UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended September 30, 2006~~

~~Commission file number: 1-2385~~

~~THE DAYTON POWER AND LIGHT COMPANY~~

~~(Exact name of registrant as specified in its charter)~~

~~OHIO~~		~~31-0258470~~
~~(State or other jurisdiction of~~		~~(I.R.S. Employer~~
~~incorporation or organization)~~		~~Identification No.)~~

		For the quarterly period ended March 31, 2007

		OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

~~1065 Woodman Drive, Dayton, Ohio~~Commission	Registrant, State of Incorporation,	I.R.S. Employer
File Number	Address and Telephone Number	Identification No.

1-9052	~~45432~~DPL INC.	31-1163136
~~(Address of principal executive offices)~~	(~~Zip Code)~~An Ohio Corporation)
	1065 Woodman Drive
	Dayton, Ohio 45432
	937-224-6000

1-2385	THE DAYTON POWER AND LIGHT COMPANY	31-0258470
	(An Ohio Corporation)
	1065 Woodman Drive
	Dayton, Ohio 45432
	937-224-6000

~~Registrant’s telephone number, including area code:~~ ~~937-224-6000~~

Indicate by check mark whether ~~the~~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 x		No o
The Dayton Power and Light Company		Yes x		No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~ o	~~Accelerated~~Large accelerated filero	Accelerated filer	Non-accelerated filer
DPL Inc.	x	o	o
The Dayton Power and Light Company	o	o	x

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

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

As of April 27, 2007, each registrant had the following shares of common stock outstanding:

Registrant	Description	Shares Outstanding

DPL Inc.	Common Stock, $0.01 par value	113,342,744

The Dayton Power and Light Company	Common Stock	41,172,173

~~As of October 30, 2006, there were 41,172,173 shares of common stock outstanding, all of which were held~~

This combined Form 10-Q 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 DAYTON POWER AND LIGHT COMPANY~~DPL Inc. and The Dayton Power and Light Company

~~INDEX~~Index

Part I Financial Information

				Page No.
	~~Part I.~~Item 1	Financial ~~Information~~Statements — DPL and DP&L		4

		Condensed Consolidated Statement of Results of Operations – DPL		4

		Condensed Consolidated Statement of Cash Flows – DPL		5

		Condensed Consolidated Balance Sheet – DPL		6

		Condensed Consolidated Statement of Results of Operations – DP&L		8

		Condensed Consolidated Statement of Cash Flows – DP&L		9

		Condensed Consolidated Balance Sheet – DP&L		10

		Notes to Condensed Consolidated Financial Statements		12

	Item 1.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~Financial Statements~~		30
					3
			~~Consolidated Statements of Results of Operations~~Operating Statistics		48

4	Item 3	Quantitative and Qualitative Disclosures about Market Risk		48
			~~Consolidated Statements of Cash Flows~~
	Item 4	Controls and Procedures		48



~~Consolidated Balance Sheets~~Part II Other Information				49


	Item 1	Legal Proceedings		549

	Item 1A	Risk Factors		50

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds		50

	Item 3	Defaults Upon Senior Securities		50

	Item 4	Submission of Matters to a Vote of Security Holders		50

	Item 5	Other Information		50

	Item 6	Exhibits		50

			~~Notes to Consolidated Financial Statements~~		7

		~~Item 2.~~Other		~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~		20

			~~Operating Statistics~~
		32Signatures
	51

	~~Item 3.~~		~~Quantitative and Qualitative Disclosures about Market Risk~~Certifications		32

	~~Item 4.~~		~~Controls and Procedures~~		32

~~Part II.~~	~~Other Information~~

	~~Item 1.~~		~~Legal Proceedings~~		33

	~~Item 1A.~~		~~Risk Factors~~		34

	~~Item 6.~~		~~Exhibits~~		35

~~Other~~

	~~Signatures~~				36

	~~Certifications~~

~~Available Information:~~

DPL Inc. and The Dayton Power and Light Company ~~(DP&L, the Company, we, us, our, or ours unless the context indicates otherwise) files~~ file current, annual and quarterly reports, proxy statements (as to DPL Inc.) and other information required by the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (SEC). You may read and copy any document we file at the SEC’s public reference room located at 100 F Street N.E., Washington, D.C. 20549, USA. Please call the SEC at (800) SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s web site at http://~~www.sec.gov.~~www.sec.gov.

Our public ~~Internet~~internet site is http://~~www.dplinc.com.~~www.dplinc.com. We make available, free of charge, through our internet site, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and Forms 3, 4 and 5 filed on behalf of our directors and executive officers and amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, our public ~~Internet~~internet site includes other items related to corporate governance matters, including, among other things, our governance guidelines, charters of various committees of the Board of Directors and our code of business conduct and ethics applicable to all employees, officers and directors. You may obtain copies of these documents, free of charge, by sending a request, in writing, to ~~DP&L~~DPL Investor Relations, 1065 Woodman Drive, Dayton, Ohio 45432.

Part I.1 — Financial Information

This report includes the combined filing of DPL Inc. (DPL) and The Dayton Power and Light Company(DP&L). DP&L is the principal subsidiary of DPL providing approximately 99% of DPL’s total consolidated revenue and approximately 89% of DPL’s total consolidated asset base. 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. Historically, DPL and DP&L have filed separate SEC filings. Beginning with the Form 10-K for the year ended December 31, 2006 and in the future, DPL and DP&L will file combined SEC reports on an interim and annual basis.

Item 1.1 — Financial Statements

~~THE DAYTON POWER AND LIGHT COMPANY~~

~~CONSOLIDATED STATEMENTS OF RESULTS OF OPERATIONS~~
DPL INC.
CONDENSED CONSOLIDATED STATEMENT OF RESULTS OF OPERATIONS

Three months ended

Nine months ended

Three Months Ended

$ in millions except per share amounts

March 31,

September 30,

2007

2006

$ in millions

2006

2005

2006

2005

Revenues

390.3

355.5

1,036.1

952.0

Revenues

379.7

341.1

Cost of revenues:

Fuel

91.0

87.9

251.1

235.1

Fuel

90.3

84.2

Purchased power

70.7

48.3

134.7

116.0

Purchased power

52.2

25.3

Total cost of revenues

161.7

136.2

385.8

351.1

Total cost of revenues

142.5

109.5

Gross margin

228.6

219.3

650.3

600.9

Gross margin

237.2

231.6

Operating expenses:

Operation and maintenance

58.9

46.2

172.7

145.6

Operation and maintenance

69.3

62.4

Depreciation and amortization

33.0

31.8

96.8

92.9

Depreciation and amortization

33.5

36.9

General taxes

27.2

28.6

80.3

81.4

General taxes

28.0

28.0

Amortization of regulatory assets

2.4

0.6

5.2

1.5

Amortization of regulatory assets

2.9

1.1

Total operating expenses

121.5

107.2

355.0

321.4

Total operating expenses

133.7

128.4

Operating income

107.1

112.1

295.3

279.5

Operating income

103.5

103.2

Investment income

1.6

2.5

4.8

4.6

Investment income

3.0

6.4

Interest expense

(23.1

)

(26.3

)

Other income (deductions)

(0.2

)

0.4

0.1

4.5

Other income (deductions)

0.8

(0.3

)

Charge for early redemption of debt

—

(4.1

)

—

(4.1

)

Interest expense

(5.5

)

(10.1

)

(17.5

)

(30.7

)

Income before income taxes

103.0

100.8

282.7

253.8

Earnings from continuing operations before income tax

84.2

83.0

Income tax expense

39.0

37.7

107.8

101.5

Income tax expense

33.0

31.7

Net income

64.0

63.1

174.9

152.3

Earnings from continuing operations

51.2

51.3

Preferred dividends

0.2

0.2

0.6

0.6

Earnings on common stock

63.8

62.9

174.3

151.7

Earnings from discontinued operations, net of tax

4.9

7.6

Net Income

56.1

58.9

Average number of common shares outstanding (millions)

Basic

107.5

120.2

Diluted

119.4

129.3

Earnings per share of common stock

Basic:

Earnings from continuing operations

0.48

0.43

Earnings from discontinued operations

0.04

0.06

Total Basic

0.52

0.49

Diluted:

Earnings from continuing operations

0.43

0.40

Earnings from discontinued operations

0.04

0.06

Total Diluted

0.47

0.46

Dividends paid per share of common stock

0.26

0.25

See Notes to Condensed Consolidated Financial Statements.
These interim statements are unaudited.

DPL INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Three Months Ended
$ in millions	March 31,
	2007			2006
Cash flows from operating activities:
Net income	$	56.1		$	58.9
Less: Income from discontinued operations	(4.9		)	(7.6		)
Income from continuing operations	51.2			51.3

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization	33.5			36.9
Amortization of regulatory assets	2.9			1.1
Deferred income taxes	(1.7		)	(2.4		)
Captive insurance provision	1.3			1.2
Gain on sale of other investments	—			(1.0		)
Changes in certain assets and liabilities:
Accounts receivable	(23.3		)	(15.9		)
Accounts payable	16.3			35.0
Accrued taxes payable	6.0			(9.2		)
Accrued interest payable	(14.5		)	(7.5		)
Prepayments	(1.1		)	3.2
Inventories	(0.2		)	(7.4		)
Deferred compensation assets	7.7			3.1
Deferred compensation obligations	1.6			(1.3		)
Other	17.4			4.5
Net cash provided by operating activities	97.1			91.6

Cash flows from investing activities:
Capital expenditures	(80.5		)	(110.9		)
Purchases of short-term investments and securities	—			(494.8		)
Sales of short-term investments and securities	—			494.8
Net cash used for investing activities	(80.5		)	(110.9		)

Cash flows from financing activities:
Purchase of treasury shares	—			(155.3		)
Exercise of stock options	3.9			0.2
Tax impact related to exercise of stock options	1.4			—
Registration of warrants	—			(0.1		)
Retirement of long-term debt	(225.0		)	—
Withdrawal of restricted funds held in trust	10.1			—
Dividends paid on common stock	(27.8		)	(30.2		)
Issuance of short-term debt, net	65.0			—
Net cash used for financing activities	(172.4		)	(185.4		)

Cash and cash equivalents:
Net change	(155.8		)	(204.7		)
Balance at beginning of period	262.2			595.8
Cash and cash equivalents at end of period	$	106.4		$	391.1

Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	36.4		$	32.6
Income taxes paid, net	$	15.4		$	22.4

See Notes to Condensed Consolidated Financial Statements.
These interim statements are unaudited.

DPL INC.

CONDENSED CONSOLIDATED BALANCE SHEET

	At			At
	March 31,			December 31,
$ in millions	2007			2006

ASSETS

Current assets:
Cash and cash equivalents	$	106.4		$	262.2
Restricted funds held in trust	—			10.1
Accounts receivable, less provision for uncollectible accounts of $1.5 and $1.4, respectively	246.7			225.0
Inventories, at average cost	85.6			85.4
Taxes applicable to subsequent years	36.9			48.0
Other current assets	12.1			37.7
Total current assets	487.7			668.4

Property:
Held and used:
Property, plant and equipment	4,787.7			4,718.5
Less: Accumulated depreciation and amortization	(2,180.3		)	(2,159.2		)
Total net property held and used	2,607.4			2,559.3

Assets held for sale:
Property, plant and equipment	283.5			283.5
Less: Accumulated depreciation and amortization	(132.3		)	(132.3		)
Total net property held for sale	151.2			151.2

Other noncurrent assets:
Regulatory assets	144.6			148.6
Other assets	76.7			84.7
Total other noncurrent assets	221.3			233.3

Total Assets	$	3,467.6		$	3,612.2

See Notes to Condensed Consolidated Financial Statements.
These interim statements are unaudited.

DPL INC.
CONDENSED CONSOLIDATED BALANCE SHEET

$ in millions

At
March 31,
2007

At
December 31,
2006

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion - long-term debt

0.9

225.9

Accounts payable

179.0

169.4

Accrued taxes

151.4

155.2

Accrued interest

20.8

35.2

Short-term debt

65.0

—

Other current liabilities

32.4

38.3

Total current liabilities

449.5

624.0

Noncurrent liabilities:

Long-term debt

1,551.8

1,551.8

Deferred taxes

355.9

355.2

Unamortized investment tax credit

42.8

43.6

Insurance and claims costs

23.2

21.9

Other deferred credits

277.2

280.7

Total noncurrent liabilites

2,250.9

2,253.2

Cumulative preferred stock not subject to mandatory redemption

22.9

22.9

Commitments and contingencies (Note 10)

Common shareholders’ equity:

Common stock, at par value of $0.01 per share:

March 2007

December 2006

Shares authorized

250,000,000

Shares issued

163,724,211

Treasury shares

50,540,767

50,705,239

Shares outstanding

113,183,444

113,018,972

1.1

1.1

Warrants

50.0

50.0

Common stock held by employee plans

(68.5

)

(69.0

)

Accumulated other comprehensive loss

(8.1

)

(6.5

)

Retained earnings

769.8

736.5

Total common shareholders’ equity

744.3

712.1

Total Liabilities and Shareholders’ Equity

3,467.6

3,612.2

See Notes to Condensed Consolidated Financial Statements.
These interim statements are unaudited.

~~THE DAYTON POWER AND LIGHT COMPANY~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Nine months ended

September 30,

$ in millions

2006

2005

Cash flows from operating activities:

Net income

$
174.9

$
152.3

Adjustments:

Depreciation and amortization

96.8

92.9

Amortization of regulatory assets

5.2

1.5

Deferred income taxes

(13.0
)
(11.4
)
Charge for early redemption of debt

—

4.1

Changes in certain assets and liabilities:

Accounts receivable

(25.7
)
(7.5
)
Accounts payable

41.2

(2.8
)
Net receivable/payable from/to parent

(2.3
)
(0.9
)
Accrued taxes payable

1.5

37.6

Accrued interest payable

4.8

3.1

Prepayments

5.4

3.9

Inventories

(7.5
)
(9.4
)
Deferred compensation assets

3.4

1.6

Deferred compensation obligations

(2.5
)
7.9

Other

(11.5
)
0.6

Net cash provided by operating activities

270.7

273.5

Cash flows from investing activities:

Capital expenditures

(281.7
)
(137.1
)
Net cash (used for) investing activities

(281.7
)
(137.1
)

Cash flows from financing activities:

Issuance of long-term debt, net

—

211.2

Issuance of pollution control bonds

100.0

—

Pollution control bond proceeds held in trust

(100.0
)
—

Withdrawal of restricted funds held in trust

23.1

—

Retirement of long-term debt

—

(218.9
)
Dividends paid on common stock

—

(75.0
)
Dividends paid on preferred stock

(0.6
)
(0.6
)
Net cash provided by/(used for) financing activities

22.5

(83.3
)

Cash and cash equivalents:

Net change

11.5

53.1

Balance at beginning of period

46.2

17.2

Cash and cash equivalents at end of period

$
57.7

$
70.3

Supplemental cash flow information:

Interest paid, net of amounts capitalized

10.3

25.3

Income taxes paid, net

108.3

67.2

Non-cash financing and investing activities:

Restricted funds held in trust (see Note 6 of Notes to Consolidated Financial Statements)

75.5

—

~~See Notes to Consolidated Financial Statements.~~

~~These interim statements are unaudited.~~

~~THE DAYTON POWER AND LIGHT COMPANY~~

~~CONSOLIDATED BALANCE SHEETS~~

At

At

September 30,

December 31,

$ in millions

2006

2005

ASSETS

Current assets:

Cash and cash equivalents

$
57.7

$
46.2

Restricted funds held in trust

75.5

—

Accounts receivable, less provision for uncollectible accounts of $1.7 and $1.0, respectively

204.0

182.7

Net intercompany receivable from parent

2.4

—

Inventories, at average cost

85.2

77.7

Taxes applicable to subsequent years

11.5

45.9

Other current assets

36.1

19.3

Total current assets

472.4

371.8

Property, plant and equipment:

Property, plant and equipment

4,363.1

4,118.0

Less: Accumulated depreciation and amortization

(2,050.2
)
(1,973.3
)
Net property

2,312.9

2,144.7

Other noncurrent assets:

Regulatory assets

78.8

83.8

Other deferred assets

136.5

138.3

Total other noncurrent assets

215.3

222.1

Total Assets

$
3,000.6

$
2,738.6

~~See Notes to Consolidated Financial Statements.~~

~~These interim statements are unaudited.~~

THE DAYTON POWER AND LIGHT COMPANY
CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENT OF RESULTS OF OPERATIONS

At

At

September 30,

December 31,

$ in millions

2006

2005

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$
137.8

$
116.2

Accrued taxes

126.1

167.7

Accrued interest

15.2

9.8

Other current liabilities

32.1

28.4

Total current liabilities

311.2

322.1

Noncurrent liabilities:

Long-term debt

785.3

685.9

Deferred taxes

314.7

323.2

Unamortized investment tax credit

44.3

46.4

Other deferred credits

268.9

258.7

Total noncurrent liabilities

1,413.2

1,314.2

Cumulative preferred stock not subject to mandatory redemption

22.9

22.9

Commitments and contingencies (Note 7)

Common shareholders’ equity:

Common stock, at par value of $0.01 per share

0.4

0.4

Other paid-in capital

781.6

783.4

Retained earnings

464.7

290.5

Accumulated other comprehensive income

6.6

5.1

Total common shareholders’ equity

1,253.3

1,079.4

Total Liabilities and Shareholders’ Equity

$
3,000.6

$
2,738.6

	Three Months Ended March 31,
$ in millions	2007			2006

Revenues	$	377.5		$	339.1

Cost of revenues:
Fuel	89.5			83.9
Purchased power	52.7			25.6
Total cost of revenues	142.2			109.5

Gross margin	235.3			229.6

Operating expenses:
Operation and maintenance	59.4			54.2
Depreciation and amortization	30.7			31.3
General taxes	27.6			27.5
Amortization of regulatory assets	2.9			1.1
Total operating expenses	120.6			114.1

Operating income	114.7			115.5

Investment income	1.5			1.9
Interest expense	(5.4		)	(6.7		)
Other income (deductions)	0.8			(0.5		)

Earnings Before Income Tax	111.6			110.2

Income tax expense	41.8			43.3

Net Income	$	69.8		$	66.9

Preferred dividends	0.2			0.2

Earnings on common stock	$	69.6		$	66.7

See Notes to Condensed Consolidated Financial Statements.

These interim statements are unaudited.

THE DAYTON POWER AND LIGHT COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

$ in millions	Three Months Ended March 31,
	2007			2006
Cash flows from operating activities:
Net income	$	69.8		$	66.9
Adjustments:
Depreciation and amortization	30.7			31.3
Amortization of regulatory assets	2.9			1.1
Deferred income taxes	(4.7		)	(1.9		)
Changes in certain assets and liabilities:
Accounts receivable	(23.8		)	(10.7		)
Accounts payable	15.2			38.1
Accrued taxes payable	20.5			14.2
Accrued interest payable	2.8			4.8
Prepayments	0.1			4.4
Inventories	(0.2		)	(7.4		)
Deferred compensation assets	7.9			4.6
Deferred compensation obligations	1.6			(3.5		)
Other	14.2			1.6
Net cash provided by operating activities	137.0			143.5

Cash flows from investing activities:
Capital expenditures	(79.6		)	(110.5		)
Net cash used for investing activities	(79.6		)	(110.5		)

Cash flows from financing activities:
Issuance of short-term debt, net	65.0			—
Withdrawal of restricted funds held in trust	10.1			—
Dividends paid on preferred stock	(0.2		)	(0.2		)
Dividends paid on common stock to parent	(125.0		)	—
Net cash used for financing activities	(50.1		)	(0.2		)

Cash and cash equivalents:
Net change	7.3			32.8
Balance at beginning of period	46.1			46.2
Cash and cash equivalents at end of period	$	53.4		$	79.0

Supplemental cash flow information:
Interest paid, net of amounts capitalized	$	1.8		$	1.2
Income taxes paid, net	$	14.1		$	9.3

See Notes to Condensed Consolidated Financial Statements.
These interim statements are unaudited.

THE DAYTON POWER AND LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET

$ in millions	At March 31, 2007			At December 31, 2006

ASSETS

Current assets:
Cash and cash equivalents	$	53.4		$	46.1
Restricted funds held in trust	—			10.1
Accounts receivable, less provision for uncollectible accounts of $1.5 and $1.4, respectively	227.8			205.6
Inventories, at average cost	83.1			83.0
Taxes applicable to subsequent years	36.9			48.0
Other current assets	12.3			38.2

Total current assets	413.5			431.0

Property:
Property, plant and equipment	4,519.1			4,450.6
Less: Accumulated depreciation and amortization	(2,097.3		)	(2,079.0		)

Net property	2,421.8			2,371.6

Other noncurrent assets:
Regulatory assets	144.6			148.6
Other assets	139.0			139.1

Total other noncurrent assets	283.6			287.7

Total Assets	$	3,118.9		$	3,090.3

See Notes to Condensed Consolidated Financial Statements.
These interim statements are unaudited.

THE DAYTON POWER AND LIGHT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET

$ in millions	At March 31, 2007		At December 31, 2006

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Current portion - long-term debt	$	0.9	$	0.9
Accounts payable	174.5		166.2
Accrued taxes	169.1		159.6
Accrued interest	15.5		12.6
Short-term debt	65.0		—
Other current liabilities	29.1		35.4
Total current liabilities	454.1		374.7

Noncurrent liabilities:
Long-term debt	785.1		785.2
Deferred taxes	357.0		360.2
Unamortized investment tax credit	42.9		43.6
Other deferred credits	277.2		272.5
Total noncurrent liabilities	1,462.2		1,461.5

Cumulative preferred stock not subject to mandatory redemption	22.9		22.9

Commitments and contingencies (Note 10)

Common shareholders’ equity:
Common stock, at par value of $0.01 per share:	0.4		0.4
Other paid-in capital	783.6		783.7
Accumulated other comprehensive income	19.1		15.1
Retained earnings	376.6		432.0
Total common shareholders’ equity	1,179.7		1,231.2

Total Liabilities and Shareholders’ Equity	$	3,118.9	$	3,090.3

See Notes to Condensed Consolidated Financial Statements.

These interim statements are unaudited.

Notes to Condensed Consolidated Financial Statements

1.Basis of Presentation

Description of Business

DPL is a diversified regional energy company organized in 1985 under the laws of Ohio. DPL’s principal subsidiary is The Dayton Power and Light Company (DP~~&L, the Company, we, our, or ours unless the context indicates otherwise) is a wholly-owned subsidiary of DPL Inc. (DPL)~~&L). ~~We are~~DP&L is a public utility incorporated in 1911 under the laws of ~~Ohio and we conduct our principal business in one business segment – Electric Utility. We sell~~Ohio. DP&L sells electricity to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio. Electricity for ~~our 24-county~~DP&L’s 24 county service area is primarily generated at eight coal-fired power plants and is distributed to more than 500,000 retail customers. WeDP&L also ~~purchase~~purchases retail peak load requirements from DPL Energy LLC ~~(DPLE), a~~(DPLE, one of our wholly-owned ~~subsidiary of DPL Inc.~~subsidiaries). Principal industries served include automotive, food processing, paper, plastic manufacturing, and defense. ~~Our~~DP&L’s sales reflect the general economic conditions and seasonal weather patterns of the area. ~~We sell~~DP&L sells any excess energy and capacity into the wholesale market.

