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Our sulfur dioxide (SO2)emission allowance consumption will bewas reduced in 20072008 due to the installation of flue gas desulfurization equipment (scrubbers) at the Killen and J.M. Stuart electric generating stations.  Due to the installation of this emission control equipment at a portion ofand barring any changes in the Companies’ generation facilities.  We do notregulatory environment in which we operate, we expect to purchase SO2 allowances for 2007.  The exact consumption of SO2 allowances will depend on market prices for power, availabilityhave emission allowance inventory in excess of our generating units, the timing of FGD (flu gas desulfurization) completionneeds, which we plan to sell during 2009 and the actual sulfur content of the coal burned.in future periods.  We did not purchase SO2 allowances or NOX allowances during 2008, nor do notwe plan to purchase any nitrogen oxide (NOxin 2009.) allowances for 2007.

The gross average cost of fuel usedconsumed per kilowatt-hour (kWh) was as follows:

·DP&L may seek recovery of certain cost increases such as storm damage expenses, regulatory or tax changes, costs associated with new climate change or carbon regulations, certain costs associated with the market development period that began January 2001.operation of the Hutchings station, costs associated with transmission cost recovery rider (TCRR), and Regional Transmission Organization costs not covered by the TCRR.

In 2003,·                  The significantly excessive earnings test will not apply to DP&L until 2012.

·DP&L will be permitted to begin its energy efficiency and demand response programs immediately with recovery scheduled to begin in 2009, with a two year reconciliation.  DP&L’s smart grid deployment initiative will be revised and resubmitted to the PUCO for approval by September 2009 with the anticipation that the plans and recovery will begin January 1, 2010 also with a two year reconciliation.

·DP&L’s proposed alternative energy plans will be approved aand recovery of these costs will begin in 2009 with an annual reconciliation.

·                  Mercantile (large use) customers can obtain exemption from the energy efficiency rider if self-directed energy and demand programs generate reductions equal to or greater than DP&L’s energy and demand reduction benchmarks.

The Stipulation executedmay be approved, modified or rejected by DP&L and other parties that extended the market development period throughPUCO.  A final decision from the PUCO regarding the Stipulation is expected by the end of 2005,the second quarter of 2009.

As a member of PJM, DP&L is subject to charges and included provisions that generation rates may be modified as of January 1, 2006, by up to 11% of generation rates to reflect increased costs associated with fuel, environmental compliance, taxes, regulatory changes,PJM operations as approved by the FERC.  FERC Orders issued in 2007 regarding the allocation of costs of large transmission facilities within PJM, could result in additional costs being allocated to DP&L of approximately $12 million or more annually by 2012.  DP&L filed a notice of appeal to the U.S. Court of Appeals, D.C. Circuit on March 18, 2008.  The appeal has been consolidated with other appeals taken by other interested parties of the same FERC Orders and security measures.  In 2006, the Ohio Supreme Court affirmedconsolidated cases have been assigned to the PUCO’s Order approving7th Circuit.  The Company cannot predict the Stipulation.

outcome or timing of a decision on the appeals.  On April 4, 2005,November 7, 2008, DP&L filed a request at the PUCO for authority to implement a new rate stabilization surcharge effective January 1, 2006 to recover cost increases associated with environmental capital, related operations and maintenance costs and fuel expenses.  On November 3, 2005, DP&L entered into a settlement agreement that extended DP&L’s rate stabilization period through December 31, 2010.  During this time, DP&L will continue to provide retail electric service at fixed rates with the ability to recover increased fuel and environmental costs through surcharges and riders.  Specifically, the agreement provides for:

·                  A rate stabilization surcharge equal to 11% of generation rates beginning January 1, 2006 and continuing through December 2010.  Based on 2004 sales, this rider is expected to result in approximately $65 million in net revenues per year.

