2.2.0.7 false Contractual Obligations, Commercial Commitments and Contingencies 1140 - Disclosure - Contractual Obligations, Commercial Commitments and Contingencies true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDPerShare Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Contractual Obligations, Commercial Commitments and Contingencies 0 dpl_ContractualObligationsCommercialCommitmentsAndContingenciesDisclosureAbstract dpl false na duration No definition available. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string No definition available. false 3 Contractual Obligations, Commercial Commitments and Contingencies 1 us-gaap_CommitmentsAndContingenciesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false terselabel false 1 false false false false 0 0 <table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> 14.  Contractual Obligations, Commercial Commitments and Contingencies   DPL Inc. Guarantees In the normal course of business, DPL enters into various agreements with its wholly-owned generating subsidiary, DPLE and its competitive retail electric supplier subsidiary, DPLER, providing financial or performance assurance to third parties.  These agreements are entered into primarily to support or enhance the creditworthiness otherwise attributed to DPLE and DPLER on a stand-alone basis, thereby facilitating the extension of sufficient credit to accomplish DPLEs and DPLERs intended commercial purposes.  There have been no material changes to our guarantees as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.  Through June 30, 2010, neither DPL nor DP&L have incurred any losses related to the guarantees of DPLEs and DPLERs obligations and we believe it is unlikely that either DPL or DP&L would be required to perform or incur any losses in the future associated with any of the above guarantees of DPLEs and DPLERs obligations.   DP&L Equity Ownership Interest DP&L owns a 4.9% equity ownership interest in an electric generation company which is recorded using the cost method of accounting under GAAP.  As of June 30, 2010, DP&L could be responsible for the repayment of 4.9%, or $63.3 million, of a $1,291.3 million debt obligation that matures in 2026.  This would only happen if this electric generation company defaulted on its debt payments.  As of June 30, 2010, we have no knowledge of such a default.   Other than the guarantees discussed in our Annual Report on Form 10-K and the guarantees discussed above, DPL and DP&L do not have any other off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.   Commercial Commitments and Contractual Obligations There have been no material changes, outside the ordinary course of business, to our commercial commitments and to the information disclosed in the contractual obligations table in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.   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.  However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, 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 June 30, 2010, cannot be reasonably determined.   Environmental Matters DPL, DP&L and our subsidiaries facilities and operations are subject to a wide range of environmental regulations and laws by federal, state and local authorities.  As well as imposing continuing compliance obligations, these laws and regulations authorize the imposition of substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. In the normal course of business, we have investigatory and remedial activities underway at these facilities to comply, or to determine compliance, with such regulations.  We record liabilities for losses that are probable of occurring and can be reasonably estimated.  As of June 30, 2010, DPL has an immaterial reserve for environmental matters.  A portion of this reserve is recorded at MVIC, DPLs wholly owned captive insurance subsidiary.  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, financial position or cash flows.   We have several pending environmental matters associated with our power plants.  Some of these matters could have material adverse impacts on the operation of the power plants, especially the plants that do not have SCR and FGD equipment installed to further control certain emissions.  Currently, Beckjord and Hutchings are our only coal-fired power plants that do not have this equipment installed.   Air Quality In 1990, the federal government amended the CAA to further regulate air pollution.  Under the law, the USEPA sets limits on how much of a pollutant can be in the air anywhere in the United States.  The CAA allows individual states to have stronger pollution controls, but states are not allowed to have weaker pollution controls than those set for the whole country.  The CAA has a material effect on our operations and such effects are detailed below with respect to certain programs under the CAA.   On October 27, 2003, the USEPA published final rules regarding the equipment replacement provision (ERP) of the routine maintenance, repair and replacement (RMRR) exclusion of the CAA.  Activities at power plants that fall within the scope of the RMRR exclusion do not trigger new source review (NSR) requirements, including the imposition of stricter emission limits.  