DPL’s significant subsidiaries (all of which are wholly-owned) include DPLE, which engages in the operation of peaking generating facilities; DPL Energy Resources, Inc. (DPLER), which sells retail electric energy under contract to major industrial and commercial customers in West Central Ohio; MVE, Inc., which was primarily responsible for the management of our financial asset portfolio; and Miami Valley Insurance Company (MVIC), our captive insurance company that provides insurance sources to us and our subsidiaries. DP&L has one significant subsidiary, DPL Finance Company, Inc., which is wholly-owned and provides financing to DPL, DP&L and other affiliated companies.

DPL and DP&L conduct their principal business in one business segment - Electric.

Financial Statement Presentation

We prepare ~~our~~ consolidated financial statements in accordance with ~~accounting principles generally accepted~~Generally Accepted Accounting Principles (GAAP) in the United States of ~~America (GAAP).~~America. The ~~consolidated financial statements~~Condensed Consolidated Financial Statements include the accounts of DPL and DP&L and ~~our~~their majority-owned subsidiaries. Investments that are not majority owned are accounted for using the equity method when our investment allows us the ability to exert significant influence, as defined by GAAP. Undivided interests in jointly-owned generation facilities are consolidated on a pro rata basis. All material intercompany accounts and transactions are eliminated in consolidation. Interim results for the three ~~and nine~~ months ended ~~September 30, 2006~~March 31, 2007 may not be indicative of our results that will be realized for the full year ending December 31, ~~2006.~~2007.

Pursuant to the Securities and Exchange Commission (SEC) rules, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted from interim reports. Therefore, these financial statements should be read along with the annual financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2005 and our quarterly reports on Form 10-Q ended March 31, 2006 and June 30,~~ 2006. In the opinion of our management, the condensed consolidated financial statements contain all adjustments (which are all of a normal recurring nature) necessary to fairly state our financial condition as of ~~September 30, 2006,~~March 31, 2007, our results of operations for the three ~~and nine~~ months ended ~~September 30, 2006,~~March 31, 2007, and our cash flows for the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 in accordance with GAAP.

Estimates, Judgments and Reclassifications

The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the revenue and expenses of the period reported. Different estimates could have a material effect on our financial results. Judgments and uncertainties affecting the application of these ~~policies and~~ estimates may result in materially different amounts being reported under different conditions or circumstances. Significant items subject to such estimates and judgments include the carrying value of property, plant and equipment; unbilled revenues; the valuation of derivative instruments; the valuation of insurance and claims costs; valuation allowances for receivables and deferred income taxes; regulatory assets and liabilities; reserves recorded for income tax exposures; litigation; ~~regulatory proceedings and orders;~~ and assets and liabilities related to employee benefits. Actual results may differ from those estimates. Certain amounts from prior periods have been reclassified to conform to the current reporting presentation.

Recently Adopted Accounting Standards

~~Recently Issued~~ Accounting ~~Standards~~for Uncertainty in Income Taxes

~~Stock-Based Compensation~~

~~In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard~~On January 1, 2007, we adopted Interpretation No. ~~123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R replaces SFAS 123,~~48, “Accounting for ~~Stock-Based Compensation,” and supersedes Accounting Principles Board (APB) Opinion No. 25 (Opinion 25), “Accounting for Stock Issued~~Uncertainty in Income Taxes” (FIN 48). There was no significant impact to Employees.” SFAS 123R requires a public entity to measure the cost of employee services received and paid with equity instruments to be based on the fair-value of such equity on the grant date. This cost is recognized inour overall results of operations, ~~over the period in which employees are required to provide service. Liabilities initially incurred are based on the fair-value~~cash flows or financial position. The total amount of equity instruments and are to be re-measured at each subsequent reporting date until the liability is ultimately settled. The fair-value for employee share options and other similar instruments at the grant date are estimated using option-pricing models and any excessunrecognized tax benefits ~~are recognized~~ as ~~an addition to paid-in capital. Cash retained from~~of the ~~excess~~date of adoption was $36.8 million and we have recorded $3.5 million (net of tax) of accrued interest. Our total reserve for uncertain tax ~~benefits~~positions is ~~presented in the statement of cash flows as financing cash inflows. The provisions of this Statement became effective~~$40.3 million as of January 1, ~~2006. Our September 30, 2006 year-to-date pre-tax results of operations were increased by approximately $0.6 million as a result~~2007. None of the ~~adoption~~amount of ~~SFAS 123R,~~unrecognized tax benefits is due to uncertainty in the timing of deductibility.

We recognize interest and penalties related to unrecognized tax benefits in income taxes.

Taxes for calendar years 2004 - 2006 remain open to examination by the jurisdictions in which we ~~apply~~are subject to ~~stock-based transactions related to DPL Inc. common stock. See Note 5 of Notes to Consolidated Financial Statements.~~taxation.

~~How~~Accounting for Taxes Collected from Customers and Remitted to Governmental Authorities ~~Should be Presented in the Income Statement~~

~~In June 2006, the FASB ratified the consensuses of Emerging Issues Task Force (EITF) Issue~~We adopted EITF No. ~~06-3,~~06-03 “How Taxes Collected from Customers and Remitted to Governmental Authorities Should beBe Presented in the Income ~~Statement (That Is, Gross versus Net Presentation)” (EITF 06-3).~~Statement” in January 2007. EITF 06-3 indicates that the income statement presentation on either a gross basis or a net basis of the taxes within the scope of the issue is an accounting policy decision. The consensus in this issue should be applied to interim and annual reporting periods beginning after December 15, 2006. We are in the process of evaluating EITF 06-3 and have not determined the impact to our overall results of operations, financial position or cash flows.

~~Accounting for Uncertainty in Income Taxes~~

~~In July 2006, the FASB issued Interpretation~~ No. ~~48, “Accounting for Uncertainty in Income Taxes” (FIN 48), effective for fiscal years beginning after December 15, 2006. FIN 48~~06-03 requires a ~~two-step approach~~registrant to ~~determine~~disclose how ~~to recognize tax benefits~~taxes collected from customers are presented in the financial statements, ~~where recognition~~i.e. gross or net. DP&L collects certain excise taxes levied by state or local governments from its customers. DP&L’s excise taxes are accounted for on a gross basis and ~~measurement~~recorded as revenues in the accompanying Condensed Consolidated Statements of ~~a tax benefit must be evaluated separately. A tax benefit will be recognized only if it meets a “more-likely-than-not” recognition threshold. For tax positions that meet this threshold,~~Operations for the tax benefit recognized is based on the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with the taxing authority. We are currently evaluating the impact of adopting FIN 48,three months ended March 31, 2007 and ~~have not yet determined the significance of this new rule to our overall results of operations, financial position or cash flows.~~March 31, 2006 as follows:

Three Months Ended March 31, 2007		Three Months Ended March 31, 2006
$	14,206,437	$	13,461,949

Recently Issued Accounting Standards

Accounting for Fair Value Measurements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” (SFAS 157) effective for fiscal years beginning after November 15, 2007. ~~The Standard~~SFAS 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. ~~The Standard~~SFAS 157 clarifies the ~~principle~~principal that fair value should be based on the assumptions market participants would use when pricing the ~~asset~~assest or liability. In support of this principle, ~~the Standard~~SFAS 157 establishes a fair value hierarchy that prioritizes the information used to develop those standards. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entity’s own data. Under ~~the Standard,~~SFAS 157, fair value measurements would be separately disclosed by level within the fair value hierarchy. ~~The Standard~~SFAS 157 does not expand the use of fair value in any new circumstances. In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (SFAS 159) effective for fiscal years beginning after November 15, 2007. SFAS 159 permits entities to choose to measure many financial instruments and certain warranty and insurance contracts at fair value on a contract-by-contract basis. We are currently evaluating the impact of adopting SFAS 157 and SFAS 159, and have not yet determined the significance of ~~this~~these new ~~rule~~rules to our overall results of operations, financial position or cash flows.

2. Earnings per Share

Basic earnings per share (EPS) is based on the weighted-average number of DPL common shares outstanding during the year. Diluted earnings per share is based on the weighted-average number of DPL common and common equivalent shares outstanding during the year, except in periods where the inclusion of such common equivalent shares is anti-dilutive. Excluded from outstanding shares for this weighted-average computation are the unallocated shares held by DP&L’s Master Trust Plan for deferred compensation and unallocated shares held by DP&L’s Employee Stock Ownership Plan (ESOP).

For the first quarter of 2007, there were no warrants and stock options excluded from the computation of diluted earnings per share. For the first quarter of 2006, there were 0.4 million warrants and stock options excluded from the computation of diluted earnings per share because they were anti-dilutive.

The following illustrates the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income after discontinued operations:

$ in millions except per

Three Months Ended March 31,

share amounts

2007

2006

Net

Per

Net

Per

Income

Shares

Share

Income

Shares

Share

Basic EPS

56.1

107.5

0.52

58.9

120.2

0.49

Effect of Dilutive

Securities:

Stock Incentive Units

1.3

1.3

Warrants

9.1

6.5

Stock options, performance and restricted shares

1.5

1.3

Diluted EPS

56.1

119.4

0.47

58.9

129.3

0.46

~~Employers’ Accounting~~3. Discontinued Operations

	For Three Months Ended March 31,
$ in millions	2007			2006

Investment income	$	—		$	—
Investment expenses	(0.3		)	(0.5		)
Income from discontinued operations	(0.3		)	(0.5		)

Gain realized from sale	8.2			13.2
Broker fees and other expenses	—			—
Loss recorded	—			—
Net gain on sale	8.2			13.2

Earnings before income taxes	7.9			12.7
Income tax expense	(3.0		)	(5.1		)
Earnings from discontinued operations, net	$	4.9		$	7.6

On February 13, 2005, DPL’s subsidiaries, MVE and MVIC, entered into an agreement to sell their respective interests in forty-six private equity funds to AlpInvest/Lexington 2005, LLC, a joint venture of AlpInvest Partners and Lexington Partners, Inc. Sales proceeds and any related gains or losses were recognized as the sale of each fund closed. Among other closing conditions, each fund required the transaction to be approved by the respective general partner of each fund. During 2005, MVE and MVIC completed the sale of their interests in forty-three and a portion of another of those private equity funds resulting in a $46.6 million pre-tax gain ($53.1 million less $6.5 million professional fees) from discontinued operations and provided approximately $796 million in net proceeds.

During 2005, MVE entered into alternative closing arrangements with AlpInvest/Lexington 2005, LLC for ~~Defined Benefit~~ funds where legal title to said funds could not be transferred until a later time. Pursuant to these arrangements, MVE transferred the economic aspects of the remaining private equity funds, consisting of two funds and a portion of one fund, to AlpInvest/Lexington 2005, LLC without a change in ownership of the interests. The alternative arrangements resulted in a 2005 deferred gain of $27.1 million and provided approximately $72 million in net proceeds on these funds. We recorded an impairment loss of $5.6 million in the second quarter of 2005 to write down assets transferred pursuant to the alternative arrangements to estimated fair value. A portion of the deferred gain was recognized in 2006 in the amount of $18.9 million with the remaining $8.2 million being recognized in the first quarter of 2007.

In 2007 and 2006, DPL has separately disclosed the earnings from discontinued operations, net of income taxes, which in prior periods were reported with elements of continued operations.

4. Supplemental Financial Information
DPL Inc.

$ in millions	At March 31, 2007			At December 31, 2006

Accounts receivable, net:
Unbilled revenue	$	63.5		$	68.7
Retail customers	70.4			65.0
Partners in commonly-owned plants	57.3			51.5
Wholesale and subsidiary customers	18.1			15.8
PJM including financial transmission rights	24.2			13.1
Other	9.5			7.1
Refundable franchise tax	5.2			5.2
Provision for uncollectible accounts	(1.5		)	(1.4		)
Total accounts receivable, net	$	246.7		$	225.0

Inventories, at average cost:
Fuel and emission allowances	$	51.8		$	52.4
Plant materials and supplies	33.5			32.6
Other	0.3			0.4
Total inventories, at average cost	$	85.6		$	85.4

Other current assets:
Deposits and other advances	$	0.9		$	17.8
Prepayments	7.2			13.3
Derivatives	0.2			3.2
Current deferred income taxes	1.7			2.0
Other	2.1			1.4
Total other current assets	$	12.1		$	37.7

Property, plant and equipment:
Construction work in process	$	444.9		$	376.0
Property, plant and equipment	4,626.3			4,626.0
Total property, plant and equipment (a)	$	5,071.2		$	5,002.0

Other deferred assets:
Master Trust assets	$	32.2		$	39.4
Unamortized loss on reacquired debt	20.0			20.4
Unamortized debt expense	10.3			10.6
Commercial activities tax benefit	6.8			6.8
Investments	6.9			7.0
Other	0.5			0.5
Total other deferred assets	$	76.7		$	84.7

Accounts payable:
Trade payables	$	63.7		$	75.7
Fuel accruals	44.9			37.3
Other	70.4			56.4
Total accounts payable	$	179.0		$	169.4

Other current liabilities:
Customer security deposits	$	18.7		$	19.4
Pension and retiree benefits payable	0.8			5.8
Financial transmission rights - future proceeds	1.1			2.7
Payroll taxes payable	0.1			0.1
Other	11.7			10.3
Total other current liabilities	$	32.4		$	38.3

Other deferred credits:
Asset retirement obligations - regulated property	$	87.0		$	86.3
Trust obligations	77.9			76.2
Pension liabilities	37.0			37.7
Retiree health and life benefits	28.1			28.5
SECA net revenue subject to refund	21.0			18.7
Asset retirement obligations - generation property	12.2			11.7
Deferred gain on sale of portfolio	—			8.2
Legal reserves	3.3			3.4
Environmental reserves	0.1			0.1
Other	10.6			9.9
Total other deferred credits	$	277.2		$	280.7

(a) $283.5 of the assets presented in this table are held for sale.

DP&L

	At			At
	March 31,			December 31,
$ in millions	2007			2006

Accounts receivable, net:
Retail customers	$	70.4		$	65.0
Partners in commonly-owned plants	57.3			51.5
Unbilled revenue	56.2			61.0
PJM including financial transmission rights	24.2			13.9
Wholesale and subsidiary customers	12.8			8.3
Refundable franchise tax	3.1			3.1
Other	5.3			4.2
Provision for uncollectible accounts	(1.5		)	(1.4		)
Total accounts receivable, net	$	227.8		$	205.6

Inventories, at average cost:
Fuel and emission allowances	$	51.8		$	52.4
Plant materials and supplies	31.1			30.2
Other	0.2			0.4
Total inventories, at average cost	$	83.1		$	83.0

Other current assets:
Deposits and other advances	$	0.7		$	17.0
Prepayments	8.6			15.8
Derivatives	0.2			3.2
Current deferred income taxes	0.3			0.7
Other	2.5			1.5
Total other current assets	$	12.3		$	38.2

Property, plant and equipment:
Construction work in process	$	444.1		$	375.2
Property, plant and equipment	4,075.0			4,075.4
Total property, plant and equipment	$	4,519.1		$	4,450.6

Other deferred assets:
Master Trust assets	$	109.5		$	109.0
Unamortized loss on reacquired debt	20.0			20.4
Unamortized debt expense	8.4			8.6
Investments	0.6			0.6
Other	0.5			0.5
Total other deferred assets	$	139.0		$	139.1

Accounts payable:
Trade payables	$	63.3		$	74.7
Fuel accruals	44.8			36.7
Other	66.4			54.8
Total accounts payable	$	174.5		$	166.2

Other current liabilities:
Customer security deposits	$	18.7		$	19.4
Financial transmission rights - future proceeds	1.1			2.7
Payroll taxes payable	0.2			0.2
Pension and retiree benefits payable	0.8			5.8
Other	8.3			7.3
Total other current liabilities	$	29.1		$	35.4

Other deferred credits:
Asset retirement obligations - regulated property	$	87.0		$	86.3
Trust obligations	77.9			76.2
Retiree health and life benefits	28.1			28.5
Pension liabilities	37.0			37.7
SECA net revenue subject to refund	21.0			18.7
Asset retirement obligations - generation property	12.2			11.7
Legal reserves	3.3			3.4
Environmental reserves	0.1			0.1
Other	10.6			9.9
Total other deferred credits	$	277.2		$	272.5

DPL Inc.

	Three Months Ended March 31,
$ in millions	2007			2006
Cash flows - other:
Payroll taxes payable	$	—		$	(1.1	)
Employee/director stock plan	1.5			1.9
Lump sum retirement payment	(4.9		)	—
Deposits and other advances	16.1			(2.5		)
Other	4.7			6.2
Total cash flows - other	$	17.4		$	4.5

Comprehensive income:
Net income	$	56.1		$	58.9
Net change in unrealized gains (losses) on financial instruments	0.4			0.4
Net change in deferred gains (losses) on cash flow hedges	(3.6		)	0.6
Minimum pension liability	0.6			—
Deferred income taxes related to unrealized gains and (losses)	1.1			(1.8		)
Comprehensive income	$	54.6		$	58.1

DP&L

	Three Months Ended March 31,
$ in millions	2007			2006
Cash flows - other:
Payroll taxes payable	$	—		$	(1.1	)
Deposits and other advances	15.5			(1.5		)
Lump sum retirement payment	(4.9		)	—
Other	3.6			4.2
Total cash flows - other	$	14.2		$	1.6

Comprehensive income:
Net income	$	69.8		$	66.9
Net change in unrealized gains (losses) on financial instruments	8.4			0.8
Net change in deferred gains (losses) on cash flow hedges	(3.6		)	0.6
Minimum pension liability	0.6			—
Deferred income taxes related to unrealized gains and (losses)	(1.4		)	(1.4		)
Comprehensive income	$	73.8		$	66.9

5. Regulatory Matters

We apply the provisions of SFAS 71 to our regulated operations. This accounting standard defines regulatory assets as the deferral of costs expected to be recovered in future customer rates and regulatory liabilities as current cost recovery of expected future expenditures.

Regulatory liabilities are reflected on the Condensed Consolidated Balance Sheet under the caption entitled “Other Deferred Credits”. Regulatory assets and liabilities on the Condensed Consolidated Balance Sheet include:

Type of

Amortization

March 31,

December 31,

$ in millions

Recovery (a)

Through

2007

2006

Regulatory Assets:

Deferred recoverable income taxes

C/B

Ongoing

52.9

53.1

Pension and postretirement benefits

Ongoing

46.2

47.1

Electric Choice systems costs

2010

12.6

13.5

Regional transmission organization costs

2014

11.1

11.4

Deferred storm costs

2008

4.4

5.4

PJM administrative costs

2009

4.2

4.6

Power plant emission fees

Ongoing

4.3

4.5

Rate case expenses

2010

0.9

3.5

Retail settlement system costs

3.1

3.1

PJM integration costs

2015

1.3

1.4

Other costs

3.6

1.0

Total regulatory assets

144.6

148.6

Regulatory Liabilities:

Asset retirement obligations - regulated property

87.0

86.3

Postretirement benefits

7.5

7.6

SECA net revenue subject to refund

21.0

18.7

Total regulatory liabilities

115.5

112.6

(a)		F — Recovery of incurred costs plus rate of return.
		C — Recovery of incurred costs only.
		B — Balance has an offsetting liability resulting in no impact on rate base.

Regulatory Assets

We evaluate our regulatory assets each period and believe recovery of these assets is probable. We have received or requested a return on certain regulatory assets for which we are currently recovering or seeking recovery through rates.

Deferred recoverable income taxes represent deferred income tax assets recognized from the normalization of flow-through items as the result of amounts previously provided to customers. Since currently existing temporary differences between the financial statements and the related tax basis of assets will reverse in subsequent periods, deferred recoverable income taxes are amortized.

Pension and postretirement benefits represent the unfunded benefit obligation related to the transmission and distribution areas of our electric business. We have historically recorded these costs on the accrual basis and this is how these costs have been historically recovered through rates. This factor, combined with the historical precedents from the PUCO and the FERC, makes future rate recovery of these costs probable.

Electric Choice systems costs represent costs incurred to modify the customer billing system for unbundled rates and electric choice bills relative to other generation suppliers and information reports provided to the state administrator of the low-income electric program. In February 2005, the PUCO approved a stipulation allowing us to recover certain costs incurred for modifications to its billing system from all customers in its service territory. We filed a subsequent case to implement the PUCO’s order to begin charging customers for billing costs. On March 1, 2006, the PUCO issued an order that approved our tariff as filed. We began collecting this rider immediately, and expect to recover all costs over five years.

Regional transmission organization costs represent costs incurred to join a Regional Transmission Organization (RTO) that controls the receipts and delivery of bulk power within the service area. These costs are being amortized over a 10-year period that commenced in October 2004.

Deferred storm costs include costs incurred by us to repair damage from December 2004 and January 2005 ice storms. On July 12, 2006, the PUCO approved our tariff as proposed and we began recovering these deferred costs over a two-year period beginning August 1, 2006.

PJM administrative costs contain the administrative fees billed to us by PJM Interconnection, L.L.C. (PJM) as a member of PJM . Pursuant to a PUCO order issued on January 25, 2006, these deferred costs will be recovered over a 3-year period from retail ratepayers beginning February 2006.

Power plant emission fees represent costs paid to the State of Ohio for environmental monitoring that are or will be recovered over various periods under a PUCO rate rider from customers.

Retail settlement system costs represent costs to implement a retail settlement system that reconciles the amount of energy a competitive retail electric service (CRES) supplier delivers to its customers and what its customers actually use. Based on case precedent in other utilities’ cases, the cost of this system is recoverable through DP&L’s next transmission rate case that will be filed at the FERC. The timing of this case is uncertain at this time.

PJM integration costs include infrastructure costs and other related expenses incurred by PJM and reimbursed by DP&L to integrate us into the RTO. Pursuant to a FERC order, the costs are being recovered over a 10-year period beginning May 2005 from wholesale customers within PJM.

Rate case expenses represent costs incurred in connection with the Rate Stabilization Surcharge that was approved by the PUCO and implemented in January 2006. These costs are being amortized over a five-year period.

Other costs include consumer education advertising regarding electric deregulation and costs pertaining to a recent rate case and are or will be recovered over various periods.

Regulatory Liabilities

Asset retirement obligations - regulated property reflect an estimate of amounts recovered in rates that are expected to be expended to remove existing transmission and distribution property from service upon retirement.

Postretirement ~~Plans — an amendment~~benefits reflect a regulatory liability that was recorded for the portion of ~~FASB Statements No. 87, 88, 106~~the unrealized gain on our postretirement trust assets related to the transmission and ~~132(R)~~distribution areas of our electric business. The company has historically recorded these transactions on the accrual basis and this is how these costs have historically been recovered through rates. This factor, combined with the historical precedents from the PUCO and the FERC, make it probable that these amounts will be reflected in future rates.

SECA (Seams Elimination Charge Adjustment) net revenue subject to refund represents the deferral of net SECA revenue accrued in 2005 and 2006. SECA revenue and expenses represent FERC-ordered transitional payments to replace the through-and-out transmission rates that were eliminated within the PJM/MISO region. A hearing was held in early 2006 to determine the amount of these transitional payments. As of March 31, 2007, no ruling has been issued. We received and paid these transitional payments from May 2005 through March 2006.

6. Assets Held for Sale

In ~~September 2006,~~connection with DPLE’s (significant subsidiary of DPL)decision to sell the ~~FASB issued Financial Accounting Standards No. 158: “Employers’ Accounting~~Greenville Station and Darby Station electric peaking generation facilities, DPL recorded a $71.0 million impairment charge for ~~Defined Benefit Pension~~the Greenville Station and ~~Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”~~(SFAS158). This Statement requires an employer that is a business entity and sponsors one or more single-employer defined benefit plans to: a.) recognize the funded status of a benefit plan; b.) recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that ariseDarby Station assets during the ~~period but~~fourth quarter of 2006. Prior to the impairment charge Greenville Station had a net book value of approximately $66 million and Darby Station had a net book of approximately $156 million. Greenville Station consists of four natural gas peaking units and Darby Station consists of six natural gas peaking units.