·                  A new environmental investment rider to begin January 1, 2007 equal to 5.4% of generation rates, with incremental increases equal to 5.4% each year through 2010.  Based on 2004 sales, this rider is expected to result in approximately $35 million in annual net revenues beginning January 2007, growing to approximately $140 million by 2010.

·                  An increase to the residential generation discount from January 1, 2006 through December 31, 2008, which is expected to result in a revenue decrease of approximately $7 million per year for three years, based on 2004 sales.  The residential discount is accounted for in the $65 million net revenue stated above will expire on December 31, 2008.

On December 28, 2005, the PUCO adopted the settlement with certain modifications (RSS Stipulation).  The PUCO ruled that the environmental rider will be bypassable by all customers who take service from alternate generation suppliers.  Thus, future additional revenues are dependent upon actual sales and levels of customer switching.  Applications for rehearing were denied and the case was appealed to the Ohio Supreme Court by the Ohio Consumers’ Counsel on April 21, 2006.  The Company cannot predict whether the Ohio Supreme Court will affirm the PUCO’s approval of the RSS Stipulation, affirm it in part subject to modifications, or reject it.  An oral argument has been set for April 17, 2007.

Consistent with the RSS Stipulation approved by the PUCO and prior orders, DP&L made a tariff filing to implement the environmental investment rider beginning January 1, 2007, which was approved by the PUCO in November 2006.

In 2005, DP&L made a tariff filing to recover previously deferreddefer costs associated with administrative fees charged totransmission, capacity, ancillary service and other PJM related charges incurred as a member of PJM.  DP&L under PJM’s FERC-approved tariffs.  In January 2006, the PUCO approved the recovery, effective February 1, 2006, which should result in approximately $8.5 million in additional revenue per year for three years and $6.0 million per year thereafter.

In March 2006, the PUCO approved thesought deferral until such time as it files to seek recovery of these costs and carrying costs associated with billing system changes made to permit DP&L to provide billing services to Competitive Retail Electric Service (CRES) providers.  These costs had previously been deferred for later recovery under a settlement approved in 2004.  In separate orders issued in September and December 2006, the Ohio Supreme Court affirmed the PUCO orders approving the settlement and approving the recovery of costs.  This will result in approximately $7 million in additional annual revenue beginning March 2006 through 2010.

from retail ratepayers.  On September 1, 2005, DP&L requested the PUCO authority to recover distribution costs associated with storm restoration efforts for ice storms that took place in December 2004 and January 2005.  In February 2006, DP&L

filed updated schedules in support of its application.  On July 12, 2006,19, 2009, the PUCO approved DP&L’s request to defer these costs.  DP&L anticipates filing allowinga request with the CompanyPUCO before the end of April 2009 seeking to recover approximately $8.6 million in additional revenues over a two-year period.  See Note 3 of Notes to Consolidated Financial Statements.these costs.

Ohio Competitive Considerations and Proceedings

As of December 31, 2006,2008, four unaffiliated marketers were registered as CRESCompetitive Retail Electric Service (CRES) providers in DP&L’s service territory.  While there has been some customer switching to date,associated with unaffiliated marketers, it representsrepresented less than 0.15 percent0.12% of sales in 2006.2008.  DPLER, an affiliated company, is also a registered CRES provider and accounted for 99.8%99.4% of the total kWh supplied by CRES providers within DP&L’s service territory in 2006.2008.  In addition, several communities in DP&L’s service area have passed ordinances allowing the communities to become government aggregators for the purpose of offering alternative electric generation supplies to their citizens.  To date, none of these communities have aggregated their generation load.

DP&L agreed to implement a Voluntary Enrollment Program (VEP) that would provide customers with an option to choose a competitive supplier to provide their retail generation service should switching not reach 20% in each customer class.  The 20% threshold has never been reached.  In both 2005 and 2006, customers who elected to participate in the program were grouped together and collectively bid out to CRES providers.  No bids were received in either year resulting in zero customer switching under the program.  DP&L is required to execute the same process again in 2007.  Future period effects cannot be determined at this time.