On December 24, 2003, the United States Court of Appeals for the D.C. Circuit stayed the effective date of the rule pending its decision on the merits of the lawsuits filed by numerous states and environmental organizations challenging the final rules.  On June 6, 2005, the USEPA issued its final response on the reconsideration of the ERP exclusion.  The USEPA clarified its position, but did not change any aspect of the 2003 final rules.  This decision was appealed and the D.C. Circuit vacated the final rules on March 17, 2006.  The scope of the RMRR exclusion remains uncertain due to this action by the D.C. Circuit, as well as multiple litigations not directly involving us where courts are defining the scope of the exception with respect to the specific facts and circumstances of the particular power plants and activities before the courts.  While we believe that we have not engaged in any activities with respect to our existing power plants that would trigger the NSR requirements, if NSR requirements were imposed on any of DP&Ls existing power plants, the results could be materially adverse to us.   The USEPA issued a proposed rule on October 20, 2005 concerning the test for measuring whether modifications to electric generating units should trigger application of NSR standards under the CAA.  A supplemental rule was also proposed on May 8, 2007 to include additional options for determining if there is an emissions increase when an existing electric generating unit makes a physical or operational change.  The rule was challenged by environmental organizations and has not been finalized.  While we cannot predict at this time the outcome of this rulemaking, any finalized rules could materially affect our operations.   On December 17, 2003, the USEPA proposed the Interstate Air Quality Rule (IAQR) designed to reduce and permanently cap SO2 and 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 and ozone pollution in other downwind states in the eastern United States.  On June 10, 2004, the USEPA issued a supplemental proposal to the IAQR, now renamed the CAIR.  The final rules were signed on March 10, 2005 and were published on May 12, 2005.  CAIR created an interstate trading program for annual NOx emission allowances and made modifications to an existing trading program for SO2.  On August 24, 2005, the USEPA proposed additional revisions to the CAIR.  On July 11, 2008, the U.S. Court of Appeals for the District of Columbia Circuit issued a decision to vacate the USEPAs CAIR and its associated Federal Implementation Plan and remanded to the USEPA with instructions to issue new regulations that conformed with the procedural and substantive requirements of the CAA.  The Courts decision, in part, invalidated the new NOx annual emission allowance trading program and the modifications to the SO2 emission trading program established by the March 10, 2005 rules, and created uncertainty regarding future NOx and SO2 emission reduction requirements and their timing.  The USEPA and a group representing utilities filed a request on September 24, 2008 for a rehearing before the entire Court.  On December 23, 2008, the U.S. Court of Appeals issued an order on reconsideration that permits CAIR to remain in effect until the USEPA issues new regulations that would conform to the CAA requirements and the Courts July 11, 2008 decision. In the fourth quarter of 2007, DP&L began a program for selling excess emission allowances, including annual NOx emission allowances and SO2 emission allowances that were the subject of CAIR trading programs.  In subsequent quarters, DP&L recognized gains from the sale of excess emission allowances to third parties.  The courts CAIR decision affected the trading market for excess allowances and impacted DP&Ls program for selling additional excess allowances in 2008.  In January 2009 we resumed selling excess allowances due to the revival of the emissions trading market.  The USEPA proposed new CAIR regulations on July 6, 2010.  We are currently studying this proposal.  We cannot predict at this time the long-term impact of the courts decision and the proposed new CAIR regulations, but they could have an adverse effect on our emissions trading program.   In 2007, the Ohio EPA revised their State Implementation Plan (SIP) to incorporate a CAIR program consistent with the IAQR.  The Ohio EPA had received partial approval from the USEPA and had been awaiting full program approval from the USEPA when the U.S. Court of Appeals issued its July 11, 2008 decision.  As a result of the December 23, 2008 order, the Ohio EPA proposed revised rules on May 11, 2009, which were finalized on July 15, 2009. On September 25, 2009, the USEPA issued a full SIP approval for the Ohio CAIR program.  We do not expect that full SIP approval of the Ohio CAIR program will have a significant impact on operations.   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 USEPA de-listed mercury as a hazardous air pollutant from coal-fired and oil-fired utility plants and, instead, proposed a cap-and-trade approach to regulate the total amount of mercury emissions allowed from such sources.  The final Clean Air Mercury Rule (CAMR) was signed March 15, 2005 and was published on May 18, 2005.  On March 29, 2005, nine states sued the USEPA, opposing the cap-and-trade regulatory approach taken by the USEPA.  In 2007, the Ohio EPA adopted rules implementing the CAMR program.  