These assets are ~~not recognized as components of net periodic benefit cost; c.) measure defined benefit plan~~no longer being depreciated. The assets and ~~obligations as of the date of the employer’s fiscal year-end statement of financial position; d.) disclose~~liabilities held for sale March 31, 2007 and December 31, 2006 in the ~~notes to financial statements additional information about certain effects~~Condensed Consolidated Balance Sheets are as follows:

($ in millions)

Current assets:
Inventories	$	0.2

Property:
Property, plant and equipment	$	283.5
Less: Accumulated depreciation and amortization	(132.3		)
Net property, plant and equipment	$	151.2

Current liabilities:
Accounts payable and accrued expenses	$	0.2

DPLE completed the sale of these peaking units on ~~net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits,~~April 25, 2007 and transition asset or obligation. This Statement is effective for fiscal years ending after December 15, 2006 except for the measuring of plan assets at the employer’s fiscal year end which is effective for fiscal years ending after December 15, 2008. ~~We are currently evaluating the impact of this Statement and have not yet determined the significance of this new rule to our overall results of operations, cash flows or financial position.~~received approximately $151.2 million in cash. See Footnote 11 Subsequent Events.

~~Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements~~

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (Topic 1N): “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB108). ~~The SEC believes that a registrant should quantify a current year misstatement using both the iron curtain approach and the rollover approach.~~ If the over/understatement of current year expense is material to the current year, after all of the relevant quantitative and qualitative factors are considered, the prior year financial statements should be corrected. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. We are currently evaluating the impact of this Statement and have not yet determined the significance of this new rule to our overall results of operations, cash flows or financial position.

~~Accounting for Planned Major Maintenance Activity~~

In September 2006, the FASB posted Financial Statement of Position AUG AIR-1 – “Accounting for Planned Major Maintenance Activity” (FSP AUG AIR-1). Previous guidance for planned major maintenance, such as repairing or replacing a boiler, allowed four different methods for accruing for these major repairs. These included direct expense, built-in overhaul, deferral and accrue-in-advance. The FASB has decided that the accrue-in-advance method is no longer valid because it allows a liability to accrue for future charges that may or may not happen. We use the direct expense method for major planned maintenance which calls for expensing the charges as incurred. Since we do not use the accrue-in-advance method, this FSP will have no effect on our overall results of operation, statement of financial position or cash flows.

~~2. Supplemental Financial Information~~

At

At

Balance Sheet

September 30,

December 31,

$ in millions

2006

2005

Accounts receivable, net:

Retail customers

$
72.6

$
60.8

Unbilled revenue

46.0

57.5

Partners in commonly-owned plants

56.6

37.7

Wholesale customers and subsidiary customers

8.6

2.8

PJM including financial transmission rights

13.6

11.0

Refundable franchise tax

3.1

11.8

Other

5.2

2.1

Provision for uncollectible accounts

(1.7
)
(1.0
)
Total accounts receivable, net

$
204.0

$
182.7

Inventories, at average cost:

Fuel and emission allowances

$
55.4

$
48.6

Plant materials and supplies

29.8

29.1

Total inventories, at average cost

$
85.2

$
77.7

Other current assets:

Prepayments

$
8.0

$
7.6

Deposits and other advances

16.7

5.8

Current deferred income taxes

4.7

4.9

Derivatives

5.0

—

Other

1.7

1.0

Total other current assets

$
36.1

$
19.3

Property, plant and equipment:

Construction work in process

$
346.3

$
165.1

Property, plant and equipment

4,016.8

3,952.9

Total property, plant and equipment

$
4,363.1

$
4,118.0

Other deferred assets:

Master Trust assets

$
106.1

$
107.7

Unamortized loss on reacquired debt

20.8

22.0

Unamoritized debt expense

8.5

7.4

Other

1.1

1.2

Total other deferred assets

$
136.5

$
138.3

Accounts payable:

Trade payables

$
57.9

$
26.1

Fuel accruals

40.0

39.5

Other

39.9

50.6

Total accounts payable

$
137.8

$
116.2

Other current liabilities:

Customer security deposits

$
19.7

$
19.2

Deferred revenue - financial transmission rights

4.3

—

Current portion of long-term debt

1.0

0.9

Payroll taxes payable

0.3

2.3

Unearned revenues

0.1

0.4

Other

6.7

5.6

Total other current liabilities

$
32.1

$
28.4

Other deferred credits:

Asset retirement obligations - regulated property

$
85.2

$
81.7

Master Trust obligations

73.8

74.5

Retirees’ health and life benefits

32.4

32.9

Pension liability

28.7

23.5

SECA net revenue subject to refund

21.5

20.5

Asset retirement obligations - generation

13.2

13.2

Litigation and claims pending

3.3

3.0

Environmental reserves

0.1

0.1

Other

10.7

9.3

Total other deferred credits

$
268.9

$
258.7

~~2. Supplemental Financial Information (continued)~~

Nine months ended

September 30,

$ in millions

2006

2005

Cash flows - other:

Payroll taxes payable

$
(2.0
)
$
0.1

Deposits and other advances

(10.5
)
(6.7
)
Deferred storm costs

—

(5.6
)
FERC transitional payment deferral

1.0

15.4

Other

—

(2.6
)
Total cash flows - other

$
(11.5
)
$
0.6

Three months ended

Nine months ended

September 30,

September 30,

$ in millions

2006

2005

2006

2005

Comprehensive income:

Net income

$
64.0

$
63.1

$
174.9

$
152.3

Net change in unrealized gains on financial instruments

1.2

1.1

1.8

6.6

Net change in deferred gains (losses) on cash flow hedges

0.1

(2.0
)
2.9

(4.8
)
Deferred income taxes related to unrealized gains and (losses)

(0.8
)
0.2

(3.2
)
(1.0
)
Total comprehensive income

$
64.5

$
62.4

$
176.4

$
153.1

~~3. Preferred Stock~~

~~$25 par value, 4,000,000 shares authorized, no shares outstanding; and $100 par value, 4,000,000 shares authorized, 228,508 shares without mandatory redemption provisions outstanding.~~

Preferred
Stock

Rate

Current
Redemption
Price

Current Shares
Outstanding at
September 30,
2006

Par Value At
September 30,
2006

Par Value At
December 31,
2005

($ in millions)

($ in millions)

Series A

3.75%

$
102.50

93,280

$
9.3

$
9.3

Series B

3.75%

$
103.00

69,398

7.0

7.0

Series C

3.90%

$
101.00

65,830

6.6

6.6

Total

228,508

$
22.9

$
22.9

~~The preferred stock may be redeemed at our option at the per-share prices indicated, plus cumulative accrued dividends.~~

As long as any preferred stock is outstanding, our Amended Articles of Incorporation contain provisions restricting the payment of cash dividends on any of our common stock if, after giving effect to such dividend, the aggregate of all such dividends distributed subsequent to December 31, 1946 exceeds the net income available for dividends on our common stock subsequent to December 31, 1946, plus $1.2 million. As of September 30, 2006, all earnings were available for common stock dividends. We expect all 2006 earnings to be available for common stock dividends, payable to DPL.

4.7. Pension and Postretirement Benefits

We sponsor a defined benefit plan for substantially all employees. For collective bargaining employees, the defined benefits are based on a specific dollar amount per year of service. For all other employees, the defined benefit plan is based primarily on compensation and years of service. We fund pension plan benefits as accrued in accordance with the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (ERISA). In addition, we have a Supplemental Executive Retirement Plan (SERP) for certain active and retired key executives. Benefits under this SERP have been frozen and no additional benefits can be earned. Wealso have unfunded liabilities related to retirement benefits for certain active, terminated and retired key executives (not related to our ongoing litigation with three former executives) that include The DPL Inc. Supplemental Executive Defined Contribution Retirement Plan (SEDCRP). These liabilities totaled approximately $0.8 million at March 31, 2007.

Qualified employees who retired prior to 1987 and their dependents are eligible for health care and life insurance benefits. We have funded the union-eligible health benefit using a Voluntary Employee Beneficiary Association Trust.

The net periodic benefit cost of the pension and postretirement benefit plans for the three months ended ~~September 30,~~March 31, 2007 and 2006 ~~and 2005~~ was:

Net periodic benefit cost

Pension

Postretirement

$ in millions

2006

2005

2006

2005

Service cost

$
1.0

$
0.9

$
—

$
—

Interest cost

4.3

3.9

0.5

0.5

Expected return on assets

(5.5
)
(5.4
)
(0.2
)
(0.1
)

Amortization of unrecognized:

Actuarial (gain) loss

0.9

1.0

(0.2
)
(0.1
)
Prior service cost

0.7

0.6

—

—

Transition obligation

—

—

0.1

—

Net periodic benefit cost before adjustments

1.4

1.0

0.2

0.3

Settlement cost (a)

2.6

—

—

—

Curtailment cost (b)

—

0.1

—

—

Net periodic benefit cost after adjustments

$
4.0

$
1.1

$
0.2

$
0.3

$ in millions	Pension						Postretirement
	2007			2006			2007			2006
Service cost	$	1.1		$	1.1		$	—		$	—
Interest cost	4.1			4.1			0.4			0.4
Expected return on assets (a)	(5.5		)	(5.4		)	(0.1		)	(0.1		)

Amortization of unrecognized:
Actuarial (gain) loss	0.9			1.0			(0.2		)	(0.2		)
Prior service cost	0.6			0.6			—			—
Transition obligation	—			—			—			0.1
Net periodic benefit cost before adjustments	1.2			1.4			0.1			0.2
Special termination benefit cost (b)	—			0.3			—			—
Net periodic benefit cost after adjustments	$	1.2		$	1.7		$	0.1		$	0.2

(a) The ~~settlement cost relates~~market-related value of assets is equal to ~~a former officer (not related to our ongoing litigation~~the fair value of assets at implementation with ~~three former executives) who has elected to receive a lump sum distribution in 2007 from the Supplemental Executive Retirement Plan.~~subsequent

~~(b)~~ ~~The curtailment cost relates to a freeze in benefits for the remaining active employee participating~~asset gains and losses recognized in the ~~Supplemental Executive Retirement Plan.~~market-value systematically over a three-year period.

~~The net periodic benefit cost of the pension and postretirement benefit plans for the nine months ended September 30, 2006 and 2005 was:~~

~~Net periodic benefit cost~~

Pension

Postretirement

$ in millions

2006

2005

2006

2005

Service cost

$
3.2

$
2.9

$
—

$
—

Interest cost

12.5

11.8

1.3

1.4

Expected return on assets

(16.3
)
(16.1
)
(0.4
)
(0.4
)

Amortization of unrecognized:

Actuarial (gain) loss

2.9

2.9

(0.6
)
(0.6
)
Prior service cost

1.9

1.7

—

—

Transition obligation

—

—

0.2

0.1

Net periodic benefit cost before adjustments

4.2

3.2

0.5

0.5

Settlement cost (a)

2.6

—

—

—

Special termination benefit cost (b)

0.3

—

—

—

Curtailment cost (c)

—

0.1

—

—

Net periodic benefit cost after adjustments

$
7.1

$
3.3

$
0.5

$
0.5

~~(a)~~ The settlement cost relates to a former officer (not related to our ongoing litigation with three former executives) who has elected to receive a lump sum distribution in 2007 from the Supplemental Executive Retirement Plan.

(b) In 2006, a special termination benefit cost was recognized as a result of 16 employees who participated in

a voluntary early retirement program and ~~were all~~ retired at various dates during 2006; this program was completed

as of April 1, 2006.

~~(c)~~ ~~The curtailment cost relates to a freeze in benefits for the remaining active employee participating in the Supplemental Executive Retirement Plan.~~21

The following estimated benefit payments, which reflect future ~~and past~~ service, are expected to be paid as follows:

Estimated Future Benefit Payments

$ in millions	Pension		Postretirement		Pension	Postretirement
2006	$	4.9	$	0.8
2007	$	24.6	$	3.1	$ 14.5	$ 2.0
2008	$	19.8	$	3.0	$ 19.8	$ 2.6
2009	$	20.2	$	3.0	$ 20.2	$ 2.6
2010	$	20.7	$	2.9	$ 20.7	$ 2.5
2011	$	20.9	$	2.7	$ 20.9	$ 2.4
2012 – 2016	$	111.9	$	10.7
2012 — 2016					$ 111.9	$ 10.0

5.8. Stock-Based Compensation

~~We adopted SFAS~~For the quarter ended March 31, 2007, total compensation expense was $5.1 million for all share-based compensation (stock options, RSUs, restricted shares and performance shares) with an associated tax benefit of $1.8 million. Compensation expense for the year ended December 31, 2006 was $5.8 million for all share-based compensation and the tax benefit associated with these expenses was $2.1 million.

Share-based awards will be issued from treasury stock. DPL believes it has sufficient treasury stock to satisfy all outstanding share-based awards.

Per FAS 123R, ~~on January 1, 2006 using the modified prospective approach for~~ stock options and RSUs are valued using a Black-Scholes-Merton model, performance shares are valued using a Monte Carlo simulation and restricted ~~stock units (RSUs). As a result~~shares are valued at the market price on the day of ~~our adoption of SFAS 123R, we recognized $0.6 million less compensation expense for the nine months ended September 30, 2006, as compared to what we would have recognized under SFAS 123.~~grant.

Options

In 2000, ~~our~~DPL’s Board of Directors adopted and ~~DPL~~DPL’s shareholders approved The DPL Inc. Stock Option Plan. The plan provides that “no single Participant shall receive Options with respect to more than 2,500,000 shares.” Options granted in 2000, 2001 and 2002 were fully vested as of December 31, 2005 and expire ten years from the grant date. In 2003, 100,000 options were granted which vested equitably over five years and expire ten years from the grant date. In 2004, 200,000 options were granted that vest over nineteen months and expire approximately 6.5 years from the grant date; 100,000 of these options vested in May of 2005 and the remaining 100,000 vested in May 2006. Another 20,000 options were granted in 2004 that vested in five months and expire ten years from the grant date. In December 2004, 30,000 options were granted that vest equitably over three years and expire ten years from the grant date. In 2005, 350,000 options were granted that vested in June 2006 and expire three years from the grant date. At September 30, 2006, there were 1,528,500 options available for grant. On April 26, 2006, ~~DPL~~DPL’s shareholders approved ~~the~~The DPL Inc. 2006 Equity and Performance Incentive Plan (EPIP). With the approval of the EPIP, no ~~further~~new awards will be ~~made~~granted under ~~the~~The DPL Inc. Stock Option ~~Plan.~~Plan, but shares relating to awards that are forfeited or terminated under The DPL Inc. Stock Option Plan may be granted under the EPIP. There are currently 10,000 unvested stock options outstanding that will vest as of December 31, 2007.

The schedule of ~~non-vested~~ option activity for the ~~nine~~three months ended ~~September 30, 2006~~March 31, 2007 was as follows:

$ in millions

Number of Options

Weighted-Average Grant
Date Fair Value

Non-vested at January 1, 2006

510,000

$
2.2

Granted in 1st nine months 2006

—

—

Vested in 1st nine months 2006

450,000

$
2.0

Forfeited in 1st nine months 2006

40,000

$
0.1

Non-vested at September 30, 2006

20,000

$
0.1

		Weighted-Avg.
	Number of	Grant Date
$ in millions	Options	Fair Value
Non-vested at January 1, 2007	10,000	$ 0.05
Granted in first three months 2007	—	$ —
Vested in first three months 2007	—	$ —
Forfeited in first three months 2007	—	$ —
Non-vested at March 31, 2007	10,000	$ 0.05

Summarized stock option activity was as follows:

Nine months
ended
September 30,
2006

Twelve months
ended
December 31,
2005

Options:

Outstanding at beginning of year (a)

5,486,500

6,165,500

Granted

0

350,000

Exercised

(10,000
)
(1,025,000
)
Forfeited

(40,000
)
(4,000
)
Outstanding at end of period

5,436,500

5,486,500

Exercisable at end of period

5,416,000

4,100,000

Weighted average exercise prices per share:

Outstanding at beginning of year

$
21.86

$
21.39

Granted

—

$
26.82

Exercised

$
21.00

$
21.18

Forfeited

$
15.88

$
29.63

Outstanding at end of period

$
22.02

$
21.86

Exercisable at end of period

$
20.98

$
20.98

	Three Months		Twelve Months
	Ended		Ended
	March 31,		December 31,
	2007		2006
Options:
Outstanding at beginning of year	5,091,500		5,486,500
Granted	—		—
Exercised	(150,000	)	(355,000	)
Forfeited	—		(40,000	)
Outstanding at year-end (a)	4,941,500		5,091,500
Exercisable at year-end	4,931,500		5,081,500

Weighted average option prices per share:
Outstanding at beginning of year	$ 21.95		$ 21.86
Granted	$ —		$ —
Exercised	$ 26.43		$ 21.00
Forfeited	$ —		$ 15.88
Outstanding at year-end	$ 21.79		$ 21.95
Exercisable at year-end	$ 21.78		$ 21.94

(a)

In dispute with certain former executives, among other things, are approximately 1 million forfeited options not included above and 3.6 million outstanding options that are included above.

~~(a)~~ In dispute with certain former executives, among other things, are approximately 1 million forfeited options not included above and 3.6 million outstanding options that are included above (see Note 7 of Notes to Consolidated Financial Statements).

NoThe stock options ~~were granted~~exercised in the first three quarters of 2006. The weighted-average fair value of options granted was $3.80 per share in 2005. The fair values of the options were estimated as of the dates of grant using a Black-Scholes option pricing model.

In the first quarter of ~~2006, 10,000 stock options~~2007 were ~~exercised. No stock options were exercised in the second or third quarter~~valued at $4.5 million and produced proceeds of ~~2006.~~$3.9 million. The market value of options that were vested at ~~September 30, 2006~~March 31, 2007 was approximately ~~$31~~$48.5 million. ~~Shares issued upon share option exercise are issued from treasury stock. We have sufficient treasury stock to satisfy outstanding options.~~

~~The following table reflects information about stock options outstanding at September 30, 2006:~~

Options Outstanding

Options Exercisable

Range of Exercise
Prices

Outstanding

Weighted-
Average
Contractual
Life

Weighted-
Average
Exercise
Price

Exercisable

Weighted-
Average
Exercise
Price

$14.95-$21.00

4,650,000

3.7 years

$
20.43

4,650,000

$
20.47

$21.01-$29.63

786,500

3.0 years

$
28.01

766,000

$
28.08

As of September 30, 2006, there was $0.1 million of total unrecognized compensation cost related to non-vested stock options granted under the Plan. We expect to recognize $0.1 million of this cost in 2007.

~~In addition,~~ Restricted Stock Units (RSUs)

In addition, RSUs were granted to certain key employees prior to 2001. There were 1.3 million RSUs outstanding as of ~~September 30, 2006,~~March 31, 2007, of which ~~1.3~~only $0.1 million ~~were~~have not vested. Substantially all of the vested RSUs are in dispute as part of our ongoing litigation with Peter H. Forster, formerly DPL’s Chairman; Caroline E. Muhlenkamp, formerly DPL’s Group Vice President and ~~interim~~Interim Chief Financial Officer; and Stephen F. Koziar, Jr., formerly DPL’s Chief Executive Officer and President. The remaining 0.1 million non-vested RSUs will be paid in cash upon vesting and will vest as follows: 20,097 in 2007; 14,688 in 2008; 10,205 in 2009; and 5,008 in 2010.

Vested RSUs are marked to market each quarter and any adjustment to compensation expense is recognized at that time. Non-vested RSUs are valued quarterly at fair value using the ~~Black-Scholes~~Black-Scholes-Merton model to determine the amount of compensation expense to be recognized. Non-vested RSUs do not earn dividends.

~~The following assumptions were used in the Black-Scholes model to calculate the fair value of the non-vested stock options and RSUs:~~Performance Shares

Volatility
10.3
–
29.1
%
Expected life (years)
0.8
–
8.0

Dividend yield rate
3.7
–
4.8
%
Risk-free interest rate
3.7
–
4.9
%

~~At the 2006 Annual Shareholder’s Meeting, DPL shareholders approved the DPL Inc. 2006 Equity and Performance Incentive Plan (EPIP).~~ Under the EPIP, the Board adopted a Long-Term Incentive Plan (LTIP) under which weDPL will award a targeted number of performance shares of ~~DPL Inc.~~ common stock to executives. Awards under the LTIP will be awarded based on a Total Shareholder Return Relative to Peers performance. No performance shares will be earned in a performance period if the three-year Total Shareholder Return Relative to Peers is below the threshold of the 40th percentile. Further, the LTIP awards will be capped at 200% of the target number of performance shares, if the Total Shareholder Return Relative to Peers is at or above the threshold of the 90th percentile. The Total Shareholder Return Relative to Peers is considered a ~~performance~~market condition under FAS 123R. ~~The~~There is a three year requisite ~~performance~~service period for each tranche of the Performance ~~Shares is:~~Shares.

~~Tranche 1~~		~~January 1, 2004 to December 31, 2006~~
~~Tranche 2~~		~~January 1, 2005 to December 31, 2007~~
~~Tranche 3~~		~~January 1, 2006 to December 31, 2008~~

The schedule of non-vested performance share activity for the ~~nine~~three months ended ~~September 30, 2006 follows:~~

$ in millions

Number of
Performance Shares

Weighted-Average Grant
Date Fair Value

Non-vested at January 1, 2006

—

—

Granted in 1st nine months 2006

223,289

$ 5.9

Vested in 1st nine months 2006

—

—

Forfeited in 1st nine months 2006

(89,655
)

(2.4)

Non-vested at September 30, 2006

133,634

$ 3.5

~~Summarized performance shares activity was as~~March 31, 2007 follows:

	~~Nine months~~		~~Twelve months~~
	~~ended~~		~~ended~~
	~~September 30, 2006~~		~~December 31, 2005~~
~~Performance Shares:~~
~~Outstanding at beginning of year~~	—		—
~~Granted~~	~~223,289~~		—
~~Exercised~~	—		—
~~Forfeited~~	~~(89,655~~	)	—
~~Outstanding at end of period~~	~~133,634~~		—
~~Exercisable at end of period~~	—		—

	Number of		Weighted-Avg.
	Performance		Grant Date
$ in millions	Shares		Fair Value
Non-vested at January 1, 2007	110,723		$ 2.7
Granted in first three months 2007	69,184		$ 2.4
Vested in first three months 2007	—		$ —
Forfeited in first three months 2007	(14,172	)	$ (0.5	)
Non-vested at March 31, 2007	165,735		$ 4.6

	Three Months		Twelve Months
	Ended		Ended
	March 31, 2007		December 31, 2006
Performance Shares:
Outstanding at beginning of year	154,768		—
Granted	69,184		244,423
Exercised	(22,462	)	—
Expired	(21,583	)	—
Forfeited	(14,172	)	(89,655	)
Outstanding at end of period	165,735		154,768
Exercisable at end of period	—		44,045

~~There are~~The performance shares exercised in the first quarter of 2007 were valued at $1.3 million, however, there were no proceeds because performance shares do not have an exercise ~~prices associated with performance shares.~~price.