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In April 2008, DPL was notified that the IRS would audit its 2005 and 2006 federal income tax returns.  That IRS audit has commenced and, at this time, DPL cannot determine the outcome of the audit.

We have been informed that we will be subject to a routine audit beginning in June 2009 by the North American Electric Reliability Corporation (NERC).  NERC is the FERC-certified electric reliability organization responsible for developing and enforcing mandatory reliability standards.

ENVIRONMENTAL CONSIDERATIONS

DPL, DP&L and our subsidiaries’ facilities and operations are subject to a wide range of environmental regulations and laws.laws by federal, state and local authorities.  The environmental issues that may impact us include:

·                     The Federal Clean Air Act (CAA) and state laws and regulations (including State Implementation Plans) 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 plants require additional permitting or pollution control technology, and/or whether emissions from coal-fired generating plants cause or contribute to global climate changes.

·                     Rules issued by the United States Environmental Protection Agency (USEPA) and Ohio Environmental Protection Agency (Ohio EPA) that require substantial reductions in SO2, particulates, mercury and NOX emissions.  DPL is installing (and has installed) emission control technology and is taking other measures to comply with required reductions.

·                     The Federal Clean Water Act (FCWA), which prohibits the discharge of pollutants into waters of the United States except pursuant to appropriate permits. In July 2004, the USEPA adopted a new Clean Water Act rule to reduce the number of fish and other aquatic organisms affected by cooling water intakes at power plants.

·                     Solid and hazardous waste laws and regulations, which govern the management and disposal of certain waste. The majority of solid waste created from the combustion of coal and fossil fuels is fly ash and other coal combustion by-products, which the EPA has determined are not hazardous waste subject to the Resource Conservation and Recovery Act (RCRA).

As well as imposing continuing compliance obligations, these laws 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 these facilities to comply, or to determine compliance, with such regulations.  We record liabilities for probable estimated loss in accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5), “Accounting for Contingencies.Contingencies,” To the extent a probable loss can only be estimated by referenceas discussed in Note 1 of Notes to a range of equally probable outcomes, and no amount within the range appears to be a better estimate than any other amount, we accrue for the low end of the range.  Because of uncertainties related to these matters, accruals are based on the best information available at the time.Consolidated Financial Statements. DPL,through its wholly-owned captive insurance subsidiary MVIC, has an actuarialactuarially calculated reserve for environmental matters.  Weevaluate the potential liability related to probable losses quarterly and may revise our estimates.  Such revisions in the estimates of the potential liabilities could have a material effect on our results of operations, financial position or cash flows.

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DP&L’s Table of Contentscoal-fired units are subject

In addition to the acid rain provisionsrequirements related to emissions of the Clean Air ActSO2, particulates, mercury, and NOX noted above, there is a growing concern nationally and internationally about global climate change and the NOcontribution of emissions of greenhouse gases, including most significantly, carbon dioxide (COx2).  This concern has led to increased interest in legislation at the federal level and Ozone Transport rule.   All ofactions at the SO2 and NOx state level as well as litigation relating to greenhouse gas emissions, data submittedincluding a recent U.S. Supreme Court decision holding that the USEPA has the authority to regulate carbon dioxide emissions from motor vehicles under the United States Environmental Protection Agency (USEPA) pursuant to these provisionsCAA.  Increased pressure for 2005carbon dioxide emissions reduction also is coming from investor organizations and the first quarter 2006 were recordedinternational community.  Environmental advocacy groups are also focusing considerable attention on carbon dioxide emissions from power generation facilities and reportedtheir potential role in compliance with USEPA regulations.  Subsequently climate change.  Although several bills have been introduced in Congress that would compel CO2 emission reductions, no bills have passed to date.  Future changes in environmental regulations governing these pollutants could make some of our electric generating units uneconomical to maintain or operate.  In addition, any legal obligation would require extensive mitigation efforts and, in the case of CO2 legislation, would raise uncertainty about the future viability of fossil fuels, particularly coal, as an energy source for new and existing electric generation facilities.  If legislation or regulations are passed at the federal or state levels imposing mandatory reductions of carbon dioxide and other greenhouse gases on generation facilities, the cost to DPL andDP&L detected a malfunction with its emission monitoring system at one of its generation stations and ultimately determined its SO2 and NOx emissions data were under reported.  DP&L has petitioned the USEPA to accept an alternative methodology for calculating actual emissions for 2005 and the first quarter 2006.  DP&L has sufficient allowances in its general account to cover the understatement and is working with the USEPA to resolve the matter.  Management does not believe the ultimate resolution of this matter will have a material impact on operating results or financial position.such reductions could be material.