On February 8, 2008, the U.S. Court of Appeals for the District of Columbia Circuit struck down the USEPA regulations, finding that the USEPA had not complied with statutory requirements applicable to de-listing a hazardous air pollutant and that a cap-and-trade approach was not authorized by law for listed hazardous air pollutants.  A request for rehearing before the entire Court of Appeals was denied and a petition for review before the U.S. Supreme Court was filed on October 17, 2008.  On February 23, 2009, the U.S. Supreme Court denied the petition.  The USEPA is expected to move forward on setting Maximum Available Control Technology (MACT) standards for coal- and oil-fired electric generating units.  Upon publication in the federal register following finalization, affected exempt generating units (EGUs) will have three years to come into compliance with the new requirements.  At this time, DP&L is unable to determine the impact of the promulgation of new MACT standards on its financial position or results of operations; however, a MACT standard could have a material adverse effect on our operations, in particular, our unscrubbed units.  We cannot predict at this time the final costs we may incur to comply with any resulting mercury restriction regulations.   On January 5, 2005, the USEPA published its final non-attainment designations for the National Ambient Air Quality Standard (NAAQS) for Fine Particulate Matter 2.5 (PM 2.5).  These designations included counties and partial counties in which DP&L operates and/or owns generating facilities.  On March 4, 2005, DP&L and other Ohio electric utilities and electric generators filed a petition for review in the D.C. Circuit Court of Appeals, challenging the final rule creating these designations.  On November 30, 2005, the court ordered the USEPA to decide on all petitions for reconsideration by January 20, 2006.  On January 20, 2006, the USEPA denied the petitions for reconsideration.   On July 7, 2009, the D.C. Circuit Court of Appeals upheld the USEPA non-attainment designations for the areas impacting DP&Ls generation plants, however, on October 8, 2009, the USEPA issued new designations based on 2008 monitoring data that showed all areas in attainment to the standard with the exception of several counties in northeastern Ohio.  The USEPA is expected to propose revisions to the PM 2.5 standard as part of its routine five-year rule review cycle.  We cannot predict at this time the impact the revisions to the PM 2.5 standard will have on DP&Ls financial position or results of operations.   On May 5, 2004, the USEPA issued its proposed regional haze rule, which addresses how states should determine the Best Available Retrofit Technology (BART) for sources covered under the regional haze rule.  Final rules were published July 6, 2005, providing states with several options for determining whether sources in the state should be subject to BART.  In the final rule, the USEPA made the determination that CAIR achieves greater progress than BART and may be used by states as a BART substitute.  Numerous units owned and operated by us will be impacted by BART.  We cannot determine the extent of the impact until Ohio determines how BART will be implemented.   In response to a U.S. Supreme Court decision that the USEPA has the authority to regulate CO2 emissions from motor vehicles, the USEPA made a finding that CO2 and certain other GHGs are pollutants under the CAA.  Subsequently, under the CAA, USEPA determined that CO2 and other GHGs from motor vehicles threaten the health and welfare of future generations by contributing to climate change.  This finding became effective in January 2010.  Numerous affected parties have petitioned the USEPA Administrator to reconsider this decision.  On April 1, 2010, USEPA signed the Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards rule.  Under USEPAs view, this is the final action that renders carbon dioxide and other GHGs regulated air pollutants under the CAA.  As a result of this action, it is expected that in 2011 various permitting programs will apply to other combustion sources, such as coal-fired power plants.  We cannot predict at this time the effect of this change, if any, on DP&Ls operations.   Several bills have been introduced at the federal level to regulate GHG emissions.  In June 2009, the U.S. House of Representatives passed H.R. 2454, the American Clean Energy and Security Act (ACES).  This proposed legislation targets a reduction in the emission of GHGs from large sources by 80% in 2050 through an economy wide cap and trade program.  ACES also includes energy efficiency and renewable energy initiatives.  The American Power Act was introduced by Senators John Kerry and Joe Lieberman on May 12, 2010.  This Climate Legislation proposes a reduction in GHG emissions of 83% by 2050 through an economy-wide cap-and-trade program.  The American Power Act also encourages nuclear energy and renewable energy initiatives and the development of a national strategy for carbon capture and sequestration.  Approximately 99% of the energy we produce is generated by coal.  DP&Ls share of CO2 emissions at generating stations we own and co-own is approximately 16 million tons annually.  