As of ~~September 30, 2006,~~March 31, 2007, there was ~~$1.6~~$3.1 million of total unrecognized compensation cost related to non-vested performance shares granted under the LTIP. We expect to recognize ~~$0.5~~$1.3 million of this cost ~~over the remainder of 2006 and~~in 2007, $1.1 million in ~~2007~~2008 and ~~2008.~~$0.7 million in 2009. A forfeiture rate of 20% was estimated in calculating the compensation expense.

Restricted Shares ~~issued upon achievement of the required performance condition will be issued from treasury stock. We have sufficient treasury stock to satisfy outstanding performance shares.~~

~~The following assumptions were used in a Monte Carlo simulation calculated by an actuarial consultant to estimate~~Under the ~~fair value of~~EPIP, the ~~performance shares:~~

~~Volatility~~	~~20.3~~	%
~~Expected life (years)~~	~~3.0~~
~~Dividend yield rate~~	~~3.7~~	%
~~Risk-free interest rate~~	~~4.7~~	%

For the quarter ended September 30, 2006, total compensation expense was $0.8 million with an associated tax benefit of $0.3 million. Compensation expense for the nine months ended September 30, 2006 was $4.1 million for all share-based compensation (stock options, RSUs, and performance shares) and the tax benefit associated with these expenses was $1.5 million.

For the nine months ended September 30, 2006, operating income was $0.6 million higher under SFAS 123R than under SFAS 123, while the impact to net income was $0.4 million due to a decrease in the tax benefit of $0.2 million. There was no impact on basic or diluted earnings per share.

~~On October 2, 2006, Paul M. Barbas (President and Chief Executive Officer) was~~Board granted ~~19,000~~ shares of DPL Inc. Restricted ~~Stock (Restricted Shares), granted under the 2006 Equity and Performance Incentive Plan. These shares were not included in the above calculations as the shares were issued subsequent~~Shares to ~~September 30, 2006.~~various executives. The Restricted Shares are to be registered in ~~Mr. Barbas’~~the executive’s name, receive dividends as declared and paid on all DPL common stock and will vest after a specified service period.

During the first quarter of 2007, 5,000 restricted shares were awarded to two of our executive officers.

	Number of	Weighted-Avg.
	Performance	Grant Date
$ in millions	Shares	Fair Value
Non-vested at January 1, 2007	19,000	$ 0.5
Granted in first three months 2007	5,000	0.1
Vested in first three months 2007	—	—
Forfeited in first three months 2007	—	—
Non-vested at March 31, 2007	24,000	$ 0.6

	Three Months	Twelve Months
	Ended	Ended
	March 31, 2007	December 31, 2006
Restricted Shares:
Outstanding at beginning of year	19,000	—
Granted	5,000	19,000
Exercised	—	—
Forfeited	—	—
Outstanding at end of period	24,000	19,000
Exercisable at end of period	—	—

Restricted shares do not have an exercise price.

As of March 31, 2007, there was $0.6 million of total unrecognized compensation cost related to non-vested restricted shares granted under the EPIP. We expect to recognize $0.1 million of this cost in ~~two tranches. A total of 9,000 Restricted Shares shall become nonforfeitable on December 31,~~2007, $0.2 million in 2008 and $0.3 million during the period from 2009 if Mr. Barbas remains in the continuous employ of the Company until such date. The remaining 10,000 Restricted Shares will become nonforfeitable on December 31, 2011 if Mr. Barbas remains a Company employee.- - 2011.

6.9. Long-term Debt

At

At

September 30,

December 31,

$ in millions

2006

2005

First Mortgage Bonds maturing 2013 - 5.125%

$
470.0

$
470.0

Pollution Control Series maturing through 2036 - 4.79% and 4.78% (a)

314.4

214.4

$
784.4

$
684.4

Obligation for capital leases

2.2

3.0

Unamortized debt discount

(1.3
)
(1.5
)
Total

$
785.3

$
685.9

~~(a) Weighted average interest rates for 2006 and 2005, respectively.~~

~~The amounts~~DPL Inc.

		At		At
		March 31,		December 31,
$ in millions		2007		2006
DP&L -	First mortgage bonds maturing
	2013 - 5.125%	$ 470.0		$ 470.0
DP&L -	Pollution control series maturing
	2036 - 4.80%	100.0		100.0
DP&L -	Pollution control series maturing
	through 2034 - 4.78% (a)	214.4		214.4
		784.4		784.4
DPL Inc. -	Note to Capital Trust II 8.125% due 2031	195.0		195.0
DPL Inc. -	Senior Notes 6.875% Series due 2011	297.4		297.4
DPL Inc. -	Senior Notes 6.25% Series due 2008	100.0		100.0
DPL Inc. -	Senior Notes 8.00% Series due 2009	175.0		175.0
DP&L -	Obligations for capital leases	1.9		2.0
Unamortized debt discount (b)		(1.9	)	(2.0	)
Total		$ 1,551.8		$ 1,551.8

(a)		Weighted average interest rate for 2007 and 2006.

(b)		DP&L’s unamortized debt discount was $(1.2) million and $(1.2) million for
		March 31, 2007 and December 31, 2006, respectively.

DP&L

	At		At
	March 31,		December 31,
$ in millions	2007		2006
First mortgage bonds maturing
2013 - 5.125%	$ 470.0		$ 470.0
Pollution control series maturing
2036 - 4.80%	100.0		100.0
Pollution control series maturing
through 2034 - 4.78% (a)	214.4		214.4
	784.4		784.4
Obligations for capital leases	1.9		2.0
Unamortized debt discount	(1.2	)	(1.2	)
Total	$ 785.1		$ 785.2

(a)

Weighted average interest rate for quarter ended March 31, 2007 and 2006.

At March 31, 2007, DPL’s scheduled maturities of ~~maturities and mandatory redemptions for first mortgage bonds and~~long-term debt, including capital ~~leases~~lease obligations, over the next five years are ~~$0.2~~$0.7 million for the remainder of ~~2006, $0.9~~2007, $100.7 million in 2008, $175.8 million in 2009, $0.6 million in 2010 and $297.4 million in 2011.

At March 31, 2007, DP&L’s scheduled maturities of long-term debt, including capital lease obligations, over the next five years are $0.7 million for the remainder of 2007, $0.7 million in 2008, ~~$0.7~~$0.8 million in 2009, ~~and $0.7~~$0.6 million in ~~2010.~~2010 and none in 2011. Substantially all property of ~~our property~~DP&L is subject to the mortgage lien securing the first mortgage bonds.

On August 29, 2005, DPL redeemed $200 million of its 8.25% Senior Notes due 2007. The remaining $225 million of these notes were retired March 1, 2007, their maturity date.

During the first quarter of 2006, the Ohio Department of Development (ODOD) awarded DP&L the ability to issue over the next three years up to $200 million of qualified tax-exempt financing from the ODOD’s 2005 volume cap carryforward. The financing is to be used to partially fund the ongoing flue gas desulfurization (FGD) capital projects. On September 13, 2006, the Ohio Air Quality Development Authority (OAQDA) issued $100 million of 4.80% fixed interest rate OAQDA Revenue Bonds 2006 Series A due September 1, 2036. All funds from this borrowing have been drawn as of April 3, 2007. In turn, DP&L borrowed these funds from the OAQDA. These funds were placed in escrow with a trustee and, as of April 3, 2007, DP&L has drawn out the entirety of the funds.

DP&L expects to use the remaining $100 million of volume cap carryforward prior to the end of 2008. DP&L is planning to issue in conjunction with the OAQDA another $100 million of tax-exempt bonds to finance the remaining qualifying solid waste disposal facilities at Miami Fort, Killen, Stuart and ~~the pollution control series.~~Conesville Generating Stations.

~~We have~~On November 21, 2006, DP&L entered into a ~~$100~~new $220 million unsecured revolving credit agreement replacing its $100 million facility. This new agreement has a five-year term that ~~is renewable annually~~expires November 21, 2011 and ~~expires on May 30, 2010. This~~provides DP&L with the ability to increase the size of the facility ~~may be increased up to $150 million.~~by an additional $50 million at any time. The facility contains one financial covenant: ~~our~~DP&L’s total debt to total capitalization ratio is not to exceed 0.65 to 1.00. This covenant is currently met. ~~We had no outstanding borrowings under~~As of March 31, 2007, DP&L has borrowed $65 million from this ~~credit~~ facility for ninety-two days at ~~September 30, 2006.~~5.63%. Fees associated with this credit facility are approximately $0.2 million per year. Changes in credit ratings, however, may affect fees and the applicable interest ~~rate for our~~rate. This revolving credit ~~agreement.~~

~~On February 17, 2006, we renewed our $10~~agreement also contains a $50 million ~~Master Letter~~letter of ~~Credit Agreement for one year with a financial lending institution. This agreement supports performance assurance needs in the ordinary course of business. We have~~credit sublimit. DP&L has certain contractual agreements for the sale and purchase of power, fuel and related energy services that contain credit rating related clauses allowing the counter parties to seek additional surety under certain conditions. As of ~~September 30, 2006, we~~March 31, 2007, DP&L had ~~two~~no outstanding letters of credit ~~for a total of $2.2 million.~~against the facility.

~~During~~On February 24, 2005, DP&L entered into an amendment to extend the ~~first quarter~~term of its Master Letter of Credit Agreement with a financial lending institution for one year and to reduce the maximum dollar volume of letters of credit to $10 million. On February 17, 2006, ~~the Ohio Department of Development (ODOD) awarded us the ability~~DP&L renewed its $10 million agreement for one year. In February 2007, DP&L opted not to ~~issue over the next three years up to $200 million of qualified tax-exempt financing from the ODOD's 2005 volume cap carryforward. The financing is to be used to partially fund the ongoing~~ ~~flue gas desulfurization (FGD) projects. The PUCO approved our application for~~renew this ~~additional financing on July 26, 2006.~~agreement.

On September 13, 2006, the Ohio Air Quality Development Authority (OAQDA) issued $100 million of 4.80% fixed interest rate OAQDA Revenue Bonds 2006 Series A due September 1, 2036. In turn, DP&L then borrowed these funds from the OAQDA. Payment of principal and interest on the Bonds when due is insured by an insurance policy issued by Financial Guaranty Insurance Company. We are using the proceeds from these borrowings to assist in financing our portion of the costs of acquiring, constructing and installing certain solid waste disposal facilities comprising air quality facilities at Miami Fort, Killen and Stuart Generating Stations. These facilities are currently under construction and the proceeds from the borrowings have been placed in escrow with the trustee (the Bank of New York) and are being drawn upon only as facilities are built and qualified costs incurred. In the event any of the proceeds are not drawn, we would eventually be required to return the unused proceeds to bondholders. We expect to draw down all of the proceeds from the borrowing over the next year.

We expect to use the remaining $100 million of volume cap carry forward prior to the end of 2008. We are planning to issue in conjunction with the OAQDA another $100 million of tax-exempt bonds to finance the remaining solid waste disposal facilities at Miami Fort, Killen, Stuart and Conesville Generating Stations.

There are no inter-company debt collateralizations or debt guarantees between usDPL, DP&L and ~~our parent.~~their subsidiaries. None of ~~our~~the debt obligations of DPL or DP&L are guaranteed or secured by affiliates and no cross-collateralization exists between any subsidiaries.

7.10. Commitments and Contingencies

Contractual Obligations and Commercial Commitments

We enter into various contractual obligations and other commercial commitments that may affect the liquidity of our operations. At March 31, 2007, these include:

Contractual Obligations

		Payment Year
		Less Than	2 - 3	4 - 5	More Than
$ in millions	Total	1 Year	Years	Years	5 Years
DPL

Long-term debt	$ 1,549.9	$ —	$ 275.0	$ 297.4	$ 977.5
Interest payments	1,074.3	71.8	170.7	144.0	687.8
Pension and postretirement payments	230.1	16.5	45.2	46.5	121.9
Capital leases	2.8	0.7	1.5	0.6	—
Operating leases	0.7	0.3	0.3	0.1	—
Coal contracts (a)	467.8	246.5	110.5	110.8	—
Limestone contracts	58.4	1.5	9.4	10.8	36.7
Other contractual obligations	436.7	370.0	57.1	9.6	—
Total contractual obligations	$ 3,820.7	$ 707.3	$ 669.7	$ 619.8	$ 1,823.9


DP&L

Long-term debt	$ 783.2	$ —	$ —	$ —	$ 783.2
Interest payments	562.2	29.4	78.3	78.3	376.2
Pension and postretirement payments	230.1	16.5	45.2	46.5	121.9
Capital leases	2.8	0.7	1.5	0.6	—
Operating leases	0.7	0.3	0.3	0.1	—
Coal contracts (a)	467.8	246.5	110.5	110.8	—
Limestone contracts	58.4	1.5	9.4	10.8	36.7
Other contractual obligations	436.7	370.0	57.1	9.6	—
Total contractual obligations	$ 2,541.9	$ 664.9	$ 302.3	$ 256.7	$ 1,318.0

(a) DP&L-operated units

Long-term debt:

DPL’s long-term debt as of March 31, 2007, consists of DP&L’s first mortgage bonds, tax-exempt pollution control bonds, DPL unsecured notes and includes current maturities and unamortized debt discounts.

DP&L’s long-term debt as of March 31, 2007, consists of first mortgage bonds, tax-exempt pollution control bonds and includes an unamortized debt discount.

See Note 9 of Notes to Condensed Consolidated Financial Statements.

Interest payments:

Interest payments associated with the long-term debt described above.

Pension and postretirement payments:

As of March 31, 2007, DP&L had estimated future benefit payments as outlined in Note 7 of Notes to Condensed Consolidated Financial Statements. These estimated future benefit payments are projected through 2015.

Capital leases:

As of March 31, 2007, DP&L had two capital leases that expire in November 2007 and September 2010.

Operating leases:

As of March 31, 2007, DPL and DP&L had several operating leases with various terms and expiration dates. Not included in this total is approximately $88,000 per year related to right-of-way agreements that are assumed to have no definite expiration dates.

Coal contracts:

DP&L has entered into various long-term coal contracts to supply portions of its coal requirements for its generating plants. Contract prices are subject to periodic adjustment and have features that limit price escalation in any given year.

Limestone contracts:

DP&L has entered into various limestone contracts to supply limestone for its generating facilities.

Other contractual obligations:

As of March 31, 2007, DPL and DP&L had various other contractual obligations including non-cancelable contracts to purchase goods and services with various terms and expiration dates.

We enter into various commercial commitments, which may affect the liquidity of our operations. At March 31, 2007, these include:

Credit facilities:

In November 2006, DP&L replaced its previous $100 million revolving credit agreement with a $220 million five-year facility that expires on November 21, 2011. DP&L has the ability to increase the size of the facility by an additional $50 million at any time. At March 31, 2007, there was $65 million outstanding under this credit agreement due on May 29, 2007 at 5.63% interest.

Guarantees:

DP&L owns a 4.9% equity ownership interest in an electric generation company. As of March 31, 2007, DP&L could be responsible for the repayment of 4.9%, or $21.8 million, of a $445 million debt obligation that matures in 2026.

In two separate transactions in November and December 2006, DPL agreed to be a guarantor of the obligations of its wholly-owned subsidiary, DPL Energy, LLC (DPLE) regarding the pending sale of the Darby Electric Peaking Station to American Electric Power and the sale of the Greenville Electric Peaking Station to Buckeye Electric Power, Inc. In both cases, DPL has agreed to guarantee the obligations of DPLE over a multiple year period as follows:

	2007	2008	2009	2010
Darby	$ 30.6	$ 23.0	$ 15.3	$ 7.7

Greenville	$ 14.8	$ 11.1	$ 7.4	$ 3.7

Contingencies

In the normal course of business, we are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations. We believe the amounts provided in our Condensed Consolidated Financial Statements, as prescribed by GAAP, are adequate in light of the probable and estimable contingencies. ~~(See Note 1 of Notes to Consolidated Financial Statements.)~~ However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, ~~regulatory proceedings and orders,~~ claims, tax examinations and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our Condensed Consolidated Financial Statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of March 31, 2007, cannot be reasonably determined.

Environmental Matters

~~Our~~DPL, DP&L and our subsidiaries’ facilities and operations are subject to a wide range of environmental regulations and law. 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 have been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP) at two sites pursuant to state and federal laws. ~~Our units are subject to the acid rain provisions of the Clean Air Act and the NO~~x ~~and Ozone Transport rule. All of the SO~~2 ~~and NO~~x emissions data submitted to the EPA pursuant to these provisions for 2005 and the first quarter 2006 were recorded and reported in compliance with EPA regulations. Subsequently we detected a malfunction with its emission monitoring system at one of its generation stations and ultimately determined its SO2 ~~and NO~~x emissions data was under reported. We have petitioned the EPA to accept an alternative methodology for calculating actual emissions for 2005 and the first quarter 2006. The Company has sufficient allowances in its general account to cover the understatement and is working with the EPA 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. We record liabilities for probable estimated loss in accordance with Statement of Financial Accounting Standards No. 5 (SFAS 5), “Accounting for Contingencies.” To the extent a probable loss can only be estimated by reference 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. We evaluate 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 and financial position.

~~Legal Matters~~Former Executive Litigation

~~In the normal course of business,~~

Cumulatively through March 31, 2007, we have ~~been named a defendant in various~~accrued for accounting purposes, obligations of approximately $61 million to reflect claims regarding deferred compensation, estimated MVE incentives and/or legal ~~actions, including arbitrations, class actions~~fees that certain former executives assert are payable per contracts. We dispute the former executives’ entitlement to any of those sums and ~~other litigation. Certain of the legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We~~ are ~~also involved in other reviews,~~pursuing litigation against them contesting all such claims.

~~investigations~~ Environmental

In September 2004, the Sierra Club filed a lawsuit against DP&L and ~~proceedings by governmental and self-regulatory organizations regarding our business. Certain~~the other owners of the ~~foregoing could result in adverse judgments, settlements, fines, penalties or other relief.~~

~~Because litigation is inherently unpredictable, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are~~Stuart Generating Station in the ~~early stages, we cannot predict with certainty~~United States District Court for the ~~loss~~Southern District of Ohio for alleged violations of the Clean Air Act (CAA) and the Station’s operating permit. DP&L, on behalf 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.

On April 2, 2007, the U.S. Supreme Court unanimously overturned the rulings of two lower courts and concluded that the CAA’s New Source Review (NSR) requirements are triggered when a major physical or ~~range~~operational change at a facility results in an increase in the facility’s annual emissions (Environmental Defense et al, v. Duke Energy Corp. et al.). The outcome of ~~loss related~~this case is significant to ~~such matters, how such matters~~DP&L because it eliminates one of DP&L’s major arguments in the lawsuit filed against it by the Sierra Club . The Court decided that an annual rate of emissions could be used to determine if major modifications have been made to a plant as opposed to an hourly emission rate as Duke had argued. Using the annual rate makes it more likely that most plant modifications will be ~~resolved, when they~~found to be “major” modifications, thus requiring EPA permits. DP&L can still defend against the allegations of NSR violations if it can establish that the activities at issue did not cause total annual emissions to increase or that the projects that resulted in increased emissions were undertaken for routine maintenance, repair and replacement activities.

11. Subsequent Events

Sale of Peaking Units

On April 25, 2007, DPL Energy, LLC, completed the sale of its Darby and Greenville electric peaking generation facilities providing DPL with approximately $151.2 million in cash. Darby Station was sold to Columbus Southern Power, a utility subsidiary of American Electric Power (AEP), for approximately $102 million in cash. Greenville Station was sold to Buckeye Power, Inc. for approximately $49.2 million in cash.

The sale proceeds will be ~~ultimately resolved, or what~~used to pay down short-term borrowings and fund DP&L's major construction projects.

Darby station has a summer capacity of 450 megawatts and is located 20 miles southwest of Columbus, Ohio and Greenville station has a summer capacity of 200 megawatts and is located in Greenville, Ohio. With the eventual settlement, fine, penalty or other relief might be. Consequently, we cannot estimate losses or ranges of losses for matters where there is only a reasonable possibility that a loss may have been incurred. Although the ultimate outcomeclosing of these ~~matters cannot be ascertained at this time, it is the opinion~~sales, DPL owns approximately 950 megawatts of ~~management, that the resolution~~peaking generation and 2,800 megawatts of the foregoing matters will not have a material adverse effect on our financial condition, taken as a whole; such resolution may, however, have a material effect on the operating results in any future period, depending on the level of income for such period.coal-fired generation.

~~We have provided reserves for such matters in accordance with SFAS 5, “Accounting for Contingencies.” The ultimate resolution may differ from the amounts reserved.~~Insurance Recovery Claim

Certain legal proceedings in which we are involved are discussed in Note 11 to the Consolidated Financial Statements and, Part I, Item 3, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2005; and Note 7 to the Consolidated Financial Statements and Part II, Item 1, included in our Form 10-Q for the quarterly periods ended March 31, 2006 and June 30, 2006. The following discussion is limited to recent developments concerning our legal proceedings and should be read in conjunction with those earlier reports.

On January 13, 2006, we filed a claim against one of our insurers, Associated Electric & Gas Insurance Services ~~Limited~~ (AEGIS), under a fiduciary liability policy to recoup legal fees associated with our litigation against three former executives. ~~An arbitration of this matter was held on August 4, 2006. The arbitration panel ruled on or about September 12, 2006 that~~On April 17-18, 2007, DP&L and AEGIS mediated the issue and reached a settlement in which AEGIS ~~policy does not require an advance of defense expenses~~agreed to us. Rather, the arbitration panel stated that we are required to file a written undertaking as a condition precedent to repay expenses finally established not to be insured. We have filed a written undertaking with AEGIS and will continue to pursue resolution of the claim through mediation and arbitration in 2007.

On February 13, 2006, we received correspondence from the Ohio Department of Taxation (ODT) notifying us that ODT has completed their examination and review of our Ohio Corporation Franchise Tax Returnspay DP&L $14.5 million for tax years 2002 through 2004 and that the final proposed audit adjustments result in a balance due of $90.8 million before interest and penalties. We have reviewed the proposed audit adjustments and are vigorously contesting the ODT findings and notice of assessment through all administrative and judicial means available. On March 29, 2006, we filed petitions for reassessment with the ODT to protest each assessment as well as request corrected assessments for each tax year. On October 12, 2006, we signed a Memorandum of Understanding with the ODT that stated if the ODT’s positions are ultimately sustained in judicial proceedings, the total additional tax liability that we would be subject to for tax years 2002 through 2004 would be no more than $50.7 million before interest as opposed to the $90.8 million stated in the ODT’s correspondence of February 13, 2006. We believe we have recorded adequate tax reserves related to the proposed adjustments; however, we cannot predict the outcome, which could be material to our results of operations and cash flows.

~~We are also under audit review~~legal fees incurred by various state agencies for tax years 2002 through 2004. We have also filed an appeal to the Ohio Board of Tax Appeals for tax years 1998 through 2001. Depending upon the outcome of these audits and the appeal, we may be required to increase our tax provision if actual amounts ultimately determined exceed recorded reserves. We believe we have adequate reserves in each tax jurisdiction but cannot predict the outcome of these audits.

In September 2006, we became aware of unasserted claims under the Fair Labor Standards Act concerning the calculation of overtime rates for our unionized workforce. We will vigorously oppose these claims, if asserted against us. However, if we do not prevail, the cost to us would be in the range of $0-$3.5 million.