Environmental Regulation and Litigation Related to Air Quality

Regulation Proceedings — Air

In 1990, the federal government amended the Clean Air Act (CAA)CAA to further regulate air pollution.  Under the law, the USEPA sets limits on how much of a pollutant can be in the air anywhere in the United States.  The CAA allows individual states to have stronger pollution controls, but states are not allowed to have weaker pollution controls than those set for the whole country. The CAA has a material effect on our operations and such effects are detailed below with respect to certain programs under the CAA.

On October 27, 2003, the USEPA published final rules regarding the equipment replacement provision (ERP) of the routine maintenance, repair and replacement (RMRR) exclusion of the CAA.  Subsequently, on December 24, 2003, the United States Court of Appeals for the D.C. Circuit stayed the effective date of the rule pending its decision on the merits of the lawsuits filed by numerous states and environmental organizations challenging the final rules.  As a result of the stay, the Ohio Environmental Protection Agency (Ohio EPA)EPA delayed its previously announced intent to adopt the RMRR rule.  On October 20, 2005, USEPA proposed to revise the emissions test for existing electric generating units.  At this time, we are unable to determine the impact of the ERP appeal or the outcome of the proposed emissions test.

In a regulation proceeding relating to the same issue pending beforedecided by the U.S. Supreme Court in the Duke Energy case discussed below, the USEPA issued a proposed rule in October 2005 concerning the test for measuring whether modifications to electric generating units should trigger application of New Source Review (NSR) standards under the CAA.  The proposed rule seeks comments on two different hourly emissions test options as well as the USEPA’s current method of measuring previous actual emission levels to projected actual emission levels after the modification.  A third option that tests emissions increase based upon emissions per unit of energy output is also available for comment.  We cannot predict the outcome of this rulemaking or its impact on current environmental litigation.

On December 17, 2003, the USEPA proposed the Interstate Air Quality Rule (IAQR) designed to reduce and permanently cap SO2 and NOxNOX emissions from electric utilities.  The proposed IAQR focused on states, including Ohio, whose power plant emissions are believed to be significantly contributing to fine particle and ozone pollution in other downwind states in the eastern United States.  On June 10, 2004, the USEPA issued a supplemental proposal to the IAQR, now renamed as the Clean Air Interstate Rule (CAIR).  The final rules were signed on March 10, 2005 and were published on May 12, 2005.  CAIR created an interstate trading program for annual NOX emission allowances and made modifications to an existing trading program for SO2.  On August 24, 2005, the USEPA proposed additional revisions to the CAIR.  On July 11, 2008, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision to vacate the USEPA’s CAIR and initiatedits associated Federal Implementation Plan and remanded to the USEPA with instructions to issue new regulations that conformed with the procedural and substantive requirements of the Clean Air Act.  The Court’s decision, in part, invalidated the new NOX annual emission allowance trading program and the modifications to the SO2 emission trading program established by the March 10, 2005 rules, and created uncertainty regarding future NOX and SO2 emission reduction requirements and their timing.  The USEPA and a group representing utilities filed a request for a rehearing en banc on September 24, 2008.  On December 23, 2008, the U.S. Court of Appeals issued an order on reconsideration on one issue.  Although wethat permits CAIR to remain in effect until the USEPA issues new regulations that would conform to the Clean Air Act requirements and the Court’s July 11, 2008 decision.