Proposed GHG legislation finalized at a future date could have a significant effect on DP&Ls operations and costs, which could adversely affect our net income, cash flows and financial position.  However, due to the uncertainty associated with such legislation, we cannot predict at this time the final outcome or the financial impact that this legislation will have on DP&L.   On September 22, 2009, the USEPA issued a final rule for mandatory reporting of GHGs from large sources that emit 25,000 metric tons per year or more of CO2,  including electric generating units.  The first report is due in March 2011 for 2010 emissions.  This reporting rule will guide development of policies and programs to reduce emissions.  DP&L does not anticipate that this reporting rule will result in any significant cost or other impact on current operations.   On July 15, 2009, the USEPA proposed revisions to its primary National Ambient Air Quality Standard (NAAQS) for nitrogen dioxide.  This change could affect certain emission sources in heavy traffic areas like the I-75 corridor between Cincinnati and Dayton; several of our facilities or co-owned facilities are within this area.  At this point, DP&L cannot determine the effect of this potential change, if any, on its operations.   On June 3, 2010, the USEPA finalized revisions to its primary NAAQS for SO2 replacing the current 24-hour standard and annual standard with a one hour standard.  At this time, DP&L cannot determine the effect of this potential change, if any, on its operations.   On September 16, 2009, the USEPA announced that it would reconsider the 2008 national ground level ozone standard.  A more stringent ambient ozone standard may lead to stricter NOx emission standards in the future.  At this point, DP&L cannot determine the effect of this potential change, if any, on its operations.   Air Quality Litigation Involving Co-Owned Plants In 2004, eight states and the City of New York filed a lawsuit in Federal District Court for the Southern District of New York against American Electric Power Company, Inc. (AEP), one of AEPs subsidiaries, Cinergy Corp. (a subsidiary of Duke Energy Corporation (Duke Energy)) and four other electric power companies.  A similar lawsuit was filed against these companies in the same court by Open Space Institute, Inc., Open Space Conservancy, Inc. and The Audubon Society of New Hampshire.  The lawsuits allege that the companies emissions of CO2 contribute to global warming and constitute a public or private nuisance.  The lawsuits seek injunctive relief in the form of specific emission reduction commitments.  In 2005, the Federal District Court dismissed the lawsuits, holding that the lawsuits raised political questions that should not be decided by the courts.  The plaintiffs appealed.  Finding that the plaintiffs have standing to sue and can assert federal common law nuisance claims, the United States Court of Appeals for the Second Circuit on September 21, 2009 vacated the dismissal of the Federal District Court and remanded the lawsuits back to the Federal District Court for further proceedings.  Although we are not named as a party to these lawsuits, DP&L is a co-owner of coal-fired plants with Duke Energy and AEP (or their subsidiaries) that could be affected by the outcome of these lawsuits.  The Second Circuit Courts decision could also encourage these or other plaintiffs to file similar lawsuits against other electric power companies, including us.  We are unable at this time to predict with certainty the impact that these lawsuits might have on us.   On September 21, 2004, the Sierra Club filed a lawsuit against DP&L and the other owners of the J.M. Stuart generating station in the U.S. District Court for the Southern District of Ohio for alleged violations of the CAA and the stations operating permit.  On August 7, 2008, a consent decree was filed in the U.S. District Court in full settlement of these CAA claims.  Under the terms of the consent decree, DP&L and the other owners of the J.M. Stuart generating station agreed to: (i) certain emission targets related to NOx, SO2 and particulate matter; (ii) make energy efficiency and renewable energy commitments that are conditioned on receiving PUCO approval for the recovery of costs; (iii) forfeit 5,500 SO2 allowances; and (iv) provide funding to a third party non-profit organization to establish a solar water heater rebate program.  DP&L and the other owners of the station also entered into an attorneys fee agreement to pay a portion of the Sierra Clubs attorney and expert witness fees.  The parties to the lawsuit filed a joint motion on October 22, 2008, seeking an order by the U.S. District Court approving the consent decree with funding for the third party non-profit organization set at $300,000.  On October 23, 2008, the U.S. District Court approved the consent decree.  On October 21, 2009, the Sierra Club filed with the U.S. District Court a motion for enforcement of the consent decree based on the Sierra Clubs interpretation of the consent decree that would require certain NOx emissions that DP&L has been excluding from its computations to be included for purposes of complying with the emission targets and reporting requirements of the consent decree.  DP&L believed that it was properly computing and reporting NOx emissions under the consent decree, but participated in settlement discussions with the Sierra Club.  