy efficiency programs ^(a)	$	(34.2	)
Decrease in uncollectible expenses for the low-income payment program, which is funded by the USF revenue rate rider ^(a)	(8.5		)
Decrease due to higher severance expense in the prior year mostly due to AES restructuring activities	(2.6		)
Decrease in group insurance expense associated with participation in the AES self-insurance plan	(2.2		)
Increase in amortization of previously deferred regulatory costs, including rate case costs, certain transmission costs, and various costs collected under the regulatory compliance rider ^(a)	10.8
Increase in legal and other consulting costs, including write-off of previously deferred rate case costs no longer deemed probable for recovery	7.3
Increase in maintenance of overhead transmission and distribution lines	2.6
Other, net	(2.5		)
Net change in Operations and Maintenance expense	$	(29.3	)


(a)	There is corresponding revenue associated with these program costs resulting in minimal impact to Net income.


~~(a)~~	~~There is corresponding revenue associated with these program costs resulting in minimal impact to Net income.~~


(b)	DP&L retail electric sales represent the total transmission and distribution retail sales for the periods presented. SSO sales were 3,913 million kWh and 3,977 ~~KWh, 3,684 KWh and 3,856 KWh~~million kWh for the years ended December 31, 2019 and 2018, ~~2017 and 2016,~~ respectively.


(c)	Included within wholesale electric sales is DP&L's 4.9% share of the generation output of OVEC.


	For the years ended December 31,								$ change						For the years ended December 31,					$ change
$ in millions	2018		2017			2016			2018 vs. 2017			2017 vs. 2016			2019			2018		2019 vs. 2018
Net income / (loss)	$	70.1	$	(94.6	)	$	(485.2	)	$	164.7		$	390.6		$	105.4		$	70.1	$	35.3
Depreciation and amortization	55.7		110.5			137.9			(54.8		)	(27.4		)	58.7			55.7		3.0
Impairment expenses	2.8		175.8			859.0			(173.0		)	(683.2		)	3.5			2.8		0.7
Charge for early redemption of debt	6.5		3.3			3.1			3.2			0.2
Loss on early extinguishment of debt															44.9			6.5		38.4
Other adjustments to Net income / (loss)	2.0		(21.8		)	(359.8		)	23.8			338.0			(4.0		)	2.2		(6.2		)
Net income / (loss), adjusted for non-cash items	137.1		173.2			155.0			(36.1		)	18.2			208.5			137.3		71.2
Net change in operating assets and liabilities	68.8		(41.5		)	112.1			110.3			(153.6		)	(28.2		)	68.6		(96.8		)
Net cash provided by operating activities	$	205.9	$	131.7		$	267.1		$	74.2		$	(135.4	)	$	180.3		$	205.9	$	(25.6	)



$ in millions	$ change
Increase from accrued taxes payable is primarily due to a prior year income tax benefit and current year income tax expense	$	41.1
Increase from accounts receivable is primarily due to 2018 collections of PJM transmission enhancement settlement and remaining amounts due from partners in jointly-owned stations	27.6
Increase from accounts payable is primarily due to timing of payments and lower coal purchases in 2018	20.0
Increase from deferred regulatory costs, net, is primarily due to higher collections on regulatory assets and liabilities	14.5
Decrease from pension, retiree and other benefits relates to higher contributions and lower accruals of net periodic benefit costs in 2018	(8.1		)
Increase from inventory primarily due to lower coal purchases in 2018	7.1
Other	8.1
Net change in cash from changes in operating assets and liabilities	$	110.3



$ in millions	$ change
Decrease from accrued taxes primarily due to a current year income tax benefit and prior year income tax expense	$	(58.6	)
Decrease from accounts receivable primarily due to lower collections following the sale or closure of plants in 2018	(35.5		)
Decrease from inventory primarily due a significant decrease in inventory balances in 2018 due to the closure of the Stuart and Killen plants	(19.0		)
Decrease from other non-current liabilities primarily due to the settlement of the Joint Owners' Agreement with the co-owners of Stuart and Killen in the current year	(14.1		)
Increase from accounts payable primarily due to timing of payments	26.0
Other	4.4
Net change in cash from changes in operating assets and liabilities	$	(96.8	)



$ in millions	$ change
Decrease from accounts payable primarily due to timing of payments and spending patterns	$	(51.4	)
Decrease from accrued taxes payable primarily due to incurring current income tax expense in 2016 compared to a current tax benefit in 2017	(48.8		)
Decrease from deferred regulatory costs, net, due to lower collections on regulatory assets and liabilities	(27.8		)
Decrease from inventory primarily due to lower coal purchases in 2016	(24.3		)
Other	(1.3		)
Net change in cash from changes in operating assets and liabilities	$	(153.6	)


$ in millions	Type	Maturity	Commitment		Amounts available as of December 31, 2018		Type	Maturity	Commitment		Amounts available as of December 31, 2019
DPL	Revolving	July 2020	$	205.0	$	191.0	Revolving	June 2023	$	125.0	$	11.3