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In September 2004, the Sierra Club filed a lawsuit against the Company DP&L and the other owners of the Stuart Generating Stationgenerating station in the United StatesU.S. District Court for the Southern District of Ohio for alleged violations of the Clean Air Act (CAA) and the station’s operating permit.  On August 7, 2008, a consent decree was filed in the U.S. District Court in full settlement of these CAA including issuesclaims.  Under the terms of the consent decree, DP&L and the other owners of the Stuart generating station agreed to: (i) certain emission targets related to NOx, SO2 and particulate matter; (ii) make energy efficiency and renewable energy commitments that may be decidedare conditioned on receiving PUCO approval for the recovery of costs; (iii) forfeit 5,500 sulfur dioxide allowances; and (iv) provide funding to a third party non-profit organization to establish a solar water heater rebate program.  DP&L and the other owners of the station also entered into an attorneys’ fee agreement to pay a portion of the Sierra Club’s attorney and expert witness fees.  The parties to the lawsuit filed a joint motion on October 22, 2008, seeking an order by the SupremeU.S. District Court inapproving the Duke Energy case and other issues relating to alleged violationsconsent decree with funding for the third party non-profit organization set at $300,000.  On October 23, 2008, the U.S. District Court approved the consent decree.  We have determined that the terms of opacity limitations.  DP&L,the consent decree will not have a material impact on behalfour overall results of all co-owners, is leading the defense of this matter.  A sizable amount of discovery has taken place and expert reports are scheduled to be filed at various times from May through September, 2007.  Dispositive motions are to be filed in January 2008.  No trial date has been set yet.operations, financial position, or cash flows.

Litigation Involving Co-Owned Plants

In March 2000, as amended in June 2004, the United StatesU.S. Department of Justice filed a complaint in an Indiana federal court against Cinergy CorporationCorp. (now part of Duke Energy) and two Cinergy subsidiaries for alleged violations of the CAA at various generation units operated by PSI Energy, Inc. and CG&E, including generation units co-owned by DP&L (Beckjord Unit 6 and Miami Fort Unit 7).  Prior to trial, plaintiffs chose not to pursue allegations that had been made with respect to Miami Fort 7.  On May 22, 2008, the jury rendered a verdict in favor of Cinergy with respect to the allegations made involving projects at Beckjord Unit 6.  The jury found for the plaintiffs with respect to units at one of Duke Energy’s wholly-owned facilities.  In August 2006,mid-December 2008, the Seventh Circuit upheldjudge ordered a retrial after hearing arguments regarding the district court’s 2005 rulingpotential prejudicial effect of Duke’s failure to disclose that an increase in annual emissions could triggercertain of its witnesses were paid for their time and expertise.  No date has been established for retrying the permitting requirements of the CAA even if there were no increase in hourly emissions per hour of operations.

In November 2004, the State of New Yorkcase and seven other states filed suit against the American Electric Power Corporation (AEP) and various subsidiaries, alleging various CAA violations at a number of AEP electric generating facilities, including Conesville Unit 4 (co-owned by CG&E, DP&L and Columbus Southern Power (CSP)).  AEP, on behalfis unable to predict the outcome or timing of all co-owners, is leading the defense of this matter.  During 2006, a number of procedural and discovery-related disputes were resolved by the Southern District Court of Ohio.  Discovery is ongoing.any retrial.