A proposed settlement has been agreed upon by both parties, approved by the Judge and then filed into the official record on July 13, 2010.  The settlement amends the Consent Decree and sets forth a more detailed and clearer methodology to compute NOx emissions during start-up and shut-down periods.  The revision is not expected to have a material effect on DP&Ls results of operations, financial position or cash flows in the future.   Air Quality Notices of Violation Involving Co-Owned Plants On March 13, 2008, Duke Energy Ohio Inc., the operator of the Zimmer generating station, received a NOV and a Finding of Violation from the USEPA alleging violations of the CAA, the Ohio State Implementation Program (SIP) and permits for the Station in areas including SO2, opacity and increased heat input.  DP&L is a co-owner of the Zimmer generating station and could be affected by the eventual resolution of this matter.  Duke Energy Ohio Inc. is expected to act on behalf of itself and the co-owners with respect to this matter.  At this time, DP&L is unable to predict the outcome of this matter.   In June 2000, the USEPA issued a NOV to the DP&L-operated J.M. Stuart generating station (co-owned by DP&L, CG&E, and CSP) for alleged violations of the CAA.  The NOV contained allegations consistent with NOVs and complaints that the USEPA had recently brought against numerous other coal-fired utilities in the Midwest.  The NOV indicated the USEPA may: (1) issue an order requiring compliance with the requirements of the Ohio SIP; or (2) bring a civil action seeking injunctive relief and civil penalties of up to $27,500 per day for each violation.  To date, neither action has been taken.  At this time, DP&L cannot predict the outcome of this matter.   In November 1999, the USEPA filed civil complaints and NOVs against operators and owners of certain generation facilities for alleged violations of the CAA.  Generation units operated by CG&E (Beckjord Unit 6) and CSP (Conesville Unit 4) and co-owned by DP&L were referenced in these actions.  Numerous northeast states have filed complaints or have indicated that they will be joining the USEPAs action against CG&E and CSP.  Although DP&L was not identified in the NOVs, civil complaints or state actions, the results of such proceedings could materially affect DP&Ls co-owned plants.   In December 2007, the Ohio EPA issued a NOV to the DP&L-operated Killen generating station (co-owned by DP&L and CG&E) for alleged violations of the CAA.  The NOVs alleged deficiencies in the continuous monitoring of opacity.  We submitted a compliance plan to the Ohio EPA on December 19, 2007.  To date, no further actions have been taken by the Ohio EPA.   On April 29, 2010, the USEPA issued a proposed rule that would reduce emissions of toxic air pollutant from new and existing industrial, commercial and institutional boilers, and process heaters at major and area source facilities.  This regulation may affect five auxiliary boilers used for start-up purposes at DP&Ls generation facilities.  The proposed regulations contain emissions limitations, operating limitations and other requirements.  The compliance schedule will be three years from the effective date of the rule.  We cannot predict, at this time, the effect of compliance costs, if any, on DP&Ls operations; however, such costs are not expected to be material.   On May 3, 2010, the USEPA finalized the National Emissions Standards for Hazardous Air Pollutants (NESHAP) for compression ignition (CI) reciprocating internal combustion engines (RICE).  The units affected at DP&L are 18 diesel electric generating engines and eight emergency black start engines.  The existing CI RICE units must comply by May 3, 2013.  The regulations contain emissions limitations, operating limitations and other requirements.  We cannot predict, at this time, the effect of compliance costs, if any, on DP&Ls operations; however, such costs are not expected to be material.   Air Quality Other Issues Involving Co-Owned Plants In 2006, DP&L detected a malfunction with its emission monitoring system at the DP&L-operated Killen generating station (co-owned by DP&L and CG&E) and ultimately determined its SO2 and NOx emissions data were under reported.  DP&L has petitioned the USEPA to accept an alternative methodology for calculating actual emissions for 2005 and the first quarter of 2006.  DP&L has sufficient allowances in its general account to cover the understatement.  Management does not believe the ultimate resolution of this matter will have a material impact on results of operations, financial position or cash flows.   Air Quality Notices of Violation Involving Wholly-Owned Plants In 2007, the Ohio EPA and the USEPA issued NOVs to DP&L for alleged violations of the CAA at the O.H. Hutchings Station.  The NOVs alleged deficiencies relate to stack opacity and particulate emissions.  Discussions are under way with the USEPA, the U.S. Department of Justice and Ohio EPA.  DP&L has provided data to those agencies regarding its maintenance expenses and operating results.  On December 15, 2008, DP&L received a request from the USEPA for additional documentation with respect to those issues and other CAA issues including issues relating to capital expenses and any changes in capacity or output of the units at the O.H. Hutchings Station.  