DP&L	Revolving	July 2020	175.0		173.9		Revolving	June 2024	175.0		133.9

			$	380.0	$	364.9			$	300.0	$	145.2


	Actual						Projected						Actual						Projected
$ in millions	2016		2017		2018		2019		2020		2021		2017		2018		2019		2020		2021		2022
DPL	$	140	$	108	$	84	$	143	$	223	$	262	$	108	$	84	$	161	$	210	$	211	$	200

DP&L	$	88	$	83	$	82	$	140	$	221	$	260	$	83	$	82	$	159	$	206	$	209	$	198



	DPL	DP&L	Outlook	Effective or Affirmed
Fitch Ratings	~~BBB~~BBB-^(a) / ~~BBB-~~BB+^(b)	A-BBB+^(c)	~~Stable~~Negative	~~October 2018~~December 2019
Moody's Investors Service, Inc.	Ba1^(b)	A3^(c)	~~Positive~~Negative	~~October 2018~~December 2019
Standard & Poor's Financial Services LLC	~~BBB-~~BB^(b)	~~BBB+~~BBB ^(c)	~~Stable~~Negative	~~March 2018~~November 2019


	Payments due in:										Payments due in:
$ in millions	Total		Less than 1 year		2 - 3 years		4 - 5 years		More than 5 years		Total		Less than 1 year		2 - 3 years		4 - 5 years		More than 5 years
DPL:
Long-term debt	$	1,488.4	$	103.6	$	929.4	$	423.0	$	32.4	$	1,378.1	$	140.2	$	380.4	$	0.4	$	857.1
Interest payments	274.4		86.6		145.3		15.9		26.6		741.7		64.9		94.4		72.4		510.0
Pension and postretirement payments	264.6		27.8		54.7		53.6		128.5		259.5		27.6		54.0		52.7		125.2
Electricity purchase commitments	209.4		139.5		69.9		—		—		173.2		115.8		57.4		—		—
Purchase orders and other contractual obligations	40.2		11.4		14.8		14.0		—		52.8		45.0		7.8		—		—
Total contractual obligations	$	2,277.0	$	368.9	$	1,214.1	$	506.5	$	187.5	$	2,605.3	$	393.5	$	594.0	$	125.5	$	1,492.3


DPL	Years ending December 31,																		Principal amount at December 31,		Fair value at December 31,		Years ending December 31,																		Principal amount at December 31,		Fair value at December 31,
$ in millions	2019			2020			2021			2022			2023			Thereafter			2018		2018		2020			2021			2022			2023			2024			Thereafter			2019		2019
Long-term debt ^(a)
Variable-rate debt	$	4.5		$	144.5		$	4.5		$	422.6		$	—		$	—		$	576.1	$	576.1	$	140.0		$	—		$	—		$	—		$	—		$	—		$	140.0	$	140.0

Average interest rate	4.4		%	3.0		%	4.4		%	4.4		%	—		%	—		%					4.2		%	—		%	—		%	—		%	—		%	—		%

Fixed-rate debt	$	99.1		$	0.2		$	780.2		$	0.2		$	0.2		$	32.4		912.3		943.5		$	0.2		$	380.2		$	0.2		$	0.2		$	0.2		$	857.1		1,238.1		1,264.0

Average interest rate	6.7		%	4.2		%	7.2		%	4.2		%	4.2		%	6.1		%					2.4		%	7.2		%	4.2		%	4.2		%	4.2		%	4.3		%

Total																			$	1,488.4	$	1,519.6																			$	1,378.1	$	1,404.0



DPL INC.
Consolidated Statements of Shareholder's Deficit
	Common Stock ^(a)
$ in millions	Outstanding Shares	Amount		Other Paid-in Capital		Accumulated Other Comprehensive Income / (Loss)			Accumulated Deficit			Total
Year ended December 31, 2017
Beginning balance	1	$	—	$	2,233.0	$	0.3		$	(2,820.9	)	$	(587.6	)
Net comprehensive loss						0.5			(94.6		)	(94.1		)
Capital contributions ^(b)				97.1								97.1
Other				0.3								0.3
Ending balance	1	—		2,330.4		0.8			(2,915.5		)	(584.3		)
Year ended December 31, 2018
Net comprehensive income						2.4			70.1			72.5
Capital contributions ^(b)				40.0								40.0
Other ^(c)				0.1		(1.0		)	1.0			0.1
Ending balance	1	—		2,370.5		2.2			(2,844.4		)	(471.7		)
Year ended December 31, 2019
Net comprehensive income						(5.8		)	105.4			99.6
Other				0.2								0.2
Ending balance	1	$	—	$	2,370.7	$	(3.6	)	$	(2,739.0	)	$	(371.9	)


(b)	~~Includes $5.1 million charged to Other paid-in capital for the redemption of the~~ ~~DP&L~~ ~~preferred shares. See Note 10 – Equity.~~


~~(c)~~	Represents the conversion of a tax sharing payable to AES to contributed capital, as DP&L's 2017 ESP ~~restricts~~restricted tax sharing payments to AES during the term of the ESP. See Note 8 – Income Taxes.