In July 2004 and November 2004, various residents of the Village of Moscow, Ohio notifiedsued CG&E, as the operator of Zimmer generating station (co-owned by CG&E, DP&L and CSP), of their intent to sue for alleged violations of the CAA and air pollution nuisances.  CG&E, on behalf of all co-owners, is leading the defense of this matter.  One lawsuit was dismissed on procedural grounds.  Several counts

Notices of Violation Involving Co-Owned Plants

On March 13, 2008, Duke Energy Ohio Inc., the operator of the remaining suit have been dismissed because they were basedZimmer generating station, received a Notice of Violation (NOV) and a Finding of Violation from the USEPA alleging violations of the CAA, the Ohio State Implementation Program (SIP) and permits for the Station in areas including SO2, opacity and increased heat input.  DP&L is a co-owner of the Zimmer generating station and could be affected by the eventual resolution of this matter.  Duke Energy Ohio Inc. is expected to act on activity outsidebehalf of itself and the statuteco-owners with respect to this matter.  At this time, DP&L is unable to predict the outcome of limitations.this matter.

In June 2000, the USEPA issued a Notice of Violation (NOV)NOV to the DP&L operated-operated Stuart Generating Stationgenerating station (co-owned by DP&L, CG&E, and CSP) for alleged violations of the CAA.  The NOV contained allegations consistent with NOVs and complaints that the USEPA had recently brought against numerous other coal-fired utilities in the Midwest.  The NOV indicated the USEPA maymay: (1) issue an order requiring compliance with the requirements of the Ohio State Implementation Plan (SIP)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 has been taken.

In November 1999, the USEPA filed civil complaints and NOVs against operators and owners of certain generation facilities for alleged violations of the CAA.  Generation units operated by CG&E (Beckjord Unit 6) and CSP (Conesville Unit 4) and co-owned by DP&L were referenced in these actions.  Numerous northeast states have filed complaints or have indicated that they will be joining the USEPA’s action against CG&E and CSP.  DP&L was not identified in the NOVs, civil complaints or state actions.

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In December 2007, the Ohio EPA issued a NOV to the DP&L-operated Killen generating station (co-owned by DP&L and CG&E) for alleged violations of the CAA.  The NOVs alleged deficiencies in the continuous monitoring of opacity.  A compliance plan has been submitted to the Ohio EPA.  To date, no further actions have been taken by the Ohio EPA.

Other Issues Involving Co-Owned Plants

In 2006, DP&L detected a malfunction with its emission monitoring system at the DP&L-operated Killen generating station (co-owned by DP&L and CG&E) and ultimately determined its SO2 and NOx emissions data were under reported.  DP&L has petitioned the USEPA to accept an alternative methodology for calculating actual emissions for 2005 and the first quarter 2006.  DP&L has sufficient allowances in its general account to cover the understatement and is working with the USEPA to resolve the matter.  Management does not believe the ultimate resolution of this matter will have a material impact on results of operations, financial position or cash flows.

Notices of Violation Involving Wholly-Owned Plants

In 2007, the Ohio EPA and the USEPA issued NOVs to DP&L for alleged violations of the CAA at the O.H. Hutchings station.  The NOVs alleged deficiencies relate to stack opacity and particulate emissions.  Discussions are under way with the USEPA, the U.S. Department of Justice and Ohio EPA.  DP&L has provided data to those agencies regarding its maintenance expenses and operating results.  On December 15, 2008, DP&L received a request from the USEPA for additional documentation with respect to those issues and other Clean Air Act issues including issues relating to capital expenses and any changes in capacity or output of the units at the O.H. Hutchings station.  DP&L is complying with that request.  DP&L is unable to determine the timing, costs, or method by which the issues may be resolved.