During 2009, DP&L continued to submit various other operational and performance data to the USEPA in compliance with its request.  DP&L is currently unable to determine the timing, costs or method by which the issues may be resolved and continues to work with the USEPA on this issue.   On November 18, 2009, the USEPA issued a NOV to DP&L for alleged NSR violations of the CAA at the O.H. Hutchings Station relating to capital projects performed in 2001 involving Unit 3 and Unit 6.  DP&L does not believe that the two projects described in the NOV were modifications subject to NSR.  DP&L is unable to determine the timing, costs or method by which these issues may be resolved and continues to work with the USEPA on this issue.   Water Quality On July 9, 2004, the USEPA issued final rules pursuant to the Clean Water Act governing existing facilities that have cooling water intake structures.  The rules require an assessment of impingement and/or entrainment of organisms as a result of cooling water withdrawal.  A number of parties appealed the rules to the 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 the USEPA for reconsideration.  Several parties petitioned the U.S. Supreme Court for review of the lower court decision.  On April 14, 2008, the Supreme Court elected to review the lower court decision on the issue of whether the USEPA can compare costs with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake structures.  Briefs were submitted to the Court in the summer of 2008 and oral arguments were held in December 2008.  In April 2009, the U.S. Supreme Court ruled that the USEPA did have the authority to compare costs with benefits in determining best technology available.  The USEPA is developing proposed regulations.   On May 4, 2004, the Ohio EPA issued a final National Pollutant Discharge Elimination System permit (the Permit) for J.M. Stuart Station that continued our authority to discharge water from the station into the Ohio River.  During the three-year term of the Permit, we conducted a thermal discharge study to evaluate the technical feasibility and economic reasonableness of water cooling methods other than cooling towers.  In December 2006, we submitted an application for the renewal of the Permit that was due to expire on June 30, 2007.  In July 2007, we received a draft permit proposing to continue our authority to discharge water from the station into the Ohio River.  On February 5, 2008, we received a letter from the Ohio EPA indicating that they intended to impose a compliance schedule as part of the final Permit, that requires us to implement one of two diffuser options for the discharge of water from the station into the Ohio River as identified in the thermal discharge study.  Subsequently, representatives from DP&L and the Ohio EPA have agreed to allow DP&L to restrict public access to the water discharge area as an alternative to installing one of the diffuser options.  Ohio EPA issued a revised draft permit that was received on November 12, 2008.  In December 2008, the USEPA requested that the Ohio EPA provide additional information regarding the thermal discharge in the draft permit.  In June 2009, DP&L provided information to the USEPA in response to their request to the Ohio EPA.  The timing for issuance of a final permit is uncertain.   In September 2009, the USEPA announced that it will be revising technology-based regulations governing water discharges from steam electric generating facilities.  The rulemaking will include the collection of information via an industry-wide questionnaire as well as targeted water sampling efforts at selected facilities.  Subsequent to the information collection effort, it is anticipated that the USEPA will release a proposed rule.  At present, DP&L is unable to predict the timing of the issuance or impact this rulemaking will have on its operations.   Land Use and Solid Waste Disposal In September 2002, DP&L and other parties received a special notice that the USEPA considers us to be a PRP for the clean-up of hazardous substances at the South Dayton Dump landfill site.  In August 2005, DP&L and other parties received a general notice regarding the performance of a Remedial Investigation and Feasibility Study (RI/FS) under a Superfund Alternative Approach.  In October 2005, DP&L received a special notice letter inviting it to enter into negotiations with the USEPA to conduct the RI/FS.  No recent activity has occurred with respect to that notice or PRP status.  However, on August 25, 2009, the USEPA issued an Administrative Order requiring that access to DP&Ls service center building site, which is across the street from the landfill site, be given to the USEPA and the existing PRP group to help determine the extent of the landfill sites contamination as well as to assess whether certain chemicals used at the service center building site might have migrated through groundwater to the landfill site.  DP&L has granted such access and drilling of soil borings and installation of monitoring wells occurred in late 2009 and early 2010.  DP&L believes the chemicals used at its service center building site were appropriately disposed of and have not contributed to the contamination at the South Dayton Dump landfill site.  