~~Contractual Obligations and Commercial Commitments~~

~~We enter into various contractual and other long-term obligations that may affect the liquidity of our operations. At September 30, 2006, these include:~~

~~Contractual Obligations~~

Payment Year

$ in millions

Total

Less than 1
Year

2 - 3 Years

4 - 5 Years

More than 5
Years

Long-term debt

$
783.1

$
—

$
—

$
—

$
783.1

Interest payments

581.7

39.1

78.3

78.3

386.0

Pension and postretirement payments

249.2

33.4

46.0

47.2

122.6

Capital leases

3.2

1.1

1.4

0.7

—

Operating leases

0.5

0.3

0.2

—

—

Fuel and limestone contracts (a)

586.8

86.7

315.5

97.5

87.1

Other long-term obligations

27.5

14.6

9.8

3.1

—

Total contractual obligations

$
2,232.0

$
175.2

$
451.2

$
226.8

$
1,378.8

~~(a)~~DP&L ~~operated units.~~

~~Long-term debt:~~

Long-term debt as of September 30, 2006, consists of our first mortgage bonds and tax-exempt pollution control bonds and includes an unamortized debt discount. (See Note 6 of Notes to Consolidated Financial Statements.)

~~Interest payments:~~

~~Interest payments~~ associated with ~~the long-term debt described above.~~

~~Pension and postretirement payments:~~

As of September 30, 2006, we had estimated future benefit payments as outlined in Note 4 of Notes to Consolidated Financial Statements. These estimated future benefit payments are projected through 2016.

~~Capital leases:~~

~~As of September 30, 2006, we had two capital leases that expire in November 2007 and September 2010.~~

~~Operating leases:~~

As of September 30, 2006, we had several operating leases with various terms and expiration dates. Not included in this total is approximately $88 thousand per year related to right-of-way agreements that are assumed to have no definite expiration dates.

~~Fuel and limestone contracts:~~

~~We have entered into various long-term coal contracts to supply portions of~~ our coal requirements for our generating plants and a long-term contract to supply limestone for the operation of our flue gas desulfurization (FGD) units. Coal contract prices are subject to periodic adjustment, and have features that limit price escalation in any given year.

~~A new long-term barge~~litigation against three former executives. The settlement agreement was signed and executed ~~for five years beginning September 2006.~~on April 30, 2007.

~~Other long-term obligations:~~29

~~As of September 30, 2006, we had various other contractual obligations including non-cancelable contracts to purchase goods and services with various terms and expiration dates.~~

~~We enter into various commercial commitments, which may affect the liquidity of our operations. At September 30, 2006, these include:~~

~~Credit facilities:~~

We have a $100 million, 364-day unsecured credit facility that is renewable annually and expires on May 30, 2010. At September 30, 2006, there were no borrowings outstanding under this credit agreement. The new facility may be increased up to $150 million.

~~Guarantee:~~

We own a 4.9% equity ownership interest in an electric generation company. As of September 30, 2006, we could be responsible for the repayment of 4.9%, or $21.8 million, of a $445 million debt obligation that matures in 2026.

8. ~~Peaking Generating Facilities~~

Through DPL Energy, DPL owns peaking facilities to which DP&L has rights to the capacity, energy and ancillary service output. DPL has received and is evaluating purchase offers for three of its peaking generation sites. The sites represent a combined capacity of 872 megawatts and a net book value of approximately $300 million. A decision about whether to sell these assets has not been made or approved. The Company believes that if terms could be reached with potential buyers a transaction could be taken to its Board for approval during the fourth quarter of 2006. If approved, a transaction is not expected to close until the first half of 2007.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained in this discussion 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 our future economic performance, taking into account the information currently available to management. These statements are not statements of historical fact. 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: abnormal or severe weather; unusual maintenance or repair requirements; changes in fuel costs, ~~and~~ purchased power, coal, environmental emissions, gas and other commodity prices; increased competition; regulatory changes and decisions; changes in accounting rules; financial market conditions; and general economic conditions.

Forward-looking statements speak only as of the date of the document in which they are made. These forward-looking statements are identified by terms and phrases such as “anticipate”, “believe”, “intend”, “estimate”, “expect”, “continue”, “should”, “could”, “may”, “plan”, “project”, “predict”, “will”, and similar expressions. 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.

The following discussion should be read in conjunction with the accompanying financials and related footnotes included in Part 1 — Financial Information.

BUSINESS OVERVIEW

This report includes the combined filing of DPL Inc. (DPL) and The Dayton Power and Light Company(DP&L). DP&L is the principal subsidiary of DPL providing approximately 99% of DPL’s total consolidated revenue and approximately 89% of DPL’s total consolidated asset base. 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. Historically, DPL and DP&L have filed separate SEC filings. Beginning with the 2006 Form 10-K and in the future, DPL and DP&L will file combined SEC reports on an interim and annual basis.

DPL is a regional electric energy and utility company and through its principal subsidiary, DP&L, is primarily engaged in the generation, transmission and distribution of electricity in West Central Ohio. DPL and DP&L strive to achieve disciplined growth in energy margins while limiting volatility in both cash flows and earnings and to achieve stable, long-term growth through efficient operations and strong customer and regulatory relations. More specifically, DPL and DP&L’s strategy is to match energy supply with load or customer demand, maximize profits while effectively managing exposure to movements in energy and fuel prices and utilize the transmission and distribution assets that transfer electricity at the most efficient cost, while maintaining the highest level of customer service and reliability.

We operate and manage generation assets and are exposed to a number of risks through this management. These risks include but are not limited to electricity wholesale price risk, fuel supply and price risk and power plant performance. We attempt to manage these risks through various means. For instance, we operate a portfolio of wholly-owned and jointly-owned generation assets that is diversified as to fuel source, cost structure and operating characteristics. We are focused on the operating efficiency of these power plants and maintaining their availability.

Like other electric utilities and energy marketers, DP&L and DPL Energy, LLC (DPLE, one of our wholly-owned subsidiaries) may sell or purchase electric products on the wholesale market. DP&L and DPLE compete with other generators, power marketers, privately and municipally-owned electric utilities, and rural electric cooperatives when selling electricity. The ability of DP&L and DPLE to sell this electricity will depend on how DP&L’s and DPLE’s price, terms and conditions compare to those of other suppliers.

Weoperate and managetransmission and distribution assets in a rate-regulated environment. Accordingly, this subjects us to regulatory risk in terms of the costs that we may recover and the investment returns that we may

collect in customer rates. We are focused on delivering electricity and maintaining high standards of customer service and reliability in a cost-effective manner.

We operate in a regulated and deregulated environment. The electric utility industry has historically operated in a regulated environment. However, in recent years, there have been a number of federal and state regulatory and legislative decisions aimed at promoting competition and providing customer choice. Market participants have therefore created new business models to exploit opportunities. The marketplace is now comprised of independent power producers, energy marketers and traders, energy merchants, transmission and distribution providers and retail energy suppliers. There have also been new market entrants and activity among the traditional participants, such as mergers, acquisitions, asset sales and spin-offs of lines of business. In addition, transmission systems are being operated by Regional Transmission Organizations (RTOs).

As part of Ohio’s electric deregulation law, all of the state’s investor-owned utilities are required to join a RTO. In October 2004, DP&L successfully integrated its 1,000 miles of high-voltage transmission into the PJM Interconnection, L.L.C. (PJM) RTO. The role of the RTO is to administer an electric marketplace and ensure reliability of the transmission grid. PJM ensures the reliability of the high-voltage electric power system serving 51 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.

As a member of PJM, DP&L is subject to charges and costs associated with PJM operations as approved by the FERC. As discussed below, in connection with the recovery of such costs in retail rates, DP&L incurs significant administrative charges. Additionally, PJM’s role in administering the regional transmission grid and planning regional transmission expansion improvements results in periodic proposals by PJM and other stakeholder members of PJM to the FERC to allocate and charge costs associated with the transmission system to various entities operating within PJM including DP&L. DP&L and other interested parties have the right to intervene and offer counter-proposals.

~~UPDATES/~~UPDATES / OTHER MATTERS

Sale of Peaking ~~Generating Facilities~~Units

~~Through~~On April 25, 2007, DPL Energy, ~~DPL owns~~LLC, completed the sale of its Darby and Greenville electric peaking generation facilities providing DPL with approximately $151.2 million in cash. Darby Station was sold to ~~which~~ Columbus Southern Power, a utility subsidiary of American Electric Power (AEP), for approximately $102 million in cash. Greenville Station was sold to Buckeye Power, Inc. for approximately $49.2 million in cash.

The sale proceeds will be used to pay down short-term borrowings and fund DP&L&L's major construction projects.

Darby station has ~~rights to the~~a summer capacity ~~energy and ancillary service output. DPL has received~~of 450 megawatts and is ~~evaluating purchase offers for three~~located 20 miles southwest of ~~its~~Columbus, Ohio and Greenville station has a summer capacity of 200 megawatts and is located in Greenville, Ohio. With the closing of these sales, DPL owns approximately 950 megawatts of peaking generation ~~sites.~~and 2,800 megawatts of coal-fired generation.

Insurance Recovery Claim

On January 13, 2006, we filed a claim against one of our insurers, Associated Electric & Gas Insurance Services (AEGIS), under a fiduciary liability policy to recoup legal fees associated with our litigation against three former executives. On April 17-18, 2007, DP&L and AEGIS mediated the issue and reached a settlement in which AEGIS agreed to pay DP&L $14.5 million for legal fees incurred by DP&L associated with our litigation against three former executives. The ~~sites represent a combined capacity of 872 megawatts~~settlement agreement was signed and a net book value of approximately $300 million. A decision about whether to sell these assets has not been made or approved. The Company believes that if terms could be reached with potential buyers a transaction could be taken to its Board for approval during the fourth quarter of 2006. If approved, a transaction is not expected to close until the first half ofexecuted on April 30, 2007.

Updates on Competition and Regulation

~~On April 4, 2005, we filed a request at~~Ohio Matters

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. The Public Utilities Commission of Ohio (PUCO) maintains jurisdiction over DP&L’s delivery of electricity, the standard offer supply service that customers receive if they do not choose an alternative retail electricity supplier, and other rates and charges associated with the provision of retail electric service.

On April 4, 2005, DP&L filed a request with the PUCO to implement a new ~~rate stabilization surcharge~~Rate Stabilization Surcharge (RSS) effective January 1, 2006 to recover cost increases associated with environmental capital, ~~and~~ related operations and maintenance costs and fuel expenses. ~~On November 3, 2005, we~~DP&L entered into a settlement agreement that extended ~~our~~DP&L’s rate stabilization period through December 31, 2010. During this time, weDP&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~~beginning 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 ~~in annual new revenues~~ 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 and 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. ~~Future~~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 (OCC)~~Counsel. Oral argument was heard by the Supreme Court on April ~~21, 2006. On September 1, 2006, DP&L made a tariff filing to implement~~17, 2007. The Company cannot predict whether the ~~environmental investment rider beginning January 1, 2007.~~

We agreed to implement a Voluntary Enrollment Process that would provide residential customers with an option to choose a competitive supplier to provide their retail generation service should switching not reach 20% in each customer class. During 2005, approximately 51 thousand residential customers that volunteered forOhio Supreme Court will affirm the ~~program were bid out to Competitive Retail Electric Service (CRES) providers who were registered in our service territory; however, no bids were received and the 2005 program ended. As part~~PUCO’s approval of the RSS Stipulation, ~~we agreed~~affirm it in part subject to ~~implement~~modifications, or reject it. The decision of the ~~Voluntary Enrollment Program again in 2006 and 2007. Approximately 25 thousand residential customers have volunteered for the 2006 program.~~ Ohio Supreme Court is pending.

As of ~~October 16, 2006, all four rounds of bids were complete, which resulted in no bids being received. The magnitude of any customer switching and the financial impact of this program in~~March 31, 2007, ~~cannot be determined at this time.~~

~~As of September 30, 2006,~~ four unaffiliated marketers were registered as ~~CRES~~Competitive Retail Electric Services (CRES) providers in ~~our~~DP&L’s service ~~territory; to date,~~territory. While there has been ~~little activity from these suppliers.~~some customer switching to date, it represented less than 0.15 percent of sales in 2006. DPL Energy Resources, Inc. (DPLER), ~~one of our parent’s significant subsidiaries,~~an affiliated company, is also a registered CRES provider and accounted for ~~substantially~~nearly all of the ~~load served~~total kWh supplied by CRES providers within ~~our~~DP&L’s service territory in 2006. In addition, several communities in ~~our~~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.

~~In early 2004, there~~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. Customers who elected to participate in the program have been grouped together and collectively bid out to CRES providers. The first of four rounds of bidding for the 2007 program was ~~a complaint filed~~conducted in April resulting in no bids being received. To date, the VEP process has resulted in zero customer switching. Future period effects cannot be determined at the PUCO concerning the pricing of our billing services. The parties reached a settlement on the price we charge CRES providers for performing billing services. The PUCO issued an Order approving the settlement with minor modifications. This Order gave us the authority to defer costs of approximately $16 million plus carrying charges, and later request PUCO approval for recovery of those costs from all customers. The PUCO denied applications for rehearing, and the deferral case was appealed to the Ohio Supreme Court. On September 27, 2006, the Supreme Court issued a decision affirming the PUCO’s order in this ~~case. On June 17, 2005, we filed a subsequent case, requesting PUCO approval for recovery of the deferred billing~~

time.

costs plus carrying charges. On March 1, 2006, the PUCO approved our recovery of this cost with one minor modification. This new rider is expected to result in approximately $7 million in additional annual revenue beginning March 2006 through 2010. On March 30, 2006, the OCC filed an appeal of this new rider to the Ohio Supreme Court. Within that appeal, the OCC filed a motion to stay our recovery of this new rider. The motion for stay was subsequently denied by the Court. On October 19, 2006, the OCC filed to dismiss their appeal, but an appeal related to this matter filed by the Ohio Partners for Affordable Energy is still pending.

On September 1, 2005, we filed an application requesting the PUCO grant us 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, we filed updated schedules in support of our application. On July 12, 2006, the PUCO approved our filing, allowing the Company to recover approximately $8.6 million in additional revenues over a two-year period. The OCC filed an application for rehearing in this case that was subsequently denied by the PUCO.

On August 28, 2006, the Staff of the PUCO issued a report relating to compliance with the Federal Energy Policy ~~Act~~ of 2005. In that report the Staff ~~makes~~made recommendations to the Commission to implement new rules and procedures relating to net metering, customer generator interconnection, stand by power, time-of-use rates and renewable energy portfolio standards. ~~We,~~DP&L, among others, filed comments ~~on September 18, 2006,~~ and reply ~~comments on October 6, 2006. If adopted by~~comments. On March 28, 2007, the ~~Commission, these recommendations may result in~~PUCO issued a Finding and Order that established new ~~regulatory~~ requirements for Ohio ~~investor-owned~~investor owned utilities related to distribution interconnection standards and net metering programs. It initiates further discussions at the Commission on topics such as renewable energy standards, fuel ~~sources,~~source requirements, automated meter infrastructure and time differentiated rate options for customers. DP&L cannot predict the potential cost that may be associated with any new regulations that may be adopted as a result of these proceedings.

On April 3, 2007, the PUCO issued proposed revisions to the Commission’s minimum electric service and safety standards. These rules govern a variety of utility operations such as maintenance programs, new construction, meter reading and distribution circuit performance. The ~~financial implications~~proposed changes impact customer service requirements, reliability reporting and distribution inspection and maintenance programs, as well as increase the penalty the Commission may invoke if a utility is found to be in violation of ~~this matter cannot be determined~~these rules. DP&L may experience an increase in distribution operation and maintenance expense associated with the new rules. However, the amount of said increase is unknown at this time. The Company and other stakeholders will have an opportunity to offer comments and reply comments prior to finalization of the new rules.

Federal Matters

On ~~July 23, 2003,~~April 19, 2007, the ~~Federal Energy Regulatory Commission (FERC)~~FERC issued an Order with regard to the allocation of costs associated with new planned transmission facilities. FERC ordered that the ~~rates~~cost of new, high-voltage facilities be socialized across the PJM region and the costs of new facilities at lower voltages be assigned to the load centers that benefit from the new facilities. The methodology for identifying beneficiaries has been set for hearing. Also on April 19, 2007, the FERC issued an Order relating to the allocation of costs associated with existing transmission ~~service~~facilities, upholding the existing PJM rate design. These Orders are subject to rehearing and the appeal process. DP&L is currently evaluating the potential financial impacts of ~~seven companies, including us, may be unjust, unreasonable, or unduly discriminatory or preferential. A number of orders have since been issued on~~ the ~~subject of how best to modify rates.~~ Orders.

As a result, the FERC ordered utilities to eliminate certain charges and to implement transitional charges, known as Seams Elimination Charge Adjustment (SECA), effective December 1, 2004 through March 31, 2006, subject to refund. Through this proceeding, we are obligated to pay SECA charges to other utilities, but we receive a net benefit from these transitional payments. Beginning May 2005, we began receiving SECA payments and have received over $24.8 million, netmember of SECA charges, through September 2006. Several parties have sought rehearing of the FERC orders which are still pending. The hearing was held in May 2006 and an initial decision was issued on August 10, 2006 that, if upheld by the FERC, would reduce the amount of SECA charges we and other parties are permitted to recover. We, among others, have taken exception to the initial decision. A final FERC order on this issue is expected later this year. We have entered into a significant number of bi-lateral settlement agreements with certain parties to resolve the matter, which by design will be unaffected by the FERC’s decision to affirm, modify, or reject the initial decision. We believe we have recorded adequate reserves related to the proposed adjustments; however, we cannot predict the outcome.

On May 31, 2005, the FERC instituted a proceeding under Federal Power Act Section 206 concerning the justness and reasonableness of PJM’s transmission rate design. This proceeding sets the rates for hearing and requests that all of PJM, members, which include us, address the justness and reasonableness of the current rate design. On November 22, 2005, we, along with ten other transmission owners, filed in support of PJM’s existing rate design. A hearing was held in April 2006 and an initial decision was issued on July 13, 2006 recommending a rate design different than PJM’s existing rate design. We expect a final FERC order on this issue later this year. Due to the comment and appeal process, the potential for adjustments to the initial decision and the complexity of the issues, we cannot determine what effect the final outcome of this proceeding may have on our future recovery of transmission revenues.

~~PJM has a proposal before FERC that may affect~~ the value of ~~our~~DPL’s generation ~~capacity.~~capacity will be affected by changes in the PJM capacity construct. The ~~proposal~~new construct introduces a new Reliability Pricing Model (RPM) that ~~would~~will change the way generation capacity is priced and planned for by PJM. ~~On September 29, 2006, a settlement agreement executed by us~~DP&L, along with most of the parties relating to the case, ~~was filed~~entered into a settlement agreement that generally retains the RPM concept as proposed by PJM, with certain modifications. IfThe settlement was approved by the FERC on December 21, 2006. PJM held its first RPM auction in April 2007 for the ~~economic effects~~2007/2008 planning year. DP&L does not expect any material changes in forecasted financial results due to the outcome of this auction. Additional auctions will be held during 2007 for the 2008/2009 and 2009/2010 planning years. The financial impact of these auctions is unknown and will depend on a number of factors including projections made by PJM as well as market participant bidding behavior.

DP&L provides transmission and wholesale electric service to thirteen municipal customers in its service territory. Municipalities, in turn, distribute electricity principally within their incorporated limits. Approximately 1% of total electricity sales in 2006 represented sales to these municipalities.

ENVIRONMENTAL CONSIDERATIONS

DPL, DP&L and our subsidiaries’ facilities and operations are subject to a wide range of environmental regulations and laws. 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.” To the extent a probable loss can only be estimated by reference 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 ~~settlement will vary depending~~range. Because of uncertainties related to these matters, accruals are based on ~~future market conditions.~~the best information available at the time. DPL, through its captive insurance subsidiary, MVIC, has an actuarial 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.

~~Updates on Environmental Considerations~~DP&L’s

coal-fired units are subject to the acid rain provisions of the Clean Air Act and ~~Water Quality~~the NOx

and Ozone Transport rule. All of the SO~~On December 17, 2003,~~2 and NOx emissions data submitted to the United States Environmental Protection Agency (USEPA) ~~proposed~~, pursuant to these provisions, for 2005 and the ~~Interstate~~first quarter of 2006 were recorded and reported in compliance with USEPA regulations. Subsequently, DP&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 of 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.

Environmental Regulation and Litigation Related to Air Quality ~~Rule (IAQR) designed~~

Regulation Proceedings – Air

On July 15, 2003, the Ohio EPA submitted to ~~reduce and permanently cap sulfur dioxide (SO~~2) and nitrogen oxide (NOx) 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 andthe USEPA its recommendations for eight-hour ozone ~~pollution in other downwind states in~~

non-attainment boundaries for the ~~eastern United States.~~metropolitan areas within Ohio. On ~~June 10,~~April 15, 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. On August 24, 2005, the USEPA proposed additional revisions to the CAIR and initiated reconsideration on one issue. On March 15, 2006, the USEPA announced it had completed its ~~review~~list of the requests for reconsideration and determined that it would propose no changes to CAIR and denied the requests for stay. We have determined that CAIR requirements will have a material effect on our operations, requiring the installation of flue gas desulfurization (FGD) equipment and continual operation of the currently installed Selective Catalytic Reduction (SCR) equipment. As a result, we are proceeding with the installation and have begun the construction of FGD equipment at various generating units.

On January 30, 2004, the USEPA published its proposal to restrict mercury and other air toxins from coal-fired and oil-fired utility plants. The final Clean Air Mercury Rule (CAM-R) was signed March 15, 2005 and was published on May 18, 2005. The final rules will have a material effect on our operations. We anticipate that the FGDs being installed to meet the requirements of CAIR may be adequate to meet the Phase I requirements of CAM-R. We expect that additional controls will be needed to meet the Phase II requirements of CAM-R that go into effect January 1, 2018. On March 29, 2005, nine states filed lawsuits against USEPA, opposing the regulatory approach taken by USEPA. On March 31, 2005, various groups requested that USEPA stay implementation of CAM-R. On August 4, 2005, the United States Court of Appeals for the District of Columbia denied the motion for stay. On October 21, 2005, USEPA initiated reconsideration proceedings onozone non-attainment designations. DP&L owns and/or operates a number of ~~issues. On May 31, 2006, USEPA took final action on CAM-R essentially reaffirming its original rulemaking.~~

~~Under~~facilities in counties designated as non-attainment with the ~~CAIR and CAM-R cap and trade programs for SO~~2, NOx and mercury, we estimate we will spend more than $465 million from 2006 through 2008 to install the necessary pollution controls. If CAM-R litigation results in plant specific mercury controls, our costsozone national ambient air quality standard. DP&L does not know at this time what future regulations may be ~~higher. Due~~imposed on its facilities and will closely monitor the regulatory process. Ohio EPA will develop regulations to attain and maintain compliance with the eight-hour ozone national ambient air quality

standard. Numerous parties have filed petitions for review. DP&L cannot predict the outcome of USEPA’s reconsideration petitions.

In February 2007, the Ohio EPA, Regional Air Pollution Control Agency, issued a Notice of Violation (NOV) to DP&L with respect to an allegedly failed performance test in November 2006 for particulate matter at DP&L’s Hutchings Station. The EPA requested additional data, proposed that a retest be made of two boilers at Hutchings Station and noted that any decision to seek penalties would be made at another time. DP&L has responded to the ~~ongoing uncertainties associated with~~NOV noting that a retest taken in December 2006 demonstrated that the ~~litigation~~November results were not representative of ~~the CAM-R, we cannot project the final costs~~normal operations and proposing that all boilers at Hutchings Station be tested again in June 2007. We believed any penalties assessed related to this ~~time.~~

~~RISK FACTORS~~

~~A comprehensive listing of risk factors that we consider~~matter will be immaterial to ~~be the most significant to your decision to invest in us is provided in~~ our most recent Form 10-K and is incorporated herein by reference. The Form 10-K may be obtained as discussed on page 2, ‘Available Information.’ Any updates are provided in Part II, Item 1A “Risk Factors” of this quarterly report and the quarterly reports for March 31, 2006 and June 30, 2006. If any of these events occur, our business results of operations, financial position or cash ~~flow could be materially affected.~~flows.