Environmental Regulation and Litigation Related to Water Quality

On July 9, 2004, the USEPA issued final rules pursuant to the Clean Water Act governing existing facilities that have cooling water intake structures.  The rules require an assessment of impingement and/or entrainment of organisms as a result of cooling water withdrawal.  A number of parties appealed the rules to the federalFederal Court of Appeals for the Second Circuit in New York and the Court issued an opinion on January 25, 2007 remanding several aspects of the rule to USEPA for reconsideration.  We are undertaking studies at two facilities but cannot predictSeveral parties petitioned the impact such studies may have on future operations or the outcomeU.S. Supreme Court for review of the remanded rulemaking.lower court decision.  On April 14, 2008, the Supreme Court elected to review the lower court decision on the issue of whether USEPA can compare costs with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake structures.  Briefs were submitted to the Court last summer and oral arguments were held in December 2008.

InOn May 4, 2004, the Ohio EPA issued a final National Pollutant Discharge Elimination System permit (the Permit) for J.M. Stuart Station that continued our authority to discharge water from the station’s 316(a) variance which exempts DP&L from having to meet the temperature Standards instation into the Ohio River.  During the three-year term of the permit, DP&LPermit, we conducted a thermal discharge

study to evaluate the technical feasibility and economic reasonableness of water cooling methods other than cooling towers.  In December 2006, we submitted an application for the renewal of the Permit that was due to expire on June 30, 2007.  In July 2007 we received a draft permit proposing to continue our authority to discharge water from the station into the Ohio River.  On February 5, 2008 we received a letter from Ohio EPA indicating that they intended to impose a compliance schedule as part of the final Permit, that requires us to implement one of two diffuser options for the discharge of water from the station into the Ohio River as identified in the thermal discharge study.   On March 6, 2008, representatives from DP&L met with Ohio EPA to discuss the issue and reiterate our position that diffusers were not cost-effective.  We cannot predictagreed to explore other potential solutions and share findings with Ohio EPA.  On June 6, 2008, DP&L sent a letter to Ohio EPA stating that we would be willing to restrict public access to the impactthermal discharge during the warmest months of the year.  On August 22, 2008, we received word from Ohio EPA that this issueoption would be acceptable and would be incorporated in the NPDES permit, which was received in draft form on future operations.November 12, 2008, subject to comment and the review of the USEPA.  In December 2008, the USEPA requested that the Ohio EPA provide additional information regarding the draft permit and the timing for issuance of a final permit is uncertain.

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Environmental Regulation and Litigation Related to Land Use and Solid Waste Disposal

DP&L has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible partyPotentially Responsible Party (PRP) at a sitetwo sites pursuant to state and federal laws.

In September 2002, DP&L and other parties received a special notice that the USEPA considers us to be PRPs for the clean-up of hazardous substances at the South Dayton Dump landfill site.  In August 2005, DP&L and other parties received a general notice regarding the performance of a Remedial Investigation and Feasibility Study (RI/FS) under a Superfund Alternative approach.Approach.  In October 2005, DP&L received a special notice letter inviting it to enter into negotiations with USEPA to conduct the RI/FS.  Although the informationInformation available to DP&L does not demonstrate that it contributed hazardous substances to the site, DP&L will seek from USEPA a de minimis settlement at the site.  Should USEPA pursue a civil action, DP&L will vigorously challenge it.

In December 2003, DP&L and other parties received a special notice that the USEPA considers us to be PRPs for the clean-up of hazardous substances at the Tremont City landfill site.  Information available to DP&L does not demonstrate that it contributed hazardous substances to the site.

In November 2007, a PRP group contacted DP&L seeking our financial participation in a settlement that the group had reached with the federal government with respect to the clean-up of an industrial site once owned by Carolina Transformer, Inc.  DP&L’s business records clearly show we did not conduct business with Carolina Transformer that would require our participation in any clean-up of the site.  DP&L has declined to participate in the clean-up of this site.

In August 2006, Ohio EPA issued draft rules for interested party comment related to the disposal of industrial waste.  DP&L, through the Ohio Electric Utility Institute, submitted comments on the draft rules.  WeDP&L cannot predict the impact of the draft rules on future operations.

CONSTRUCTION ADDITIONSCapital Expenditures for Environmental Matters