Most recently, on May 24, 2010, three members of the existing PRP group, Hobart Corporation, Kelsey-Hayes Company and NCR Corporation, filed a civil complaint in the United States District Court for the Southern District of Ohio against DP&L and numerous other defendants alleging that DP&L and the other defendants contributed to the contamination at the South Dayton Dump landfill site and seeking reimbursement of the PRP groups costs associated with the investigation and remediation of the site.  DP&L is reviewing the complaint and intends to vigorously defend against any claim that it has any financial responsibility to remediate conditions at the landfill site.  While DP&L is unable at this time to predict the outcome of these matters, if DP&L were required to contribute to the clean-up of the site, it could have a material adverse effect on us.   In December 2003, DP&L and other parties received a special notice that the USEPA considers us to be a PRP for the clean-up of hazardous substances at the Tremont City landfill site.  Information available to DP&L does not demonstrate that it contributed hazardous substances to the site.  While DP&L is unable at this time to predict the outcome of this matter, if DP&L were required to contribute to the clean-up of the site, it could have a material adverse effect on us.   In November 2007, a PRP group contacted DP&L seeking our financial participation in a settlement that the group had reached with the federal government with respect to the clean-up of an industrial site once owned by Carolina Transformer, Inc.  DP&Ls business records clearly show we did not conduct business with Carolina Transformer that would require our participation in any clean-up of the site.  DP&L has declined to participate in the clean-up of this site.  While DP&L is unable at this time to predict the outcome of this matter, if DP&L were required to contribute to the clean-up of the site, it could have a material adverse effect on us.   On April 7, 2010 the USEPA published an Advance Notice of Proposed Rulemaking (ANPRM) announcing that it is reassessing existing regulations governing the use and distribution in commerce of polychlorinated biphenyls (PCB).  While this reassessment is in the early stages and the USEPA is seeking information from potentially affected parties on how it should proceed, the outcome may have a material effect on DP&L.  At present, DP&L is unable to predict the impact this initiative will have on its operations.   During 2008, a major spill occurred at an ash pond owned by the Tennessee Valley Authority (TVA) as a result of a dike failure.  The spill generated a significant amount of national news coverage, and support for tighter regulations for the storage and handling of coal combustion products.  DP&L has ash ponds at the Killen, O.H. Hutchings and J.M. Stuart Stations which it operates, and also at generating stations operated by others but in which DP&L has an ownership interest.   During March 2009, the USEPA, through a formal Information Collection Request, collected information on ash pond facilities across the country, including those at Killen and J.M. Stuart Stations.  Subsequently the USEPA collected similar information for O.H. Hutchings Station.  In October 2009, USEPA conducted an inspection of the J.M. Stuart Station ash ponds.  In March 2010, USEPA issued a final report from the inspection including recommendations relative to the J.M. Stuart Station ash ponds and has requested a response.  In May 2010, DP&L responded to the USEPA final inspection report with our plans to address the recommendations.  At this time, a final determination has not been made regarding the reports recommendations and DP&L continues to work with the USEPA on this matter.   In addition, as a result of the TVA ash pond spill, there has been increasing advocacy to regulate coal combustion byproducts under the Resource Conservation Recovery Act (RCRA).  On June 21, 2010, the USEPA published a proposed rule seeking comments on two options under consideration for the regulation of coal combustion products including regulating the material as a hazardous waste under RCRA Subtitle C or as a solid waste under RCRA Subtitle D.  DP&L is unable at this time to predict the financial impact of this regulation, but if coal combustion byproducts are regulated as hazardous waste, it is expected to have a material adverse impact on operations.   Legal and Other Matters In February 2007, DP&L filed a lawsuit against a coal supplier seeking damages incurred due to the suppliers failure to supply approximately 1.5 million tons of coal to two jointly owned plants under a coal supply agreement, of which approximately 570 thousand tons was DP&Ls share.  DP&L obtained replacement coal to meet its needs.  The supplier has denied liability, and is currently in federal bankruptcy proceedings.  DP&L is unable to determine the ultimate resolution of this matter at this time.  DP&L has not recorded any assets relating to possible recovery of costs in this lawsuit.   On May 16, 2007, DPL filed a claim with Energy Insurance Mutual (EIM) to recoup legal costs associated with our litigation against certain former executives.   