~~RESULTS OF OPERATIONS~~Environmental Regulation and Litigation Related to Water Quality

~~Income Statement Highlights~~

Three months ended

Nine months ended

September 30,

September 30,

$ in millions

2006

2005

2006

2005

Revenues

$
390.3

$
355.5

$
1,036.1

$
952.0

Less:
Fuel

91.0

87.9

251.1

235.1

Purchased power

70.7

48.3

134.7

116.0

Gross margin

$
228.6

$
219.3

$
650.3

$
600.9

Gross margin as a percentage of revenues

58.6
%
61.7
%
62.8
%
63.1
%

Operating income

$
107.1

$
112.1

$
295.3

$
279.5

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 Federal 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. On March 20, 2007, USEPA issued a memorandum regarding the agency’s implementation of this opinion stating that, because so many provisions of the rules had been remedied, the rule should be suspended. We are undertaking studies at two facilities but cannot predict the impact such studies may have on future operations, the outcome of the remanded rulemaking or how Ohio EPA will implement the USEPA memorandum.

~~Revenues~~FINANCIAL OVERVIEW

~~Revenues~~As more fully discussed in later sections of this Form 10-Q, the following were the significant themes and events for the first quarter of 2007:

·DPL’s revenues for the three months ended March 31, 2007 increased ~~10%~~11% over the same period in 2006 mainly due to ~~$390.3 million~~colder weather, the rate stabilization surcharge and other regulated asset recovery riders, which began in the ~~third~~first quarter of 2006, ~~compared to $355.5 million in~~improving gross margin and profitability. DPL’s fuel, purchased power costs, and operation and maintenance increasedover the third quarter of 2005 reflecting higher average rates for retail sales and greater wholesale sales volume. These increases were partially offset by lower retail sales volume, lower average rates for wholesale sales and decreased ancillary revenues associated with participation in a RTO.

~~Retail revenues increased $13.5 million in the third~~first quarter of 2006 ~~compared to 2005, primarily resulting from $21.0~~by $6.1 million, $26.9 million and $6.9 million, respectively. The increase in ~~higher average rates and $0.5 million of higher miscellaneous revenues, partially offset by decreased sales~~purchase power volume ~~of $8.0 million relating to milder weather experienced in 2006 compared to 2005. The higher average rates were~~was primarily the result of DPL and partner operated generating facilities being unavailable due to planned and unplanned outages. In addition, we purchase power when market prices are below the marginal costs associated with our higher cost generating facilities. DPL’s cash flows from operations for the three months ended March 31, 2007 of $97.1 million was 6% higher than the cash flows from operations of $91.6 million for the same period of 2006.

·DP&L’s revenues for the first quarter of 2007 increased 11% over the first quarter of 2006 resulting from the colder weather, rate stabilization ~~plan~~ surcharge and other regulated asset recovery riders ~~most of~~ which ~~were implemented early~~began in ~~2006. Wholesale revenues increased $22.9 million, primarily resulting from a $44.6 million increase in sales volume, partially offset by a $21.7 million decrease in average market rates. During~~ the ~~third~~first quarter of 2006 ~~RTO ancillary revenues decreased $1.6 million to $20.6 million from $22.2 million in~~improving gross margin and profitability. DP&L’s fuel, purchased power costs, and operation and maintenance increased over the ~~third quarter of 2005. Cooling degree-days were down 17% to 639 for the third~~first quarter of 2006 ~~compared~~by $5.6 million, $27.1 million and $5.2 million, respectively. The increase in purchase power volume was primarily the result of DP&L and Partner operated generating facilities being unavailable due to ~~772~~planned and unplanned outages. In addition, we purchase power when market prices are below the marginal costs associated with our higher cost generating facilities. DP&L’s cash flows from operations for the three months ended March 31, 2007 of $137.0 million was 5% lower than the cash flows from operations of $143.5 million for the same period in ~~2005. Heating degree-days increased to 105~~2006.

·On February 26, 2007, DP&L borrowed $65 million against the $220 million unsecured revolving credit facility.

RESULTS OF OPERATIONS – DPL Inc.

DPL’s results of operations include the results of its subsidiaries, including the consolidated results of DP&L and all of DP&L’s consolidated subsidiaries. DP&L provides approximately 99% of the total revenues of DPL. All material intercompany accounts and transactions have been eliminated in consolidation. A separate specific discussion of the results of operations for DP&L is presented elsewhere in this report.

Financial Highlights - DPL

	Three Months Ended
	March 31,
$ in millions	2007			2006

Revenues:
Retail	$	304.5		$	283.3
Wholesale	56.7			37.4
RTO ancillary	15.7			17.7
Other revenues, net of fuel costs	2.8			2.7
Total revenues	$	379.7		$	341.1

Less: Fuel	$	90.3		$	84.2
Purchased power (a)	52.2			25.3
Gross margins (b)	$	237.2		$	231.6

Gross margins as a percentage of
revenues	62.5		%	67.9		%

Operating income	$	103.5		$	103.2

Earnings per share:
Continuing operations	$	0.48		$	0.43
Discontinued operations	0.04			0.06
Net income	$	0.52		$	0.49

(a)Purchased power includes RTO ancillary charges of $12.4 million and $12.2 million for the ~~third~~three months ended 2007 and 2006, respectively.

(b)For purposes of discussing operating results, we present and discuss gross margins. 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.

DPL Inc. – Revenues

	Three Months Ended
	March 31,
$ in millions	2007 vs. 2006

Retail
Rate	$	6.2
Volume	15.1
Other miscellaneous	(0.1		)
Total retail change	$	21.2

Wholesale
Rate	$	5.5
Volume	13.8
Total wholesale change	$	19.3

RTO ancillary & other
RTO services	$	(2.0	)
Other	0.1
Total revenues change	$	(1.9	)

Total revenues	$	38.6

For the quarter ~~of 2006 compared~~ended March 31, 2007, revenues increased $38.6 million, or 11% to 23$379.7 from $341.1 for the same period in ~~2005.~~

~~Revenues~~the prior year. This increase was primarily the result of higher average rates and sales volume for both retail and wholesale. Retail revenues increased 9%$21.2 million resulting from a 5% increase in sales volume driven by colder weather and a 2% increase in average retail rates related to ~~$1,036.1~~the Rate Stabilization Plan surcharge and other regulated asset recovery riders. These increases resulted in a $15.1 million sales volume variance and a $6.2 million price variance for retail revenues. Wholesale revenue increased $19.3 million for the first quarter of 2007 primarily as a result of a 37% increase in sales volume (301 GWh) and an 11% increase in wholesale average rates. These increases resulted in a $13.8 million sales volume variance and a $5.5 million price volume variance for wholesale revenues. For the first quarter of 2007, the RTO ancillary revenues decreased $2.0 million, or 11%, to $15.7 million compared to the first quarter of 2006. RTO ancillary revenues primarily consist of compensation for use of DP&L’s transmission assets, regulation services, reactive supply and operating reserves.

DPL Inc. – Margins, Fuel and Purchased Power

For the first quarter of 2007, gross margin of $237.2 million increased $5.6 million, or 2%, from $231.6 million in the first nine months of 2006 compared to $952.0 million in the first nine months of 2005, primarily reflecting higher average rates for retail sales and greater wholesale sales volume. These increases were partially offset by lower retail sales volume relating to the milder weather in 2006 as compared to 2005 and lower wholesale average market rates.

Retail revenues increased $38.2 million in the first nine months of 2006 compared to the first nine months of 2005, primarily resulting from a $56.3 million increase relating to higher average rates and increased miscellaneous revenues of $0.9 million, partially offset by decreased sales volume of $19.0 million resulting from milder weather experienced in 2006 compared to 2005. The higher average rates were primarily the result of the rate stabilization plan surcharge, and regulated asset recovery riders implemented throughout 2006. Wholesale revenues increased $45.4 million, primarily related to a $71.5 million increase in sales volume, partially offset by a $26.1 million decrease in average market rates. During the first nine months of 2006, RTO ancillary revenues increased $0.5 million to $55.7 million from $55.2 million in the first nine months of 2005. Heating degree-days were down 10% to 3,173 for the nine months ended September 30, 2006 compared to 3,538 for the same period in 2005. In addition, cooling degree-days were down 20% to 845 for the first nine months of 2006 compared to 1,050 for the same period in 2005.

~~Gross Margin, Fuel and Purchased Power~~

~~Gross margin in the third~~ quarter of ~~2006 increased $9.3 million to $228.6 million from $219.3 million in the third quarter of 2005.~~2006. As a percentage of total revenues, ~~however,~~ gross margin decreased ~~3.1 percentage points~~ to ~~58.6% from 61.7%.~~62.5% in 2007 compared to 67.9% in 2006. This result reflects the favorable impact of the rate stabilization plan on revenues offset by increased fuel and purchase power costs. Fuel costs, which include coal, gas, oil and emission allowance costs, increased by ~~$3.1~~$6.1 million, or 4%7%, in the ~~three months ended September 30, 2006, as~~first quarter of 2007 compared to the same period in ~~2005,~~2006 primarily ~~resulting from~~due to increased fuel prices and higher ~~market prices.~~generation output. Purchased power ~~costs~~ increased $22.4 million or 46%, primarily resulting from higher volumes of power purchased due to less generation being available relating to scheduled maintenance and forced outages, partially offset by lower market prices.

~~Gross margin in the first nine months of 2006 increased $49.4 million to $650.3 million from $600.9~~$26.9 million in the first ~~nine months~~quarter of 2005. As a percentage of total revenues, however, gross margin decreased by 0.3 percentage points to 62.8% from 63.1%. Fuel costs increased by $16.0 million or 7% in the nine months ended September 30, 2006, as a result of higher market prices and higher generation output as compared to 2005. Purchased power costs increased by $18.7 million or 16% in the first nine months of 20062007 compared to the same period in ~~2005~~2006 primarily resulting from increased charges of $22.3 million relating to higher ~~volumes~~purchased power volume and $4.4 million increase due to higher average market rates. The increase in purchase power volume was primarily the result of DPL and partner operated generating facilities being unavailable due to planned and unplanned outages. In addition, we purchase power ~~purchased.~~when market prices are below the marginal costs associated with our higher cost generating facilities.

DPL Inc. - - Operation and Maintenance ~~Expense~~

~~Operation~~

	Three Months Ended
	March 31,
$ in millions	2007 vs. 2006
Legal costs	$	4.0
Mark-to-market adjustments of restricted stock units (RSUs)	2.8
Power production costs	2.4
Service operations	1.9
Low-Income Assistance Program costs	0.4
Long-term and other incentive compensation	(2.5		)
Expenses for injuries and damages	(1.3		)
Pension and benefits	(0.9		)
RTO administrative fees	(0.8		)
Other, net	0.9
Total operation and maintenance expense	$	6.9

For the three months ended March 31, 2007, operation and maintenance expense increased ~~$12.7~~$6.9 million or ~~27% in the third quarter of 2006~~11% compared to the same period in ~~2005~~2006 primarily resulting from a ~~$3.8~~$4.0 million increase in ~~employee compensation and benefit expenses,~~legal fees largely related to the ~~majority of which was pension related; increased service operations costs of~~litigation with former executives; a $2.8 million ~~most~~increase in mark-to-market adjustments of ~~which was related to greater line clearance activity and electric system overhead and substation costs;~~restricted stock units; a ~~$2.6~~$2.4 million increase in power production costs ~~of which $1.5 million was due to credits received in 2005 that were not received in 2006~~primarily reflecting higher boiler maintenance and ~~increased~~plant operating expenses; ~~$1.4 million in PJM administrative fees; and increased low-income assistance program costs of $1.3 million.~~

~~Operation and maintenance expense increased $27.1 million or 19% in the first nine months of 2006 compared to the same period in the prior year primarily resulting from~~ a ~~$7.9~~$1.9 million increase in ~~employee compensation~~service operation costs resulting primarily from two major ice storms in February 2007; and ~~benefit expenses, most of which was related to pension expense and incentive accruals; increased service operations~~Low-Income Assistance Program costs of $4.8 million, the majority of which was related to greater line clearance activity; a $4.6 million increase in power production costs relating to $3.0 million of credits received in 2005 that were not received in 2006 and increased operating expenses; $4.2 million in PJM administrative fees, including $2.5 million deferred in 2005 by PUCO authority until rate relief was granted in

~~February 2006; increased low-income assistance program costs of $2.9 million; and a $1.8 million increase in reserves for injuries and damages.~~$0.4 million. These increases were partially offset by a ~~$1.1~~$2.5 million decrease in ~~Directors’~~long-term and ~~Officers’ liability insurance premiums.~~other incentive compensation; a $1.3 million decrease in expenses for injuries and damages; a $0.9 million decrease in pension and benefits expenses; and a $0.8 million decrease in RTO administrative fees.

DPL Inc. – Depreciation and Amortization

~~Depreciation~~For the first quarter of 2007, depreciation and amortization ~~increased $1.2~~expense decreased $3.4 million ~~and $3.9 million in the third quarter and in the first nine months of 2006, respectively,~~ compared to the ~~same periods in 2005 primarily reflecting a higher plant base.~~

~~General Taxes~~

~~General taxes decreased $1.4 million in the third~~first quarter of 2006 ~~compared to~~primarily reflecting the ~~third quarter~~absence of ~~2005 primarily due to a decrease in~~depreciation on the ~~Ohio kWh tax related to lower retail customer sales resulting from~~peaking units and the ~~milder weather experienced in 2006 compared to 2005 and a 2006 adjustment to payroll taxes.~~

~~General taxes decreased $1.1 million in the first nine months~~impact of 2006 as compared to the same period in 2005 primarily due to an Ohio kWh tax decrease related to lower retail customer sales resulting from the milder weather experienced in 2006 compared to 2005 and a payroll tax adjustment in 2006. These decreases were partially offset by higher taxes from the new State of Ohio Commercial Activities Tax that began in July 2005.asset retirements.

DPL Inc. – Amortization of Regulatory Assets

For the first quarter ~~ended September 30, 2006,~~of 2007, amortization of regulatory assets ~~was~~increased $1.8 million ~~higher than~~to $2.9 million compared to the same period in ~~2005 primarily reflecting $0.9 million for~~2006. The increase reflects the amortization of costs incurred to ~~modify the customer billing system for~~accommodate unbundled rates and electric choice ~~bills; $0.4 million for~~bills in the customer billing system; the amortization of PJM administrative fees deferred for the period October 2004 through January 2006; and ~~$0.4 million for~~ the amortization of incremental ~~costs incurred in 2004 and~~ 2004/2005 ~~for~~ severe ~~storms.~~storm costs.

DPL Inc. – Investment Income

~~Amortization of regulatory assets increased $3.7~~For the three months ended March 31, 2007, investment income decreased $3.4 million to $3.0 million from $6.4 million for the ~~nine months ended September 30, 2006~~same period in 2006. This decrease was primarily the result of lower cash and short-term investment balances in 2007 compared to 2006.

DPL Inc. – Interest Expense

Interest expense for the first quarter of 2007 decreased $3.2 million, or 12%, compared to the same period in the prior year primarily reflecting $1.8 million for the amortization of costs incurred to modify the customer billing system to accommodate unbundled rates and electric choice bills; $1.0 million for the amortization of deferred PJM administrative fees; $0.4 million for the amortization of deferred severe storm costs incurred in 2004 and 2005; and $0.3 million for the amortization of costs incurred to integrate us into the PJM system. We received orders2006 resulting from the ~~PUCO~~redemption of DPL $225 million 8.25% Senior Notes, the elimination of the interest penalty on the DPL $175 million 8% Senior Notes resulting from the delayed exchange offer registration of those securities and a higher capitalized interest of $2.8 million in the first quarter of 2007 compared to 2006 ~~approving the recovery of the customer billing costs and PJM administrative fees through rate riders beginning March~~associated with our major construction projects. These decreases were partially offset by interest expense associated with DP&L’s new $100 million 4.8% Series pollution control bonds issued September 13, 2006 and ~~February 2006, respectively. In July 2006, we received a PUCO order approving~~ the ~~recovery~~$65 million of the incremental storm costs through a rate rider beginning in August 2006. The customer billing costs rate rider is expected to be in place for five years, the PJM administrative fee rate rider is expected to collect deferred costs over a three-year period, and the storm costs rate rider is expected to be in place for two years.short-term borrowing against DP&L’s $220 million unsecured revolving credit facility.

~~Investment~~DPL Inc. – Other Income (deductions)

~~Investment~~

For the three months ended March 31, 2007, other income ~~decreased $0.9~~(deductions) was $1.1 million ~~during~~higher than the ~~third quarter of~~same period in 2006 ~~compared to the third quarter of 2005~~ primarily due to ~~lower interest~~gains of $0.7 million realized in the first quarter of 2007 from the sale of NOx allowances. There were no sales of pollution control emission allowances during 2006.

DPL Inc. – Income Tax Expense

For the first quarter of 2007, income ~~earned from cash on deposit.~~

~~Investment income remained stable for the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005, increasing only $0.2~~taxes increased $1.3 million, or 4%.

Other Income (Deductions)

~~Other income (deductions) remained relatively stable in the third quarter of 2006 compared to the third quarter of 2005, decreasing only $0.6 million that was comprised of various minor items.~~

~~Other income (deductions) for the nine months ended September 30, 2006 decreased $4.4 million~~, compared to the same period in ~~2005. This decrease is~~2006, primarily ~~attributable to $12.3 million~~reflecting an increase in ~~gains recognized on the sale of pollution control emission allowances during 2005, partially offset by $7.0 million in reduced investment management fees.~~

~~Charge for Early Redemption of Debt~~

~~For the three months~~pre-tax book income and nine months ended September 30, 2005, we recorded a $4.1 million charge resulting from premiums paid for the early redemption of debt, including the write-off of unamortized debt expense associated with the refinancing of our pollution control debt at reduced interest rates. There was no such activity in 2006.

~~Interest Expense~~

Interest expense decreased $4.6 million or 46% for the three months ended September 30, 2006 compared to the same period in 2005, primarily relating to $3.6 million of greater capitalized interest resulting from increased capital expenditures for pollution control equipment at the generating plants and $1.7 million of lower interest expense reflecting the 2005 refinancing of pollution control bonds at reduced interest rates and lower debt service charges associated with DPL Inc.’s early retirement of ESOP debt.

~~Interest expense decreased $13.2 million or 43%~~an increase in the first nine months of 2006 compared to the first nine months of 2005, primarily relating to $8.0 million of increased capitalized interest resulting from higher pollution control capital expenditures at the generating plants and $5.3 million of lower interest expense reflecting the refinancing of pollution control bonds at reduced interest rates in 2005, lower debt service charges associated with DPL Inc.’s early retirement of ESOP debt, and the elimination of the interest penalty resulting from the delayed exchange offer of the $470 million 5.125% series First Mortgage Bonds. See Note 6 of Notes to Consolidated Financial Statements.

Income Tax Expense

~~Income taxes increased $1.3 million~~accrual for ~~the third quarter of 2006 compared to the same period in 2005 reflecting higher book income~~open tax years, partially offset by a decrease in the effective tax rate ~~related to~~resulting from the phase-out of the Ohio Franchise Tax.

RESULTS OF OPERATIONS – The Dayton Power and Light Company (DP&L)

Income ~~taxes~~Statement Highlights – DP&L

		Three Months Ended
		March 31,
$ in millions		2007			2006

Revenues:
Retail		$	271.8		$	251.0
Wholesale		90.0			70.4
RTO ancillary		15.7			17.7
Total revenues		$	377.5		$	339.1

Less:	Fuel	$	89.5		$	83.9
	Purchased power (a)	52.7			25.6
Gross margins (b)		$	235.3		$	229.6

Gross margins as a percentage of
revenues		62.3		%	67.7		%

Operating income		$	114.7		$	115.5

(a)Purchased power includes RTO ancillary charges of $12.4 million and $12.2 million for the three months ended March 31, 2007 and 2006, respectively.

DP&L – Revenues

	Three Months Ended
	March 31,
$ in millions	2007 vs. 2006

Retail
Rate	$	7.5
Volume	13.4
Other miscellaneous	(0.1		)
Total retail change	$	20.8

Wholesale
Rate	$	(6.3	)
Volume	25.9
Total wholesale change	$	19.6

RTO ancillary & other
RTO services	$	(2.0	)

Total revenues	$	38.4

For the first quarter of 2007, revenues increased ~~$6.3~~11% to $377.5 million compared to $339.1 million in the first quarter of 2006, reflecting an increase of $38.4 million. This increase was primarily the result of increased sales volume for both retail and wholesale sales and higher average retail rates, partially offset by lower average wholesale rates and ancillary revenues associated with participation in a RTO. Retail revenues increased $20.8 million resulting from a 5% increase in sales volume driven by colder weather and a 3% increase in average retail rates related to the Rate Stabilization Plan surcharge and other regulated asset recovery riders. These increases resulted in a $13.4 million sales volume variance and a $7.5 million price variance for retail revenues. Wholesale revenues increased $19.6 million for the first ~~nine months~~quarter of ~~2006~~2007 primarily due to a 37% increase in sales volume (301 GWh) and a 7% decrease in wholesale average rates. This resulted in a $25.9 million sales volume variance an offsetting $6.3 million price volume variance for wholesale revenues. RTO ancillary revenues decreased $2.0 million, or 11%, for the first quarter of 2007 to $15.7 million compared to the first ~~nine months~~quarter of ~~2005~~2006. RTO ancillary revenues primarily consist of compensation for use of DP&L’s transmission assets, regulation services, reactive supply and operating reserves.

DP&L - Margins, Fuel and Purchased Power

For the first quarter of 2007, gross margin of $235.3 million increased $5.7 million, or 2%, from $229.6 million in the first quarter of 2006. As a percentage of total revenues, gross margin decreased to 62.3% in 2007 compared to 67.7% in 2006. This result reflects the increasing costs of fuel and purchased power despite the favorable impact on revenues of the Rate Stabilization Plan surcharge. Fuel costs, which include coal, gas, oil and emission allowance costs, increased by $5.6 million, or 7%, in the first quarter of 2007 compared to the same period in 2006 primarily due to increased fuel prices and higher generation output. Purchased power increased $27.1 million in the first quarter of 2007 compared to the same period in 2006 primarily resulting from increased charges of $22.5 million relating to higher purchased power volumes and a price variance of $4.4 million reflecting higher ~~book~~average market rates. The increase in purchase power volume was primarily the result of DP&L and partner operated generating facilities being unavailable due to planned and unplanned outages. In addition, we purchase power when market prices are below the marginal costs associated with our higher cost generating facilities.

DP&L – Operation and Maintenance

	Three Months Ended
	March 31,
$ in millions	2007 vs. 2006
Mark-to-market adjustments of restricted stock units (RSUs)	$	2.6
Power production costs	2.4
Service operations	1.9
Legal fees	0.9
Low-Income Assistance Program costs	0.7
Long-term and other incentive compensation	(2.3		)
Expenses for injures and damages	(1.3		)
Pension and benefits	(0.8		)
RTO administrative fees	(0.8		)
Other, net	1.9
Total operation and maintenance expense	$	5.2

For the three months ended March 31, 2007, operation and maintenance expense increased $5.2 million or 10% compared to the same period in 2006 primarily resulting from a $2.6 million increase in mark-to-market adjustments of restricted stock units; a $2.4 million increase in power production costs primarily reflecting higher boiler maintenance and plant operating expenses; a $1.9 million increase in service operation costs resulting primarily from two major ice storms in February 2007; a $0.9 million increase in legal fees and Low-Income Assistance Program costs of $0.7 million. These increases were partially offset by a $2.3 million decrease in long-term and other incentive compensation; a $1.3 million decrease in expenses for injuries and damages a $0.8 million decrease in pension and benefits expenses; and a $0.8 million decrease in RTO administrative fees.

DP&L – Depreciation and Amortization

Depreciation and amortization decreased $0.6 million in the first quarter of 2007, compared to the same period in 2006, primarily reflecting the impact of asset retirements.

DP&L – Amortization of Regulatory Assets

For the three months ended March 31, 2007, amortization of regulatory assets increased $1.8 million to $2.9 million compared to the same period in 2006. The increase reflects the amortization of costs incurred to accommodate unbundled rates and electric choice bills in the customer billing system; the amortization of PJM administrative fees deferred for the period October 2004 through January 2006; and the amortization of incremental 2004/2005 severe storm costs.

DP&L – Interest Expense

Interest expense decreased $1.3 million or 19% in the three months ended March 31, 2007, compared to the same period of 2006, primarily relating to $2.8 million of increased capitalized interest resulting from pollution control capital expenditures at the generating plants, partially offset by increased interest of $1.2 million related to the $100 million 4.8% Series pollution control bonds issued in September 2006 and $0.3 million of interest related to the $65 million draw on our revolving credit facility in February 2007.

DP&L – Other Income (deductions)

For the three months ended March 31, 2007, other income ~~offset~~(deductions) was $1.3 million higher than the same period in ~~part by~~2006 primarily due to gains of $0.7 million realized in the first quarter of 2007 from the sale of NOx allowances and $0.3 million of greater gains realized in 2007 compared to 2006 related to derivative activity. There were no sales of pollution control emission allowances during 2006.

DP&L – Income Tax Expense

For the first quarter of 2007, income taxes decreased $1.5 million, or 3%, compared to the same period in 2006, primarily reflecting a decrease in the effective tax rate ~~related to~~resulting from the phase-out of the Ohio Franchise Tax that was partially offset by an increase in pre-tax book income and ~~a decrease~~an increase in the accrual for open tax ~~reserve.~~years.

2640

~~FINANCIAL~~0FINANCIAL CONDITION, LIQUIDITY AND CAPITAL ~~RESOURCES~~REQUIREMENTS

~~Our~~DPL’s financial condition, liquidity and capital requirements, includes the consolidated results of DP&L and all of DP&L’s consolidated subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

DPL’s Cash Position

DPL’s cash and cash equivalents totaled ~~$57.7~~$106.4 million at ~~September 30, 2006,~~March 31, 2007, compared to ~~$46.2~~$262.2 million at December 31, ~~2005, an increase~~2006, a decrease of ~~$11.5~~$155.8 million. ~~This increase~~In addition, DPL had no restricted funds held in trust at March 31, 2007 in comparison to $10.1 million at December 31, 2006 related to the issuance of the $100 million pollution control bonds. The decrease in cash and cash equivalents was primarily attributed to ~~$270.7~~the retirement of the $225.0 million DPL 8.25% Senior Notes, $80.5 million in capital expenditures and $27.8 million in dividends paid on common stock. The decrease caused by such payments was partially offset by $97.1 million in cash generated from operating activities, ~~and $23.1~~$65.0 million of short-term debt issued against the $220.0 million unsecured revolving credit agreement, and $10.1 million of restricted funds drawn to fund pollution control capital expenditures.

DP&L’s Cash Position

DP&L’s cash and cash equivalents totaled $53.4 million at March 31, 2007, compared to $46.1 million at December 31, 2006, an increase of $7.3 million. The increase in cash and cash equivalents was primarily attributed to $137.0 million in cash generated from operating activities, $65.0 million in a draw on our revolving credit facility and $10.1 million in restricted ~~funds,~~fund draws to finance pollution control capital expenditures at our generating plants, partially offset by ~~$281.7 million in capital expenditures and $0.6~~$125.0 million in dividends paid on ~~preferred stock.~~common stock to our parent DPL and $79.6 million in capital expenditures.

~~We generated net~~Operating Activities

For the quarters ended March 31, 2007 and 2006, cash flows from operating activities of $270.7 million and $273.5 million for the first nine months of 2006 and 2005, respectively. The net cash provided by operating activities in both years was primarily the result of operating profitability; and by cash provided by certain assets and liabilities. operations were as follows:

Net Cash provided by Operating Activities
	Quarters Ended March 31,
	2007		2006

DPL	$	97.1	$	91.6

DP&L	$	137.0	$	143.5

The tariff-based revenue from our energy business continues to be the principal source of cash from operating activities. Management believes that the diversified retail customer mix of residential, commercial, and industrial classes coupled with the rate relief approved by the PUCO for 2006 and beyond provides us with a reasonably predictable gross cash flow from ~~utility~~ operations.

DPL’s Cash provided by Operating Activities

DPL generated net cash from operating activities of $97.1 million and $91.6 million in the first quarter of 2007 and 2006, respectively. The net cash provided by operating activities in the first quarter of 2007 was primarily the result of operating profitability, partially offset by an increase in cash used for working capital, specifically payments for interest. The net cash provided by operating activities for 2006 was primarily the result of operating profitability, partially offset by cash used for working capital, specifically taxes and inventories.

DP&L’s Cash provided by Operating Activities

DP&L generated net cash from operating activities of $137.0 million and $143.5 million in the first quarter of 2007 and 2006, respectively. The net cash provided by operating activities for both years was primarily the result of operating profitability as well as cash generated from working capital, specifically from accounts payable and accrued taxes.

Investing Activities

For the quarters ended March 31, 2007 and 2006, cash flows from investing activities were as follows:

Net Cash used for Investing Activities
	Quarters Ended March 31,
	2007			2006

DPL	$	(80.5	)	$	(110.9	)

DP&L	$	(79.6	)	$	(110.5	)

DPL’s Cash used for Investing Activities

DPL’s net cash used for investing activities was $80.5 million and $110.9 million in the first quarter of 2007 and 2006, respectively. Net cash flows used for investing activities ~~were $281.7 million and $137.1 million~~ in the ~~nine months ended September 30, 2006 and 2005, respectively,~~first quarter of 2007 were related to ~~provide funding for~~ capital expenditures.

Net cash flows ~~provided by financing~~used for investing activities for the quarter ended March 31, 2006 were related to capital expenditures; the sale and purchases of investments had no effect on investing activities for the quarter.

DP&L’s Cash used for Investing Activities

DP&L’s net cash flows used for investing activities were ~~$22.5~~$79.6 million and $110.5 million in the first ~~nine months~~quarter of 2007 and 2006, ~~compared~~respectively. Net cash flows used for investing activities for both years were related to capital expenditures.

Financing Activities

For the quarters ended March 31, 2007 and 2006, cash flows from financing activities were as follows:

Net Cash used for Financing Activities
	Quarters Ended March 31,
	2007			2006

DPL	$	(172.4	)	$	(185.4	)

DP&L	$	(50.1	)	$	(0.2	)

DPL’s Cash used for Financing Activities

DPL’s net cash flows used for financing activities for the first quarter of ~~$83.3~~2007 were $172.4 million compared to the first quarter of 2006 of $185.4 million. Net cash flows used for financing activities in the first quarter of 2007 were the result of cash used to redeem the $225 million 8.25% Senior Notes on March 1, 2007 and to pay dividends to stockholders of $27.8 million partially offset by cash received from borrowing $65.0 million against the $220 million unsecured revolving credit facility and the $10.1 million of restricted funds held in trust. Net cash flows used for financing activities in the first quarter of 2006 were the result of cash used to repurchase $155.3 million of common stock and pay dividends to common stockholders of $30.2 million.

DP&L’s Cash used for Financing Activities

DP&L’s net cash flows used for financing activities were $50.1 million and $0.2 million in the first ~~nine months~~quarters of ~~2005. Net cash flows provided by financing activities for the nine months ended September 30,~~2007 and 2006, were primarily the result of $23.1 million of draws from funds held by the trustee to finance our solid waste pollution control capital expenditures, partially offset by $0.6 million of dividends on preferred stock.respectively. Net cash flows used for financing activities for 2007 were the ~~nine months ended September 30, 2005 were~~result of cash used to ~~retire long-term debt and~~ pay common stock dividends ~~on common~~to our parent DPL of $125.0 million and preferred ~~stock. These uses~~dividends to third parties of ~~cash were~~$0.2 million, partially offset by $65.0 million from a draw on our revolving credit facility and $10.1 million of withdrawals from the ~~issuance~~trust set up as a result of ~~long-term debt.~~issuing the $100 million 4.8% Series pollution control bonds in September 2006. Net cash flows used for financing activities in 2006 were for the payment of preferred dividends.

WeDPL and DP&L have obligations to make future payments for capital expenditures, debt agreements, lease agreements and other long-term purchase obligations, and have certain ~~other~~ contingent ~~commitments.~~commitments such as guarantees. We believe our cash flows from operations, the credit facilities (existing or future arrangements), the senior notes and other short- and long-term debt financing, will be sufficient to satisfy our future working capital, capital expenditures and other financing requirements for the foreseeable future. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures and

other business and risk ~~factors.~~factors described in Item 1a of our fiscal 2006 Form 10-K and Part II, Item 1a of this Form 10-Q. If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities, the senior notes and other long-term debt, we may be required to refinance all or a portion of our existing debt or seek additional financing alternatives. A discussion of each of our critical liquidity commitments is outlined below.

Capital Requirements

~~Capital expenditures~~DPL’s construction additions were ~~$281.7~~$78.9 million and ~~$137.1~~$94.8 million ~~for~~in the first ~~nine months~~quarter of ~~2006~~2007 and ~~2005,~~2006, respectively, and are expected to approximate ~~an aggregate amount of $360~~$345 million in ~~2006.~~2007.

DP&L’s construction additions were $78.0 million and $94.4 million in the first quarter of 2007 and 2006, respectively, and are expected to approximate $345 million in 2007. Planned construction additions for ~~2006 primarily~~2007 relate to ~~our~~DP&L’s environmental compliance program, power plant equipment and ~~our~~its transmission and distribution system.

Capital projects are subject to continuing review and are revised in light of changes in financial and economic conditions, load forecasts, legislative and regulatory developments and changing environmental standards, among other factors. ~~For~~Over the ~~period 2006~~next three years, DPL, through ~~2008, we are~~its subsidiary DP&L, is projecting to spend an estimated ~~$820~~$645 million in capital projects, ~~(previously $810 million),~~ approximately ~~57%~~40% of which is to meet changing environmental standards. In our Form 10-K as of December 31, 2006, we reported our estimated capital spending to be approximately $605 million. This increase is due primarily to increases in the flue gas desulfurization projects at both DPL-operated and partner-operated generating plants. Our ability to complete ~~our~~ capital projects and the reliability of future service will be affected by our financial condition, the availability of internal funds and ~~external funds at~~the reasonable cost ~~and adequate and timely return on these capital investments.~~of external funds. We expect to finance our construction additions in ~~2006~~2007 with a combination of cash on hand, short-term financing, tax-exempt debt and ~~internally-generated funds.~~cash flows from operations.

Debt and Debt Covenants

~~At September 30, 2006, our scheduled maturities~~On August 29, 2005, DPL redeemed $200 million of ~~capital lease obligations, over~~its 8.25% Senior Notes due 2007. The remaining $225 million of these notes were retired March 1, 2007, the next five years are $0.2 million for the remainder of 2006, $0.9 million in 2007, $0.7 million in 2008, $0.7 million in 2009 and $0.7 million in 2010. Substantially all of our property is subject to the mortgage lien securing the first mortgage bonds. Debt maturities in 2006 are expected to be financed with internal funds. Certain debt agreements contain reporting and financial covenants for which we are in compliance as of September 30, 2006 and expect to be in compliance during the near term.maturity date.

Issuance of additional amounts of first mortgage bonds is limited by the provisions of our mortgage; however, management believes that we continue to have sufficient capacity to issue first mortgage bonds to satisfy our requirements in connection with our construction programs. The amounts and timing of future financings will

~~depend upon market and other conditions, interest rate increases, levels of electric sales and construction plans.~~

We have a $100 million unsecured revolving credit agreement that is renewable annually and expires on May 30, 2010. This facility may be increased up to $150 million. The facility contains one financial covenant: our total debt to total capitalization ratio is not to exceed 0.65 to 1.00. This covenant is currently met. We had no outstanding borrowings under this credit facility at September 30, 2006. Fees associated with this credit facility are approximately $0.2 million per year. Changes in credit ratings, however, may affect fees and the applicable interest rate for our revolving credit agreement.

During the first quarter of 2006, the Ohio Department of Development (ODOD) awarded usDP&L the ability to issue over the next three years up to $200 million of qualified tax-exempt financing from the ODOD’s 2005 volume cap carryforward. ~~The financing is to be used to partially fund the ongoing FGD projects. The PUCO approved our application for this additional financing on July 26, 2006.~~

On September 13, 2006, the Ohio Air Quality Development Authority (OAQDA) issued $100 million of 4.80% fixed interest rate OAQDA Revenue ~~Bonds~~bonds 2006 Series A due September 1, 2036. In turn, DP&L ~~then~~ borrowed these funds from the OAQDA. Payment of principal and interest on the Bonds when due is insured by an insurance policy issued by Financial Guaranty Insurance Company. We are using the proceeds from these borrowings to assist in financing our portion of the costs of acquiring, constructing and installing certain solid waste disposal facilities comprising air quality facilities at Miami Fort, Killen and Stuart Generating Stations. These ~~facilities are currently under construction and the proceeds from the borrowings have been~~funds were placed in escrow with a trustee and, as of April 3, 2007, DP&L has drawn out the ~~trustee (the Bank of New York) and are being drawn upon only as facilities are built and qualified costs incurred. In the event any~~entirety of the ~~proceeds are not drawn, we would eventually be required to return the unused proceeds to bondholders. We expect to draw down all of the proceeds from this borrowing over the next year.~~funds.

~~We expect~~DP&L expects to use the remaining $100 million of volume cap carryforward prior to the end of 2008. ~~We are~~DP&L is planning to issue in conjunction with the OAQDA ~~another~~this $100 million of tax-exempt bonds to finance the remaining solid waste disposal facilities at Miami Fort, Killen, Stuart and Conesville Generating Stations.

On ~~February 17,~~November 21, 2006, ~~we renewed our $10~~DP&L entered into a new $220 million ~~Master Letter~~unsecured revolving credit agreement replacing its $100 million facility. This new agreement has a five year term that expires on November 21, 2011 and that provides DP&L with the ability to increase the size of ~~Credit Agreement~~the facility by an additional $50 million at any time. The facility contains one financial covenant: DP&L’s total debt to total capitalization ratio is not to exceed 0.65 to 1.00. This covenant is currently met. As of March 31, 2007, DP&L has borrowed $65 million from this facility for ~~one year~~ninety-two days at 5.63%. Fees associated with this credit facility are approximately $0.2 million per year. Changes in credit ratings, however, may affect fees and the applicable interest. This revolving credit agreement also contains a ~~financial lending institution. This agreement supports performance assurance needs in the ordinary course~~$50 million letter of ~~business. We have~~credit sublimit. DP&L has certain contractual agreements for the sale and purchase of power, fuel and related energy services that contain credit rating related clauses allowing the counter parties to seek additional surety under certain conditions. As of ~~September 30, 2006, we~~March 31, 2007, DP&L had ~~two~~no outstanding letters of credit against the facility.

On February 24, 2005, DP&L entered into an amendment to extend the term of its Master Letter of Credit Agreement with a financial lending institution for ~~a total~~one year and to reduce the maximum dollar volume of ~~$2.2~~letters of credit to $10 million. On February 17, 2006, DP&L renewed its $10 million agreement for one year. This agreement supports performance assurance needs in the ordinary course of business. In February 2007, DP&L opted not to renew this agreement.

Issuance of additional amounts of first mortgage bonds by DP&L is limited by the provisions of its mortgage; however, management believes that DP&L continues to have sufficient capacity to issue first mortgage bonds to

satisfy its requirements in connection with its current refinancing and construction programs. The amounts and timing of future financings will depend upon market and other conditions, rate increases, levels of sales and construction plans.

There are no inter-company debt collateralizations or debt guarantees between usDPL and ~~our parent.~~its subsidiaries. None of ~~our~~the debt obligations of DPL or DP&L are guaranteed or secured by affiliates and no cross-collateralization exists between any subsidiaries.

There was no change to our debt covenants as described in our Form 10-K as of December 31, 2006.

Credit Ratings

Currently, ~~our~~DPL’s senior unsecured and DP&L’s senior secured debt credit ratings are as follows:

	~~Rating~~DPL Inc.	DP&L		Outlook	Effective

Fitch Ratings	ABBB+	A+		Stable	~~April 2006~~
			March 2007
Moody’s Investors Service	Baa3	A3		Positive	June 2006

Standard & Poor’s Corp.	~~BBB~~BBB-	~~Positive~~BBB+		~~August 2006~~Stable	February 2007

Off-Balance Sheet Arrangements

WeDPL and DP&L do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Contractual Obligations and Commercial Commitments

We enter into various contractual obligations and other ~~long-term obligations~~commercial commitments that may affect the liquidity of our operations. At ~~September 30, 2006,~~March 31, 2007, these include:

Contractual Obligations

Payment Year

$ in millions

Total

Less than 1
Year

2 - 3 Years

4 - 5 Years

More than
5 Years

Long-term debt

$
783.1

$
—

$
—

$
—

$
783.1

Interest payments

581.7

39.1

78.3

78.3

386.0

Pension and postretirement payments

249.2

33.4

46.0

47.2

122.6

Capital leases

3.2

1.1

1.4

0.7

—

Operating leases

0.5

0.3

0.2

—

—

Fuel and limestone contracts (a)

586.8

86.7

315.5

97.5

87.1

Other long-term obligations

27.5

14.6

9.8

3.1

—

Total contractual obligations

$
2,232.0

$
175.2

$
451.2

$
226.8

$
1,378.8

				Payment Year
				Less Than			2 - 3			4 - 5			More Than
$ in millions		Total			1 Year			Years			Years			5 Years
DPL Inc.

Long-term debt	$		1,549.9	$		—	$		275.0	$		297.4	$		977.5
Interest payments	1,074.3			71.8			170.7			144.0			687.8
Pension and postretirement payments	230.1			16.5			45.2			46.5			121.9
Capital leases	2.8			0.7			1.5			0.6			—
Operating leases	0.7			0.3			0.3			0.1			—
Coal contracts (a)	467.8			246.5			110.5			110.8			—
Limestone contracts	58.4			1.5			9.4			10.8			36.7
Other contractual obligations	436.7			370.0			57.1			9.6			—
Total contractual obligations	$		3,820.7	$		707.3	$		669.7	$		619.8	$		1,823.9


DP&L

Long-term debt	$		783.2	$		—	$		—	$		—	$		783.2
Interest payments	562.2			29.4			78.3			78.3			376.2
Pension and postretirement payments	230.1			16.5			45.2			46.5			121.9
Capital leases	2.8			0.7			1.5			0.6			—
Operating leases	0.7			0.3			0.3			0.1			—
Coal contracts (a)	467.8			246.5			110.5			110.8			—
Limestone contracts	58.4			1.5			9.4			10.8			36.7
Other contractual obligations	436.7			370.0			57.1			9.6			—
Total contractual obligations	$		2,541.9	$		664.9	$		302.3	$		256.7	$		1,318.0

(a)DP&L ~~operated units.~~

-operated units

Long-term debt:

~~Long-term~~DPL’s long-term debt, as of ~~September 30, 2006,~~March 31, 2007, consists of ~~our~~DP&L’s first mortgage bonds, tax-exempt pollution control bonds, DPL unsecured notes and includes current maturities and unamortized debt discounts.

DP&L’s long-term debt, as of March 31, 2007, consists of first mortgage bonds, tax-exempt pollution control bonds and includes an unamortized debt discount. ~~(See~~

See Note 69 of Notes to Condensed Consolidated Financial Statements.)

Interest payments:

Interest payments associated with the long-term debt is described above.

Pension and postretirement payments:

As of ~~September 30, 2006, we~~March 31, 2007, DP&L had estimated future benefit payments as outlined in Note 47 of Notes to Condensed Consolidated Financial Statements. These estimated future benefit payments are projected through 2016.

Capital leases:

As of ~~September 30, 2006, we~~March 31, 2007, DP&L had two capital leases that expire in November 2007 and September 2010.

Operating leases:

As of ~~September 30, 2006, we~~March 31, 2007, DPL and DP&L had several operating leases with various terms and expiration dates. Not included in this total is approximately ~~$88 thousand~~$88,000 per year related to ~~right-of-way~~right of way agreements that are assumed to have no definite expiration dates.

~~Fuel and limestone~~Coal contracts:

~~We have~~DP&L has entered into various long-term coal contracts to supply portions of ~~our~~its coal requirements for ~~our~~its generating ~~plants and a long-term contract to supply limestone for the operation of our flue gas desulfurization (FGD) units. Coal contract~~plants. Contract prices are subject to periodic adjustment and have features that limit price escalation in any given year.

~~A new long-term barge agreement was executed~~Limestone contracts:

DP&L has entered into various limestone contracts to supply limestone for ~~five years beginning September 2006.~~its generating facilities.

Other ~~long-term obligations:~~Contractual Obligation:

As of ~~September 30, 2006, we~~March 31, 2007, DPL and DP&L had various other contractual obligations including non-cancelable contracts to purchase goods and services with various terms and expiration dates.

We enter into various commercial commitments, which may affect the liquidity of our operations. At ~~September 30, 2006,~~March 31, 2007, these include:

Credit facilities:

~~We have a~~In November 2006, DP&L replaced its previous $100 million ~~364-day unsecured~~revolving credit agreement with a $220 million five year facility that ~~is renewable annually and~~ expires on ~~May 30, 2010.~~November 21, 2011. DP&L has the ability to increase the size of the facility by an additional $50 million at any time. At ~~September 30, 2006,~~March 31, 2007, there ~~were no borrowings~~was $65 million outstanding under this credit ~~agreement. The facility may be increased up to $150 million.~~agreement due May 29, 2007 at 5.63% interest.

~~Guarantee:~~Guarantees:

~~We own~~DP&L owns a 4.9% equity ownership interest in an electric generation company. As of ~~September 30, 2006, we~~March 31, 2007, DP&L could be responsible for the repayment of 4.9%, or $21.8 million, of a $445 million debt obligation that matures in 2026.

	2007		2008		2009		2010
Darby	$	30.6	$	23.0	$	15.3	$	7.7

Greenville	$	14.8	$	11.1	$	7.4	$	3.7

MARKET RISK

As a result of ~~our~~its operating, investing and financing activities, we are subject to certain market risks including ~~fluctuations in interest rates and~~ changes in commodity prices for electricity, coal, environmental emissions and ~~gas.~~gas and fluctuations in interest rates. Commodity pricing exposure includes the impacts of weather, market demand, ~~potential coal supplier contract breaches or defaults,~~ increased competition and other economic conditions. For purposes of potential risk analysis, we use sensitivity ~~analyses~~analysis to quantify potential impacts of market rate changes on the results of operations. The sensitivity ~~analyses represent~~analysis represents hypothetical changes in market values that may or may not occur in the future.