On February 15, 2010, after having engaged in both mediation and arbitration, DPL and EIM entered into a settlement agreement resolving all coverage issues and finalizing all obligations in connection with the claim, under which DPL received $3.4 million (net of associated expenses).   As a member of PJM, DP&L is also subject to charges and costs associated with PJM operations as approved by the FERC.  FERC Orders issued in 2007 regarding the allocation of costs of large transmission facilities within PJM, could result in additional costs being allocated to DP&L of approximately $12 million or more annually by 2012.  DP&L filed a notice of appeal to the U.S. Court of Appeals, D.C. Circuit on March 18, 2008 challenging the allocation method.  The appeal was consolidated with other appeals taken by other interested parties of the same FERC Orders and the consolidated cases were assigned to the 7th Circuit.  On August 6, 2009, the 7th Circuit ruled that the FERC had failed to provide a reasoned basis for the allocation method it had approved.  Rehearing requests were filed by other interested litigants and denied by the Court, which then remanded the matter to the FERC for further proceedings.  On January 21, 2010, the FERC issued a procedural order on remand establishing a paper hearing process.  PJM made an informational filing on April 13, 2010 that quantified the differences in the levels of allocated costs among PJM member transmission owners depending on the allocation methodology used.  Subsequently PJM and other parties, including DP&L, will be able to file initial comments, testimony, and recommendations and reply comments.  Absent future changes to the procedural schedule that may occur for a number of reasons including if settlement discussions are held, we expect the paper hearing process should be complete and the case ready for FERC consideration in 2010.  FERC did not establish a deadline for its issuance of a substantive order.  DP&L cannot predict the timing or the likely outcome of the proceeding.  Until such time as FERC may act to approve a change in methodology, PJM will continue to apply the allocation methodology that had been approved by FERC in 2007.   Although we continue to maintain that these costs should be borne by the beneficiaries of these projects and that DP&L is not one of these beneficiaries, new credits or additional costs resulting from the ultimate outcome of this proceeding are and will continue to be included in DP&Ls TCRR rider which is in place and approved by the PUCO.   In connection with DP&L and other utilities joining PJM, in 2006 the FERC ordered utilities to eliminate certain charges to implement transitional payments, known as SECA, effective December 1, 2004 through March 31, 2006, subject to refund. Through this proceeding, DP&L was obligated to pay SECA charges to other utilities, but received a net benefit from these transitional payments.  A hearing was held and an initial decision was issued on August 10, 2006.  A final FERC order on this issue was issued on May 21, 2010 that substantially supports DP&Ls and other utilities position that SECA obligations should be paid by parties that used the transmission system during the timeframe stated above.  A compliance filing is required to be made at FERC by August 19, 2010 that will fully demonstrate all payment obligations to and from all parties within PJM and the Midwest Independent System Operator.  Prior to this final order being issued, DP&L 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 final decision.  DP&L management believes the appropriate reserves have been established (see SECA net revenue subject to refund within Footnote 3 of the Notes to Condensed Consolidated Financial Statements) and therefore the results of this proceeding are not expected to have a material adverse effect on DP&Ls results of operations.   In June 2009, the NERC, a FERC-certified electric reliability organization responsible for developing and enforcing mandatory reliability standards, commenced a routine audit of DP&Ls operations.  The audit, which was for the period June 18, 2007 to June 25, 2009, evaluated DP&Ls compliance with 42 requirements in 18 NERC-reliability standards.  DP&L is currently subject to a compliance audit at a minimum of once every three years as provided by the NERC Rules of Procedure. This audit was concluded in June 2009 and its findings revealed that DP&L had some Possible Alleged Violations (PAVs) associated with five NERC Reliability Standards.  In response to the report, DP&L filed mitigation plans with NERC to address the PAVs.  These mitigation plans have been accepted and DP&L is currently awaiting a proposal for settlement from NERC.  While we are currently unable to determine the extent of penalties, if any, that may be imposed on DP&L, we do not believe such penalties will have a material impact on our results of operations.</td></tr></table> 14.  Contractual Obligations, Commercial Commitments and Contingencies   DPL Inc. Guarantees In the normal course of business, DPL enters into false false false us-types:textBlockItemType textblock Includes disclosure of commitments and contingencies. This element may be used as a single block of text to encapsulate the entire disclosure including data and tables. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 5 -Paragraph 9, 10, 11, 12 false 1 2 false UnKnown UnKnown UnKnown false true