Commodity Pricing Risk

Approximately ~~22%~~15% of ~~our~~DPL’s and 24% of DP&L’s first ~~nine months 2006~~quarter of 2007 electric revenues were from sales of excess energy and capacity in the wholesale market. Energy and capacity in excess of the needs of existing retail customers are sold inon the wholesale market when we can identify opportunities with positive margins. As of ~~September 30, 2006,~~March 31, 2007, a hypothetical increase or decrease of 10% in DPL’sannual wholesale revenues could result in approximately a ~~$19~~$14.0 million increase or decrease to annual net income, assuming no increases or decreases in fuel and purchased power costs. As of March 31, 2007, a hypothetical increase or decrease of 10% in DP&L’s annual wholesale revenues could result in approximately a $23.0 million increase or decrease to annual net income, assuming no increases or decreases in fuel and purchased power costs.

DPL’s fuel (including coal, gas, oil and emission allowances) and purchased power costs as a percent of total operating costs in the first quarter of 2007 and 2006 were 52% and 46%, respectively. DP&L’s fuel (including coal, gas, oil and emission allowances) and purchased power costs as a percent of total operating costs was 54% and 49% in the first quarter of 2007 and 2006, respectively. We have ~~approximately 100% and 83%~~substantially all of the total expected coal volume needed to meet our retail and firm wholesale sales requirements for ~~2006 and~~ 2007 ~~respectively,~~ under contract. The majority of our contracted coal is purchased at fixed prices. Some contracts provide for periodic adjustment and some are priced based on market indices. Substantially all contracts have features that limit price escalations in any given year. Our ~~2006 emission allowance (SO~~2 ~~and NO~~x) consumption ~~is expected to be similar to 2005. Our holdings~~ of SO2 ~~and NO~~x allowances ~~are approximately equal~~should decline in 2007 due to ~~our expected needs from 2006 through 2010. There may be exchanges of allowances between future years to balance our 2006-2010 position.~~planned emission control upgrades. We do not expect to purchase SO2 allowances ~~outright~~ for ~~2006.~~2007. The exact consumption of SO2 ~~and NO~~xallowances will depend on market prices for power, ~~and~~ availability of our ~~generating units. The utilization~~generation units, the timing of SO2 ~~allowances will depend upon~~emission control equipment upgrade completion, and the actual sulfur content of the coal burned.DP&L does not plan to purchase NOx allowances for 2007. Fuel costs are impacted by changes in volume and price and are driven by a number of variables including weather, reliability of coal deliveries, scheduled outages and generation plant mix. ~~Fuel~~Based on weather normalized sales and our co-owners’ projections, fuel costs are forecasted to ~~increase approximately 7% in 2006 compared to 2005 and are forecasted to increase approximately 5%~~be flat in 2007 compared to 2006. ~~This forecast assumes coal prices will increase approximately 10% in 2006 as compared to 2005 and increase approximately 5% in 2007 as compared to 2006.~~

Purchased power costs depend, in part, upon the timing and extent of planned and unplanned outages of our generating capacity. We will purchase power on a discretionary basis when wholesale market conditions provide opportunities to obtain power at a cost below our internal production costs. As of ~~September 30, 2006,~~March 31, 2007, a hypothetical increase or decrease of 10% in DPL’sannual fuel and purchased power costs ~~excluding Regional Transmission Organization (RTO) services,~~ could result in approximately a ~~$29~~$33.0 million increase or decrease to annual net ~~income.~~

income, assuming no increase or decreases in sale revenues. As of March 31, 2007, a hypothetical increase or decrease of 10% in DP&L’s annual fuel and purchased power costs could result in approximately a $34.0 million increase or decrease to annual net income, assuming no increase or decreases in sale revenues.

Interest Rate Risk

As a result of our normal borrowing and leasing activities, our results are exposed to fluctuations in interest rates, which we manage through our regular financing activities. We maintain both cash on deposit and investments in cash equivalents that may be affected by adverse interest rate fluctuations. Our long-term debt represents ~~publicly-held~~publicly and privately held secured and unsecured notes and debentures with fixed interest rates. At ~~September 30, 2006,~~March 31, 2007, we had no$65 million in short-term ~~borrowings.~~borrowings at 5.63% against the $220 million unsecured revolving credit agreement.

The carrying value of ~~our~~DPL’s debt was ~~$786.3~~$1,552.7 million at ~~September 30, 2006,~~March 31, 2007, consisting of ~~our~~DP&L’s first mortgage bonds, ~~our~~DP&L’s tax-exempt pollution control bonds, our unsecured notes and ~~our~~DP&L’s capital leases. The fair value of this debt was ~~$789.5~~$1,592.1 million, based on current market prices or discounted cash flows using current rates for similar issues with similar terms and remaining maturities. The principal cash repayments and related weighted average interest rates by maturity date for long-term, fixed-rate debt at ~~September 30, 2006~~March 31, 2007, are as follows:

Long-term Debt

Expected Maturity

Amount

Date

($ in millions)

Average Rate

2006

$
0.2

6.0
%
2007

0.9

6.1
%
2008

0.7

6.9
%
2009

0.7

6.9
%
2010

0.7

6.9
%
Thereafter

783.1

5.0
%
Total

$
786.3

5.0
%

Fair Value

$
789.5

	DPL’s Long-term Debt
Expected Maturity	Amount
Date	($ in millions)		Average Rate
2007	$	0.7	6.2	%
2008	100.7		6.3	%
2009	175.7		8.0	%
2010	0.6		6.9	%
2011	297.4		6.9	%
2012	—		—
Thereafter	977.6		5.6	%
Total	$	1,552.7	6.2	%

Fair Value	$	1,592.1

The carrying value of DP&L’s debt was $786.0 million at March 31, 2007, consisting of our first mortgage bonds, our tax-exempt pollution control bonds, and our capital leases. The fair value of this debt was $786.2 million, based on current market prices or discounted cash flows using current rates for similar issues with similar terms and remaining maturities. The principal cash repayments and related weighted average interest rates by maturity date for long-term, fixed-rate debt at March 31, 2007, are as follows:

	DP&L’s Long-term Debt
Expected Maturity	Amount
Date	($ in millions)		Average Rate
2007	$	0.7	6.2	%
2008	0.7		6.9	%
2009	0.7		6.9	%
2010	0.6		6.9	%
2011	—		—
2012	—		—
Thereafter	783.3		5.0	%
Total	$	786.0	5.0	%

Fair Value	$	786.2

Debt maturities for DPL and DP&Lin ~~2006~~2007 are expected to be financed with a combination of short-term borrowings, tax-exempt pollution control bonds and internal funds.

CRITICAL ACCOUNTING ~~POLICIES AND~~ ESTIMATES

~~We prepare our~~DPL’s and DP&L’s condensed consolidated financial statements are prepared in accordance with ~~accounting principles generally accepted in~~GAAP. In connection with the ~~United States of America (GAAP).~~

~~The~~ preparation of these financial statements, ~~in conformity with GAAP requires us~~our management is required to make assumptions, estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and ~~liabilities,~~ the related disclosure of contingent ~~assets~~liabilities. These assumptions, estimates and ~~liabilities~~judgments are based on our historical experience and assumptions that we believed to be reasonable at the ~~date~~time. However, because future events and their effects cannot be determined with certainty, the determination of estimates requires the ~~financial statements, and the revenue and expenses~~exercise of ~~the period reported.~~ judgment. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain.

Different estimates could have a material effect on our financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially different amounts being reported under different conditions or circumstances. Significant items subject to such ~~estimates and~~ judgments ~~include~~include: the carrying value of property, plant and equipment; unbilled revenues; the valuation of ~~derivative instruments;~~insurance and claims costs; valuation allowances for receivables and deferred income taxes; the valuation of reserves ~~recorded for income tax exposures;~~related to current litigation; ~~regulatory proceedings and orders;~~ and assets and liabilities related to employee benefits. Actual results may differ from those estimates. Refer to our ~~2005~~2006 Annual Report filed on Form 10-K for a complete listing of our critical accounting policies and estimates.

~~THE DAYTON POWER AND LIGHT COMPANY~~Recently Issued Accounting Pronouncements

A discussion of recently issued accounting pronouncements is described in Note 1 of Notes to Condensed Consolidated Financial Statements and such discussion is incorporated by reference in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and made a part hereof.

OPERATING STATISTICS

	DPL Inc.				DP&L (a)
	Three Months Ended March 31,				Three Months Ended March 31,
	2007		2006		2007		2006
Electric sales (millions in kWh)
Residential	1,638		1,468		1,638		1,468
Commercial	932		893		932		893
Industrial	977		988		977		988
Other retail	338		338		338		338
Total retail	3,885		3,687		3,885		3,687

Wholesale	1,120		819		1,120		819
Total	5,005		4,506		5,005		4,506

Operating revenues ($ in thousands)
Residential	$	147,977	$	130,631	$	147,977	$	130,631
Commercial	74,698		71,299		70,987		65,890
Industrial	57,496		57,805		31,619		30,835
Other retail	21,526		20,607		18,408		20,669
Other miscellaneous revenues	2,850		2,979		2,864		2,984
Total retail	$	304,547	$	283,321	$	271,855	$	251,009

Wholesale	56,685		37,420		90,032		70,360

RTO ancillary revenues	15,662		17,704		15,662		17,704

Other revenues, net of fuel costs	2,799		2,698		—		—
Total	$	379,693	$	341,143	$	377,549	$	339,073

Electric customers at end of period
Residential	457,754		457,248		457,754		457,248
Commercial	49,373		48,977		49,373		48,977
Industrial	1,817		1,840		1,817		1,840
Other	6,350		6,315		6,350		6,315
Total	515,294		514,380		515,294		514,380

(a) DP&L sells power to DPLER (a subsidiary of DPL). These sales are classified as wholesale on DP&L’s financial statements and retail sales for DPL. The kWh volumes contain all volumes distributed on the DP&L system which include the retail sales by DPLER. The sales for resale volumes are omitted to avoid duplicate reporting.

Three months ended

Nine months ended

September 30,

September 30,

2006

2005

2006

2005

Sales (millions of kWh)

Residential

1,432

1,546

3,939

4,182

Commercial

1,075

1,086

2,906

2,937

Industrial

1,169

1,174

3,254

3,281

Other retail

380

380

1,069

1,077

Other miscellaneous revenues

—

—

—

—

Total retail

4,056

4,186

11,168

11,477

Wholesale

1,149

719

2,649

1,913

Total sales

5,205

4,905

13,817

13,390

Revenues ($ in thousands)

Residential

$
137,317

$
136,337

$
369,412

$
362,294

Commercial

73,672

64,875

207,192

184,372

Industrial

35,214

33,887

98,586

95,602

Other retail

22,779

20,844

65,074

60,707

Other miscellaneous revenues

3,289

2,771

8,700

7,836

Total retail

272,271

258,714

748,964

710,811

Wholesale

97,438

74,567

231,469

186,029

RTO ancillary revenues

20,653

22,239

55,696

55,191

Total revenues

$
390,362

$
355,520

$
1,036,129

$
952,031

Electric customers at end of period

513,469

511,948

513,469

511,948

Item 3. Quantitative and Qualitative Disclosures about Market Risk

See the “Market Risk” section of Item 2.

Item 4. Controls and Procedures

Our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for establishing and maintaining our disclosure controls and procedures. These controls and procedures were designed to ensure that material information relating to us and our subsidiaries is communicated to the CEO and CFO. We evaluated these disclosure controls and procedures as of the end of the period covered by this report with the participation of our CEO and CFO. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures are ~~effective~~effective: (i) to ensure that information required to be disclosed by us in the reports that

we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed by us in the reports that we submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting during the most recently completed quarter ended March 31, 2007 that has materially affected, or is reasonably likely to materially affect, internal control over reporting.

PART II~~Part II. Other Information~~

Item 1. 1 - Legal Proceedings

In the normal course of business, we ~~have has been named a defendant~~are subject to various lawsuits, actions, proceedings, claims and other matters asserted under laws and regulations. We believe the amounts provided in our Condensed Consolidated Financial Statements, as prescribed by GAAP, for these matters are adequate in light of the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal ~~actions, including arbitrations, class actions~~proceedings, claims, and other ~~litigation. Certain~~matters discussed below, and to comply with applicable laws and regulations will not exceed the amounts reflected in our Condensed Consolidated Financial Statements. As such, costs, if any, that may be incurred in excess of ~~the legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate~~those amounts provided as of damages. We are is also involved in other reviews, investigations and proceedings by governmental and self-regulatory organizations regarding our business. Certain of the foregoing could result in adverse judgments, settlements, fines, penalties or other relief.

Because litigation is inherently unpredictable, particularly in cases where claimants seek substantial or indeterminate damages or where investigations and proceedings are in the early stages, we cannot predict with certainty the loss or range of loss related to such matters, how such matters will be resolved, when they will be ultimately resolved, or what the eventual settlement, fine, penalty or other relief might be. Consequently, we cannot estimate losses or ranges of losses for matters where there is only a reasonable possibility that a loss may have been incurred. Although the ultimate outcome of these mattersMarch 31, 2007, cannot be ascertained at this time, it is the opinion of management, that the resolution of the foregoing matters will not have a material adverse effect on our financial condition, taken as a whole; such resolution may, however, have a material effect on the operating results in any future period, depending on the level of income for such period.

~~We have provided reserves for such matters in accordance with SFAS 5, “Accounting for Contingencies.” The ultimate resolution may differ from the amounts reserved.~~reasonably determined.

Certain legal proceedings in which we are involved are discussed in Part I, Item 1-Environmental Considerations, Item 1-Competition and Regulation, Item 3 and Note 1115 to the Consolidated Financial Statements ~~and, Part I, Item 3,~~included therein of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2005; and Note 7 to the Consolidated Financial Statements and Part II, Item 1, included in our Form 10-Q for the quarterly period ended March 31, 2006 and June 30,~~ 2006. The following discussion is limited to recent developments concerning our legal proceedings and should be read in conjunction with ~~those~~this earlier ~~reports.~~report.

~~On January 13, 2006,~~Former Executive Litigation

Cumulatively through March 31, 2007, we ~~filed a claim against one~~have accrued for accounting purposes, obligations of ~~our insurers, Associated Electric & Gas Insurance Services (AEGIS), under a fiduciary liability policy~~approximately $61 million to ~~recoup~~reflect claims made by three former executives regarding deferred compensation, estimated MVE incentives and/or legal fees ~~associated with our~~that the former executives assert are payable per contracts. We dispute the former executives’ entitlement to any of those sums and any other sums the former executives assert are due to them and, as noted above, we are pursuing litigation against three former executives. An arbitration of this matter was held on August 4, 2006. The arbitration panel ruled on or about September 12, 2006 that the AEGIS policy does not require an advance of defense expenses to us. Rather, the arbitration panel stated that we are required to file a written undertaking as a condition precedent to repay expenses finally established not to be insured. We have filed a written undertaking with AEGIS and will continue to pursue resolution of the claim through mediation and arbitration in 2007.them contesting all such claims.

On February 13, 2006, we received correspondence from the Ohio Department of Taxation (ODT) notifying us that ODT has completed their examination and review of our Ohio Corporation Franchise Tax Returns for tax years 2002 through 2004 and that the final proposed audit adjustments result in a balance due of $90.8 million before interest and penalties. We have reviewed the proposed audit adjustments and are vigorously contesting the ODT findings and notice of assessment through all administrative and judicial means available. On March 29, 2006, we filed petitions for reassessment with the ODT to protest each assessment as well as request corrected assessments for each tax year. On October 12, 2006, we signed a Memorandum of Understanding with the ODT that stated if the ODT’s positions are ultimately sustained in judicial proceedings, the total additional tax liability that we would be subject to for tax years 2002 through 2004 would be no more than $50.7 million before interest as opposed to the $90.8 million stated in the ODT’s correspondence of February 13, 2006. We believe we have recorded adequate tax reserves related to the proposed adjustments; however, we cannot predict the outcome, which could be material to our results of operations and cash flows.Environmental

We are also under audit review by various state agencies for tax years 2002 through 2004. We have also filed an appeal to the Ohio Board of Tax Appeals for tax years 1998 through 2001. Depending upon the outcome of these audits and the appeal, we may be required to increase our tax provision if actual amounts ultimately determined exceed recorded reserves. We believe we have adequate reserves in each tax jurisdiction but cannot predict the outcome of these audits.

In September 2006, we became aware of unasserted claims under the Fair Labor Standards Act concerning the calculation of overtime rates for our unionized workforce. We will vigorously oppose this claim, if asserted against us. However, if we do not prevail, the cost to us would be in the range of $0-$3.5 million.

~~On September 21,~~ 2004, the Sierra Club filed a lawsuit against us DP&L and the other owners of the Stuart Generating Station in the United States District Court for the Southern District of Ohio for alleged violations of the ~~Clean Air Act (CAA). On October 13, 2006,~~CAA and ~~pursuant~~the Station’s operating permit. DP&L, on behalf 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 ~~an approved procedural schedule, the Sierra Club~~be filed ~~an amended complaint setting forth additional actions taken by us that the Sierra Club alleges were also~~at various times from May through September, 2007. Dispositive motions are to be filed in ~~violation of the CAA. We are currently reviewing that amended complaint and will vigorously defend our action. The case is currently in discovery; a~~January 2008. No trial date has been set yet.

On April 2, 2007, the U.S. Supreme Court unanimously overturned the rulings of two lower courts and concluded that the Clean Air Act’s (CAA) New Source Review (NSR) requirements are triggered when a major physical or operational change at a facility results in an increase in the facility’s annual emissions (Environmental Defense et al, v. Duke Energy Corp. et al.). The outcome of this case is significant to DP&L

because it eliminates one of DP&L’s major arguments in the lawsuit filed against it by the Sierra Club. The Court decided that an annual rate of emissions could be used to determine if major modifications have been made to a plant as opposed to an hourly emission rate as Duke had argued. Using the annual rate makes it more likely that most plant modifications will be found to be “major” modifications, thus requiring EPA permits. DP&L can still defend against the allegations of NSR violations if it can establish that the activities at issue did not ~~been set.~~cause total annual emissions to increase or that the projects that resulted in increased emissions were undertaken for routine maintenance, repair and replacement activities.

Item ~~1A.~~ 1a – Risk Factors

A comprehensive listing of risk factors that we consider to be the most significant to your decision to invest in usour stock is provided in our most recent Annual Report on Form 10-K and is incorporated herein by reference. The Form 10-K may be obtained as discussed on ~~page 2, ‘Available Information.~~Page 4, ‘Website Access to Reports.’ If any of these events occur, our business, financial position or results of operation could be materially affected. ~~The following risk factors are additions to our 2005 Annual Report on Form 10-K discussion on risk factors.~~

Greenhouse gas (GHG) emissions, consisting primarily of carbon dioxide emissions, are presently unregulated. Numerous bills have been introduced in Congress to regulate GHG emissions, but to date none have passed. Future regulation of GHG emissions is uncertain. However, such regulation would be expected to impose costs on our operations. Such costs could include measures as advanced by various constituencies, including a carbon tax; investments in energy efficiency; installation of CO2 ~~emissions control technology, to the extent such technology exists; purchase of emission allowances, should a trading mechanism be developed; or the use of higher-cost, lower CO~~2 ~~emitting fuels. We will continue to make prudent investments in energy efficiency that reduces our GHG emissions intensity.~~

Wright Patterson Air Force Base (WPAFB) represents approximately 1% of our annual revenues. WPAFB has the right to select another competitive retail electric supplier to meet its generationg needs. Effective August 2006, WPAFB secures its generation under our standard offer rate until such time as they choose to contract with an alternative supplier. If this occurs, this could impact our results of operations.

We are currently constructing flue gas desulfurization (FGD) facilities at five units located at our J. M. Stuart and Killen Electric Generating Stations. Construction of the FGD facilities at each unit is scheduled to be completed in phases commencing mid-year 2007 through 2008. We are also co-owners of electric generating stations operated by other investor-owned utilities, who are in various stages of constructing FGD facilities at these stations. Significant construction delays could adversely affect our ability to operate or may substantially increase our costs to operate these electric generating stations under federal environmental laws and regulations that become effective in 2010. For those electric generating stations where we are co-owners but do not operate, significant construction delays may substantially increase our pro rata share of the cost to operate those facilities beginning in 2010.

Annually, PJM, the regional transmission organization that provides transmission services for a large portion of the midwest United States, performs a review of the capital additions required to provide reliable electric transmission services throughout its territory. PJM allocates the costs of constructing these facilities to the applicable entity that will benefit from the new construction. FERC is authorized to provide rate recovery to utilities for the costs they incur to construct these transmission facilities. To date, we have not been required to construct any new facilities nor have we been assigned any costs as a result of PJM’s annual review, but there is no guarantee that we will not be assigned some costs or be required to construct facilities in the future.

Item 2 – Unregistered Sale of Equity Securities and Use of Proceeds

None

Item 6. ~~Exhibits~~3 – Defaults Upon Senior Securities

None

Item 4 – Submission of Matters to a Vote of Security Holders

None

Item 5 – Other Information

None

Item 6 – Exhibits

~~4.1~~DPL Inc.	DP&L	Exhibit Number	Exhibit	Location
X	Loan Agreement, dated as of September 1, 2006, by and between Ohio Air Quality Development Authority and The Dayton Power and Light Company (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 19, 2006, File #1-2385)
X
~~4.2~~	44th Supplemental Indenture to the First and Refunding Mortgage, dated as of September 1, 2006, by and between the Bank of New York, as trustee and The Dayton Power and Light Company (Filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on September 19, 2006, File #1-2385)

~~10.1~~	~~Non-Employee Director Compensation Summary dated as of September 19, 2006 (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 25, 2006, File #1-2385)~~

~~31.1~~31(a)	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 31(a)

~~31.2~~X	X	31(b)	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 31(b)

32X	X	32(a)	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 32(a)

X	X	32(b)	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith as Exhibit 32(b)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ~~the Registrant~~DPL Inc. and The Dayton Power and Light Company has duly caused this report to be signed on ~~its~~their behalf by the undersigned, thereunto duly authorized.

		~~THE DAYTON POWER AND LIGHT COMPANY~~DPL INC.
		The Dayton Power and Light Company
		~~(Registrant)~~(Registrants)

Date:		April 30, 2007		/s/ Paul M. Barbas
				Paul M. Barbas
				President and Chief Executive Officer
				(principal executive officer)

		April 30, 2007		/s/ John J. Gillen

~~Date:~~	~~October 31, 2006~~		~~/s/ Paul M. Barbas~~	John J. Gillen
		~~Paul M. Barbas~~		Senior Vice President and Chief Financial Officer
		~~President and Chief Executive Officer~~
			(principal ~~executive~~financial officer)



	~~October 31, 2006~~April 30, 2007		/s/ ~~John~~Frederick J. ~~Gillen~~
			~~John J. Gillen~~
			~~Senior Vice President and Chief Financial Officer~~
			~~(principal financial officer)~~	Boyle


	~~October 31, 2006~~		~~/s/~~ Frederick J. Boyle
		~~Frederick J. Boyle~~
		Controller and Chief Accounting Officer

			(principal accounting officer)

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